Single Origin Shots

Ready to Sell?

You’ve spent countless hours mastering the ins and outs of café ownership. But you’ve probably never sold a business.

Skip Colombo opened the Fresh Pot in Portland, Ore., in 1997 with business partner Matt Vinci. Having worked together in a café during college, they discovered a love for coffee and the community around it. “We used to think, ‘We could do this,’” he says. “And then the dream came true, after looking around at cafes that were for sale. We were flat busted, but the previous owner allowed us a period of time to scrape together some money and pay everything off.”

For almost 10 years, Colombo and Vinci worked side by side, growing a family of sorts, made up of employees and regulars. They also opened a second Fresh Pot location. But at the decade mark, Colombo wanted out from behind the counter to do some traveling and stretch his legs. “To run successful cafes, you have to spend time there. I knew I’d be sad to leave, but it was time.” He’s speaking to the emotional component of selling a café, but also to the only two good reasons to sell: if the business is no longer fun or if it is very successful. If you feel burned out, but your business isn’t doing well enough to sell, you may need to stick it out and either grow it or stabilize it, if possible. But if you’re riding high on your success with customers lining up, it could be time to make a break.

But then comes the delicate process of divestment. Big financial transactions often make buyers and sellers nervous and emotional. Colombo and Vinci were not just business partners but friends who shared a CPA. Theirs was an amicable transaction, but their circumstances were unique. For most business sales, a lawyer and an investment banker can come in handy, in addition to an accountant.

There is no shame ­– and in fact, specific advantages – to hiring third-party professionals. They can ease the discomfort, and get legalities straightened out so no one feels they’re being held to any fine print that they don’t understand. That way you can focus on doing what you do best: running your business. Even though you are in sales mode, you have to keep your business in shape ­– efficient and competitive – if you want to fetch the best possible price.

And the right price can be elusive. “So much is subjective in profit,” says Colombo. In his current role as a wholesale account manager at Stumptown, he’s seen businesses bought and sold, and says, “It can be hard for owners to sort through the process. I realize more and more how lucky I was with the Fresh Pot, to execute the transaction the way we did. It was painless, stress-free and straightforward. That is not usually the case.”

The biggest thing you can do to avoid a stressful sale is to keep good records. Café owners can be creative dreamers, which can result in a wonderful café. But backend business acumen is just as important. When you put your business on the market, it doesn’t matter how successful you’ve been and for how long, you have to provide cost breakdowns. Time and again, foggy financial trails make it difficult to valuate businesses.

Speaking of planning for the sale, don’t be in a hurry. It typically takes six to nine months to complete the process. Prepare by assessing your cash flow, your expenditures, your tax strategy and other elements of your operation to see whether they are fit for a sale. And consider the timing. It’s always easier to sell a business when it’s on the upswing. If you own a seasonal café, say in a tourist destination, look to sell soon after your busy season begins. Plan ahead and you won’t find yourself desperate to sell during a slump.

Your café’s track record is important, but so is its growth potential. Consider putting together a growth strategy for potential buyers. One of your greatest assets as a small-business owner is your intimate knowledge of your own operation; use that to point out opportunities for the new owner to expand the business. The few days’ work it requires may pay dividends in a sale.

In addition to keeping good financial records, pay attention to what is happening in the industry. Part of getting the most for your business is knowing what your competition is worth so that you can defend the price you are asking to your potential buyers. Knowing the trends of your market will give you an upper hand as you negotiate prices and contracts with possible sellers.

Colombo stresses the importance of good equipment in the sale. “It’s the lifeblood of the cafe and if it’s properly maintained and cared for, it can hold resale value well and be a significant component of the asking price. A prospective buyer is always interested in getting quality espresso equipment with the purchase and not having to source new gear. That old, beaten down espresso machine is not worth what most cafe owners think it is.”

A tip to avoid making an emotional decision: Prior to entering the sales process, write down the criteria for the deal that you will accept. If the sales process takes twists and turns, or an offer suddenly changes, making you jumpy, refer back to your criteria to help you see straight again. This small, low-tech technique can give you confidence in making the right move.

The big question: Did Colombo make a profit? “It depends on how you describe profit,” he says. “Anyone who starts a small business probably won’t get a return on investment, in monetary terms, for all of the blood, sweat, tears and time it took to build. But in terms of being able to walk away with a good chunk of money, that’s very doable. I paid off some debt, and took a year off to be a dad and travel. I was making up some of the time I didn’t have over the previous 10 years, before segueing into a wonderful job at Stumptown.”

After the sale, don’t expect to be completely free. Even if you were eager to cash in, it can take some time to accept that “your” café is now someone else’s. You’re walking away from a chapter of your life, your staff and your customers. “It was honestly easier to go through the transaction of the sale than the first few months after,” says Colombo. “At first, I thought, ‘Hot damn, I’m on vacation.’ But then I realized that even on bad days at the café, when we were worried about making payroll, there was something about it I truly enjoyed and was a part of. It was weird to become a customer after a decade of ownership. Even now, it’s weird to not know everyone on staff. There’s an emotional side of that.”

As far as next steps go, the coffee industry may be one of the best for networking. Don’t get trapped behind the counter at your café. Attend industry events, and get to know your roaster and equipment vendors. “I had a great relationship with Stumptown that led to my opportunity here,” says Colombo. “Café owners can only benefit from the tight community that is this industry.”

While Colombo is legally divested of the Fresh Pot, a great twist of fate allows him to stay involved in the business, since he manages Stumptown’s wholesale accounts­­ – one of which has been The Fresh Pot since its beginnings. “It continues to be one of Stumptown’s longest tenured and biggest combined-volume accounts. I get to help out on the business side and be a voice and a liaison for the Fresh Pot.” He also lives two blocks away from one of the shops. “I’m lucky that I got to walk away and keep an eye on it as it continues to be a successful business. That means a lot.”

 

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