Local Painting Franchise Sells

By By Glen Cooper, CBI, CBA, BVAL

Landmark Painting Franchise Sells

We recently sold CertaPro Painters of Southern Maine, the regional painting contractor franchise. CertaPro repainted Maine’s most famous landmark, the Portland Headlight.

Both the seller (our client) and the buyer (our customer) agreed to answer key questions about their buying and selling process.

Why did the seller decide to sell his business now? How did he choose a business broker? How did he set the asking price? What was done to sell it? How long did it all take? These are questions everyone has for a business seller.

How did the buyer search for a business? Why did he buy this business? How did he arrive at an offer? What would he recommend to other buyer prospects? These are questions we asked him.

Seller’s Side – Mike Toews

Interview with Mike Toews, seller, CertaPro Painters of Southern Maine

Why did you decide to sell your business now?

Mike: “I needed to go to the next stage of my life. My wife and I were just about to have our third child – another girl as it turns out – and I had several ideas of what I would do next. We thought it would take longer to sell than it did, so we actually ended up selling a year sooner than planned. But, we felt we got a fair price, so we went ahead.

I am excited to have some time off right now before my next challenge. It is a little strange helping the new owner with the transition. I am much more relaxed than I thought I’d be.”

How did you choose us as your business broker?

Mike: “I scouted you out a year before I was ready and I liked what you said. You laid out the options very clearly and I trusted you right away. We just hit it off. Then I came back a year later to list it with you.

I think it’s very important to go meet brokers in their offices. You get to see how professional they are if you see them in their work environment. You can also protect the confidentiality of your sale efforts that way.”

How did you set the asking price?

Mike: “The franchise gave me a formula: 2.5 times average operating profit plus the equipment value plus the franchise fee. Then I asked you. Without being told what the franchise said, you came up with nearly the same value actually using the method I read about in your newsletter. I was impressed that it was so close, even though the method is different.

The important advice for other sellers is that they don’t need an expensive appraisal to set an asking price.”

What was done to sell your business?

Mike: “The reason I hired you was to qualify and screen buyer prospects, so I really don’t know everything that was done. The best thing that you did was the booklet you did on my business. Wow! It was great. I thought it clearly laid out the story of the business along with the numbers, so a buyer could see it all in context.”

How long did it all take?

Mike: “It took seven months. The slowest part was getting the numbers and all the franchise information and photos together for the marketing materials. You guys ask an awful lot of questions and are really thorough – that surprised me. But, when that was done, you had inquiries right away. Peter made his offer in March, and we negotiated it mostly in one meeting in your office with Brad Kaplan and Mark Koshliek. Peter was approved and went to franchise school in mid-April and we closed April 26th.”

Buyer’s Side – Peter Stearns

Interview with Peter Stearns, buyer, CertaPro Painters of Southern Maine

How did you search for a business?

Peter: “I went on the Internet and looked at all the multiple listing sites for businesses.
The best site is BizBuySell, but I went to others. I reviewed at a total of 15 franchises and six non-franchise businesses. I looked at more, but only reviewed the ones that seemed realistically priced. A year after I originally registered with you, I started looking again. I actually called you first about another, but I was too late – you already had it under contract. Brad Kaplan then suggested that I look at CertaPro. I think Maine Business Brokers does a terrific job of packaging businesses, by the way. Most brokers don’t have it all laid out like you do. That helped me make a quicker decision.”

Why did you buy this business?

Peter: “I wanted a business that would leverage my talents and skills. I grew up working in my dad’s Ford dealership in Rockland. I did every job in the dealership from cleaning to sales. I have worked in automotive dealerships and franchises of various kinds all my life, so I like those systems and processes. I wanted a business where I could be pro-active in sales and training. I didn’t want to be limited by the bricks-and-mortar of a single location. I like the idea of a sales territory and market I can grow by offering great service. CertaPro has a first-rate reputation and just needs to keep growing to dominate its market. We want the residential and commercial work where people appreciate quality. CertaPro is well-positioned to serve that market.”

How did you arrive at an offer?

Peter: “Of course, the numbers had to work. I thought the asking price was too high, but that was your job to get as much for your seller client as you could. The offer I made allowed me to make a fair return on my investment. I was also buying myself a job, so I knew my own salary requirements. I went into the negotiation knowing what I wanted. I am a quick decision maker. Once I got the price down where I knew I could make it work, I stopped negotiating and got busy completing the deal so I could get on with it.”

What would you recommend to other buyer prospects?

Peter: “I would recommend that they buy a business that fits their talents, interests and skills. And, if they don’t know sales and service, don’t bother. Only people who can sell can really afford to take the risk of owning a small business. Sales and marketing skills are key elements in small businesses like this.

I suppose I should also give a plug to Maine Business Brokers. I didn’t expect to like you, but you truly offer a high level of service to your clients and customers. I respect that. Maine Business Brokers is a cut above. Buyers should definitely check you out early in the process.”

Time Lines

Seller’s Side – Mike Toews
Aug. 2004  1st meeting with Broker
Aug. 2005  2nd meeting with Broker
Sept. 2005  Listed w/Broker 9/14/05
Nov. 2005  Broker due diligence completed
Dec. 2005 Marketing materials approved
Feb. 2006  7th of 12 buyers receives materials
Mar. 2006 7th buyer makes offer; seller accepts
Apr. 2006 Franchise approves buyer
Apr. 2006  Closing of Sale 4/26/06
Time on Market: 7 months
Sale price: 89% of asking price
Seller financing: 37.5% of selling price, 5yrs, 7%

Buyer’s Side – Peter Stearns
Jan. 2005  Peter completes brokers’ buyer registration
Feb. 2006  Peter inquires about another business listed with broker
Feb. 2006  Peter receives CertaPro package from broker
Feb. 2006  Peter registers with franchise to get UFOC
Mar. 2006 CertaPro showing to Peter at brokers’ office
Mar. 2006  Peter makes offer; negotiates all in one week
Apr. 2006 Peter sends deal to franchise for approval
Apr. 2006 Peter attends 1-week franchise school
Apr. 2006  Closing of Sale 4/26/06
Time Searching for a Business: 15 months
Number of Businesses Reviewed: 10 

Headlines

  • Buying or Selling a Business at “Peak Market”.

    The cyclical nature of the economy can add uncertainty to the timing of an acquisition, or an exit from a business. However, unlike the clarity of an improving economy or the risks inherent in a downturn, buying or selling at a market high creates a unique set of challenges.

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