How to plan for a smooth transition—and a profitable sale of your business
In 2014, Emma Franklin Bell sold her Australia-based preschool dance studio, with multiple locations, in six weeks. “A parent ended up buying the studio,” says Bell. “She’s expanded it, and it’s still going strong, five years later.” If six weeks sounds like an inordinately short time to broker the sale of the studio that’s been such a big part of your life, you’re not wrong. Bell worked hard to make sure her business was eminently sellable—with studio systems in order, a thoughtful transition plan already in place and a clear understanding of her studio’s financials. It’s that kind of preparation, Bell thinks, that made her experience so painless. Shouldn’t you give the sale of your business just as much planning and consideration as you did its inception? Here’s how.
DO have your systems organized.
“Every piece of your studio needs to be arranged with systems,” says Bell, author of How to Run a Preschool Dance Studio and now a business and communications coach. If you haven’t already put systems in place, she suggests imagining that your studio has different departments—staff, marketing, finances—and then systematizing the processes you carry out within those departments. When Bell found a buyer for her studios, it was easy to explain the way she’d run her business. “Because all of those systems were in place,” she says, “it was a ‘plug-and-play–style’ business. There was nothing in my head that was open to interpretation—it was all documented.”
DON’T keep your studio’s financial information solely in your head—or worse, a secret.
You can’t be all over the place with your studio’s finances, says Bell. “The classic ‘I have it in my head’ just won’t cut it when you go to sell your business,” she says.
Florida-based Transworld business broker Michelle Sayegh routinely requests three years’ worth of financials from sellers of small businesses. “We ask for three years because we like to see whether a business can prequalify for a business loan,” she says. “To do that, we need to furnish the bank with three years of financials.” Even if your studio’s finances are messy or less-than-stellar on paper, hiding that information will only hurt you. “Everything’s going to come out at the closing,” says Sayegh, “so let’s get to the bottom of it now, before we’re two months in and the deal falls through. We need to be candid with the buyer from the beginning.”
DO ready specific facts and figures.
Don’t be surprised if potential buyers ask you questions like “What is the value per student?” (how much a single student brings in for the year) or “What is the life cycle of a dancer?” (how long a student tends to stay at your studio). “It’s difficult when students do all sorts of classes and programs,” Bell says, “but it’s important to sit down and work out, as best as possible, the overall idea of what a student brings into the studio in revenue.” Unless it’s a big part of a studio’s business, she doesn’t advise including additional student expenses, like costume fees or studio merchandise. “Just strip it back to the yearly fees,” says Bell. For the life cycle of a student, she examined enrollment and attrition numbers and calculated a few statistics for buyers: the number of dancers who stay one year, two years and more.
DON’T wait too long to tell staff and parents.
Bell admits she struggled with when to tell her teachers and parents that she was selling her studios. “I believe people should be privy to the truth of the matter and given time to ask questions, express how they feel and make decisions they need to make,” she says.
Bell was also sensitive about how she shared this news, because she knew it might be an emotional reveal for students and their parents. She told her teachers first, over the phone. “I wanted them to be completely aware of what was going on, why and when it was happening,” she says. She told her parents via e-mail, with details on how the sale would happen, what changes would occur and how the sale would affect them. “I was very thoughtful in my approach, and I allowed for open communication and discussion to happen,” she says. “They respected this a lot.”
DO separate yourself from the studio once you’ve sold it.
Though the urge to stay on in some capacity at your studio may be strong, Bell advises against it. “Even if you’ve had the studio for over a decade,” she says, “it’s not yours anymore.” Remaining involved, even as an instructor, can just make the urge to get involved on the business side too difficult to resist.
DON’T run your business any differently while you’re waiting for it to be sold.
In fact, Sayegh suggests running your business as if it’s never going to sell. “The average time it takes for a small business to sell is nine months,” she says. “You should carry on operating your business and making money. You can’t let it slide while it’s listed or even when it’s under contract—the deal may not go through, and then you’d be stuck with a business that took two steps backward.”
THE BENEFITS OF USING A BUSINESS BROKER Using a broker for the sale of your studio means you’ll have to part with a percentage of the sale, but there are significant benefits to letting a professional handle the job. Confidentiality As business broker Michelle Sayegh points out, selling a business is not like selling a house—you wouldn’t want to put a “For Sale” sign right outside your studio’s doors. “Brokers are skilled at getting it done in as confidential manner as possible,” she says. “When we deal with a buyer, we always get them to sign a nondisclosure agreement.” Bigger pool of prospects Even if your broker doesn’t know someone who’d be interested in buying your studio, she or he will have access to networks of other brokers who might know someone. Many brokers will list their clients’ businesses on multiple business-for-sale sites, as advertising. Selling savvy Selling a business requires a lot of paperwork that has to be done properly, and a broker will be intimately familiar with the many steps that have to happen, and in what order. “We take the headache out of trying to run your business and sell it at the same time,” sums up Sayegh.
Rachel Rizzuto writes the Business column for Dance Teacher and is a second-year MFA student at the University of Illinois at Urbana-Champaign.