Increasing the Value of Your Cafe for a Stronger Exit
Maximising the value of your cafe before exiting the business is an important consideration for any business owner.
In some situations, such as when a life changing event happens – whether that’s falling ill or winning the lottery. You may feel that there isn’t the time to prepare for a proper exit from your cafe business.
To avoid later regrets, it’s important to consider the benefits of taking the time to add extra value in your cafe versus a speedier exit.
4 Reasons Why Maximising the Value of Your Coffee Shop is a Good Idea Before Exiting Your Cafe Business
1. Ask a higher selling price
By maximising the value of your coffee shop, you can increase the selling price of your business when the time comes to sell. This can help you achieve a better return on your investment, putting more money in your pocket to reach your financial goals.
In Australia, cafes generally have a ‘multiplier’ of between 1.5 and 2.5 on net profits.
There have been some exceptional cafes that have achieved higher multipliers. Sold by experienced Cafe Entrepreneurs knowing how to maximise the value of their coffee shop business. Specifically, by having a longer lease, a more extensive customer base, being well located/positioned, being able to demonstrate greater growth opportunities, having good systems/processes and getting good marketing results.
2. Attract more potential buyers
Maximising the value of your cafe can also help you attract more potential buyers. Well run and operationally efficient coffee shops with great financial figures, make it more appealing to potential buyers.
When you have a larger number of interested buyers, you increase your chances of finding a buyer who is willing to pay a higher price or do a deal on terms that you want.
3. Cut out the middleman
When you have done everything to position your cafe well for an exit – maximising its value and determined an asking price. You now have a desirable asset for sale.
When a business that’s successful does up for sale, it can just take a little networking before you find potential buyers. If this happens you have the choice to exit using a broker to do the deal for you or to sell privately.
Cutting out the business broker, means you can keep their 10% and save on their fees.
4. Personal wealth building
At the end of the day, you’re exiting your cafe business for personal reasons. Maximising the value of your coffee shop means you decide how much money you get for your personal financial planning.
The more you increase the value of your coffee shop business, the higher the selling price or transition value, which means more money for you personally from the exit.
6 Ways to Maximise the Value of Your Cafe Business Before Exiting
As a coffee shop owner, it is important to think about how to maximise the value of your business before exiting.
Getting that done, can be a little more challenging if you aren’t focused on doing the things that will actually increase business value.
1. Improve financial performance
One of the key ways to increase the value of your coffee shop is to improve its financial performance. This involves increasing sales, reducing costs, and finding ways to maximise profitability.
Doing things like improving your marketing and sales efforts, streamlining operations, and controlling expenses all add value.
2. Implement systems and processes
Implementing systems and processes increases the value of your cafe by eliminating waste, getting rid of unnecessary spending, improving the customer experience and making it easier for your staff to be good at their jobs.
Having standard operating procedures, task checklist, training programs, and systems for managing inventory and finances are all important for getting your cafe running smoothly.
By creating systems and processes, you not only improve the efficiency of your business, you create opportunities to scale, grow and expand your business empire.
3. Build a brand
A strong and well-known business can be priced to sell at a much higher value. Building a strong brand identity and reputation for your cafe, helps differentiate your cafe from competitors and attract more customers.
Word-of-mouth marketing is what you are aiming for. It requires consistent effort, processes and attention, but once it is working is the most powerful form of promotion your coffee shop can have.
4. Foster a positive culture
A positive culture within your cafe can also contribute to its value – by creating a positive and supportive work environment where people want to work, customers want to visit , suppliers want to deals with you and people want to talk about you.
All these intangible benefits help your coffee shop to attract and retain top talented staff, which means giving customers an enjoyable cafe experience.
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So that your cafe gets lots of customers, making it look like a great place to passers-by. All of which improves the financial performance of your business.
5. Develop a loyal customer base
A loyal customer base is an important factor in the value of your coffee shop.
Just like a rock band won’t be successful or make lots of money if they don’t have fans (to buy their music every time they release a new song). Your cafe needs ‘fans’ – loyal customers who keep coming back to your cafe for more.
To build the trust and recognition needed for customers to like your cafe you need to be offering high-quality products and services. Then on top of that, doing things that are different/special.
6. Seek professional advice
If you’ve done everything you can think of to do and you still want to do more. Having someone who doesn’t know your cafe business will take a look at it can be really helpful.
Whether they’re an accountant, business coach, advertising agent, sales trainer, lawyer, fellow cafe entrepreneur or some other type of business expert. Seeking outside professional advice provides new ways to maximise the value of your cafe or coffee shop that you may have missed.
An accountant, lawyer, or business advisor in particular are useful for helping you understand the financial and legal aspects of selling or transitioning your business.
Being Ready to Exit Your Coffee Shop Business at Maximum Value
Before you speak to a business broker or announce that you’ll be exiting your coffee shop business, first consider building up the value of your business.
By improving financial performance, enhancing your brand, developing a loyal customer base, implementing systems and processes, fostering a positive culture, and seeking professional advice, you may discover that you’ve fallen in love with your business again. Putting you in a great position to sell your cafe business from a position of strength. Attracting more potential buyers and achieving a higher selling price or transition value.