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Franchise Planning: The Importance of an Exit Strategy

FRANCHISE PLANNING: THE IMPORTANCE OF AN EXIT STRATEGY
 July 16, 2024 |  Business Tips, Franchise |  hiring, training, small business, business growth, money management, motivation, entrepreneur

By Chris Bates, Vice President of Sales & Development

When running a small business, the day-to-day concerns surrounding things like growth strategy, team management, and increasing revenue can dominate focus. The entrepreneurial effort that it takes to grow a business is no small feat, but those who neglect to plan ahead are doing themselves a disservice.

Small business owners should begin planning their exit strategy sooner rather than later if they’re interested in getting a good return from their eventual sale. Even the most successful owners can get so caught up in the ins and outs of running their business that an unexpected event upends their plans, necessitating a change in their lifestyle and a sudden sale for less than the business is worth.

Without proper planning and vetting, businesses can get mismatched to new owners with the wrong industry knowledge, the wrong skill set, and the wrong expectations. The good news is that entrepreneurs can set their exit strategy from Day One to ensure they get a fair price from their sale and set their team up for success long after they’re gone.

Today, let’s discuss some key points to consider when planning your exit strategy.

Use Your Franchisor as a Resource
The first point that needs to be stressed when discussing exit strategies is the importance of your franchisor. From entering into a new industry and new market, to hiring your first employee, to managing conflicts with clients, having a contact that has already navigated all of these challenges and seen what works (and what doesn’t) is invaluable for achieving success. This is why forming the right franchise partnership is so important!

A willingness to take risks is certainly a positive attribute for small business owners who want to scale, but those who find a good franchise partner can avoid the unnecessary risks that come with starting a business alone and set up a more reliable track for growth. Plus, along with the support that franchisors offer while running and building the business, franchisors can also often offer valuable resources for owners when they finally are interested in selling their business.

Franchisors are invested in the success of each of their locations, and they may be able to identify a buyer interested in working within the existing territory through their existing lead generation process. Outside of finding a buyer directly through the franchisor, franchise owners who get to know their neighboring franchisees may be able to sell to them. Entrepreneurs are usually either looking to grow or to sell. This is why selling to neighbors is such a common strategy.

While these resources are helpful, there is no guarantee that a franchisor will have a buyer ready to go when the time comes to sell. In this situation, franchisors can still be helpful by confirming and assisting with gathering financial information so that other prospective buyers have more clarity while entering into a purchase agreement. A good franchisor will assist during every step of the process.

A quick note on brokers:

Whether using a national brokerage firm specializing in franchise sales or finding a local broker who may have a catalog of contacts, keep in mind commission fees. Brokers can be effective throughout the process of a sale, but due to the accompanying costs, it’s usually beneficial to identify a buyer through other means.

Best Option: Hire Your Eventual Buyer
Opting for the franchisor route is great, but the best option that owners should pursue is to hire, train, and prepare an employee to become your buyer down the road. Although this option takes more planning and plenty of foresight, this is the closest way to guarantee that the business has an effective owner and continues to operate at a high level after it’s time to hang it up.

Hanging on to high quality talent seems to be tougher today than ever before, but offering up the opportunity for advancement is a great way to keep employees with ambition and potential motivated. Additionally, small business owners are often drawn towards hiring a child or family member with eventually selling the business to them in mind. Although working with family brings its own challenges, building a business for the next generation can often be the most rewarding.

Whether using a franchisor’s lead, a broker, or an employee, small business owners should focus their efforts on building their team, delegating, and gradually removing themselves from the day-to-day operations of their business over time. Especially in the home inspections field, owners have a habit of wearing all of the hats in their company and being the face that their clients and referral sources recognize. Businesses that can operate effectively without their owner will be much more attractive to buyers and demand a higher valuation.

To train your employees to elevate your business’ value, or to equip them to eventually take over, National Property Inspections offers many resources for advancement. First, our monthly training classes in Omaha, NE are open to employees with a week of technical training, and a week of marketing and business training. Through this training, franchise owners can send their inspectors, marketing employees, and business managers to experience a standardized training process from an accredited inspection training school.

National Property Inspections partners with new franchise owners, employees, and those that are ready to sell throughout every step of the business ownership journey. Learn more about how the NPI corporate office supports you when you decide to franchise!

About the Author
Chris Bates, Vice President of Sales & Development
Chris works with national and regional companies within the NPI National Accounts department. With account coordination, he refers inspections to our franchisees and tracks the progress and completion of assignments to our client's satisfaction. Additionally, he applies his training and field experience by providing technical support services to franchisees as needed.