Selling Business, While Keeping One...Help!

[j_bella]

I have a service based businesses that has been operating for over 6 years and it does well. I opened a second location a month ago, so obviously the numbers are not quite there yet, but of course we have projections. I am wanting to move out of state and had hopes of selling both locations, but that's probably not possible with the second one. That being said we are going to sell the first. The potential new owners do not want us taking any of their customers (although that's hard since many bounce between the two). They would like to retain me for awhile so they continue keeping it a success. How should we move forward, especially with branding, social media, customer lists?

Thanks!

[Freelancier]

I'd insist that everything be part of the deal even if I had to seriously discount the second location, just to get it off the books and ensure you don't conflict later. In fact, if you have a post-sale consulting agreement, you will most likely create serious conflict having that second location under your control that could be competition to the new owners.

A consulting agreement for post sale is common, just ask for a contract for a fixed amount of time at a fixed hourly rate. It's an employment agreement, though, so in any bankruptcy filing, the agreement can be voided with no penalty to them, so structure the agreement either for a short enough duration or insist on getting funds upfront for each month you're supposed to work (basically, they'll be paying a retainer fee that you'll work against).

[j_bella]

I'd insist that everything be part of the deal even if I had to seriously discount the second location, just to get it off the books and ensure you don't conflict later. In fact, if you have a post-sale consulting agreement, you will most likely create serious conflict having that second location under your control that could be competition to the new owners.

A consulting agreement for post sale is common, just ask for a contract for a fixed amount of time at a fixed hourly rate. It's an employment agreement, though, so in any bankruptcy filing, the agreement can be voided with no penalty to them, so structure the agreement either for a short enough duration or insist on getting funds upfront for each month you're supposed to work (basically, they'll be paying a retainer fee that you'll work against).


Thank you Freelancier for the quick response! I completely agree, and ideally I would like both to sell, however, financially it isn't beneficial for both right now - maybe in a year. That being said could I ask for them to change the name of the existing business or possibly partner up? If I were to partner, I obviously cannot sell it for what I had intended to sell for, right? Also, I plan on opening up more in a different state so ideally I would like to keep the brand strong and show that it is in multiple states.

[CCAdamson]

Am I following you right? You own two of the same business, one established and doing well the other newer and still gaining traction? You want to sell one location and start up other locations?

You are moving out of state, why not sell one, close the other, and open up in new state. Is this something proprietary? If you are selling one location are you selling your systems? Your process? Or are you just switching gears?

[j_bella]

Am I following you right? You own two of the same business, one established and doing well the other newer and still gaining traction? You want to sell one location and start up other locations?

You are moving out of state, why not sell one, close the other, and open up in new state. Is this something proprietary? If you are selling one location are you selling your systems? Your process? Or are you just switching gears?

Exactly @CCAdamson! I would love to close the other, but can't do that- we would be at a loss (lease contract, build out, etc.) Yes and I would say it is proprietary. We would essentially sell them the same systems and protocols to operate the business successfully.

[tallen]

Why not continue to own the business and just hire a manager to run it for you, if you are going to still be running the second location anyway? Eventually you could maybe consider moving to a franchise model, where you are maintaining the brand and still own the rights to the proprietary stuff, but have other "owners" (franchisees) taking on the local businesses...?

[Freelancier]

That being said could I ask for them to change the name of the existing business or possibly partner up? If I were to partner, I obviously cannot sell it for what I had intended to sell for, right? Also, I plan on opening up more in a different state so ideally I would like to keep the brand strong and show that it is in multiple states.
This changes things a little. What was the purpose of outright selling instead of getting a local manager and/or local partners to buy into the concept and run the local stores?

[j_bella]

@Freelancier- we considered having someone from within initially, but unfortunately that won't work. Our management was going to remain with us to work at the other location.

[j_bella]

Why not continue to own the business and just hire a manager to run it for you, if you are going to still be running the second location anyway? Eventually you could maybe consider moving to a franchise model, where you are maintaining the brand and still own the rights to the proprietary stuff, but have other "owners" (franchisees) taking on the local businesses...?

Maybe this is an option we should consider with the the one we would like to "sell"... Ideally we would like to use the money to open additional locations, but this route could possibly allow us to make enough off the sale if we modeled it as a franchise??

[Harold Mansfield]

Sounds like you're conflicting what you really want to do. One the one hand you say you're selling it (which includes the proprietary processes). Then you say you want to open another location doing the same thing using the same processes. If you're selling the business, wouldn't you lose your right to use the proprietary process that you just sold?

Maybe what you really want is to sell the existing business as a franchise as suggested above, so that you keep the rights to the proprietary process.

I'm not seeing how you're going to sell it, and still go into business doing the same thing using the same process.
As a buyer that wouldn't sound like such a good deal to me, and if I found out after the fact I'd probably sue you.

If you're not selling everything, you need to make that clear which of course will affect the price.

[CCAdamson]

Like Harold pointed out this was the source of my confusion as well. You are not going to be able to sell something proprietary and then do the same thing somewhere else. I am only seeing 3 options here. 1. Sell it all and move on, you wont be able to do this business. 2. Get a new manager for that location and you and your team run all the locations. 3. Franchise.

I am not sure what your proprietary process is but if you sell you are out of business.