You can value and sell your SERVPRO franchise business with confidence by learning about the sales process and working with an experienced business broker who understands your local area and industry. His review discusses the valuation and sales process for SERVPRO franchise business owners who are planning their exit strategy.
About The SERVPRO Franchise
SERVPRO primarialy provides fire and water cleanup services. This restoration franchise is one of the largest in the industry. There are approximately 1,915 SERVPRO locations in the United States. They primarily provide residential services, although many offer commercial restoration services as well.
How to Determine The Value of Your SERVPRO Franchise Business
SERVPRO franchisors typically sell for 90% to 95% of their annual sales plus inventory. Therefore, every business is unique. Your broker may conduct a detailed market assessment to determine your fair market value (FMV). This includes a review of your financial information (i.e. your SDE) and the application of rule of thumb data (industry multiples). Here is the rule of thumb data for SERVPRO franchise businesses:
- SERVPRO franchise businesses sold between 2.03 and 3.93 times the Seller’s Discretionary Earnings (SDE)
- SERVPRO franchise businesses sold between 3.04 and 4.92 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- SERVPRO franchise businesses sold between 0.45 and 0.59 times the annual net sales
Of course, other, non-financial factors may apply as well, such as your location, community reputation, the quality of your workforce, growth potential, and reason for selling.
A 5-Step Sales Process for SERVPRO Franchise Owners
If you are planning your exit strategy, then you should gain an understanding of how the sales process works for SERVPRO franchisors before you begin. Although the sales process may vary, the steps typically include:
- Review your franchise agreement with SERVPRO
- Put together your marketing approach
- Prepare for the sale process
- Marketing, negotiations, and due diligence
- Sale closing and ownership transfer
Step 1: Review Your Franchise Agreement With SERVPRO
The first thing you will need to do is conduct an extensive review of your franchise agreement with SERVPRO. In most cases, franchisors are allowed to sell. However, there may be certain requirements that you (and/or the buyer) must meet. You also may need to keep them infrared and receive permission from them occasionally throughout the process.
Step 2: Put Together Your Marketing Approach
After you receive the necessary approval from SERVPRO to sell, you can then shift your focus toward putting together a marketing plan. Remember, much of the work for the sale happens before you bring your business to market. The notable steps you should take in this second phase are:
- Assemble a team (i.e. broker, attorney, CPA)
- Establish your goals for the sale
- Determine your marketing channels (i.e. networks, databases, etc.)
- Set a (tentative) sales timeline
- Meet your business partners (if applicable0
Step 3: Prepare for The Sale Process (i.e. Collect Your Documents)
Once you have established your sales approach with the assistance of your broker (and other members of your team), the next step is to prepare. This notably involves a collection of your financial, legal, organizational, and franchise documents. Your broker can assist you with preparing the documents you need, which may include (but is not limited to) your tax returns, profit and loss statements, cash flow statements, balance sheets, franchise agreement, a copy of your insurance policy, lease information, and an employee list.
Step 4: Marketing, Negotiations, and Due Diligence
Finally, the time has come to bring your SERVPRO business to market and find a buyer. Your broker handles the marketing process for you, along with your input throughout the sales process. Keep in mind, confidentiality is incredibly vital, and your broker should only use private channels to find a buyer. Since negotiations between buyers and sellers are often filled with emotions, your broker should also guide this process as well to ensure a professional process that helps both sides reach a fair deal.
Lastly, once you have received a letter of intent (LOI) from a buyer and you have received approval from SERVPRO to proceed with finalizing the sale, due diligence begins. During due diligence, the buyer has the opportunity to review the documents you prepared in step 3 and may request additional information, a walk-through, and/or meetings with certain employees.
Step 5: Sale Closing and Ownership Transfer
After you have completed due diligence, then the next (and final) steps are to close the sale and transfer ownership of your SERVPRO franchise business to the buyer; you will also need to notify SERVPRO that the transaction is complete. At the closing table, you (and your attorney) can review the purchase agreement before you attain the final signatures. You will also confirm the payment and update all legal and financial information, along with notifying employees, your insurance agency, etc.
You should also check: How to Sell a Blimpie Franchise
Speak With an Experienced Business Broker at Sigma Mergers and Acquisitions
Sigma Mergers and Acquisitions has helped hundreds of business owners sell and reach their exit strategy goals in a stress-free manner. Additionally, we have helped many franchisors (for various franchises) sell. If you are planning your exit strategy and would like to speak with a professional and experienced business broker, schedule a consultation with us today.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!