While every deal is different, the underlying reasons for selling a business tend to be quite similar. Regardless of the size of the business, its age (or that of the owner), the industry or geographic location, most of us end up reaching our limit as business owners at some point, and decide it’s time to move on.
When Chris and I sold our small business back in 2006, we weren’t approaching retirement like many owners. We were simply done with that phase of our life, knew we had built an asset with value, and wanted to cash out. When it comes to the specifics, here are three reasons why Chris and I decided to sell our business:
1. The Industry
For many would-be business owners, the food service industry has romantic appeal. It’s not just about the food; it’s about serving up an authentic experience. Whether it’s an Irish pub, a vegetarian cafe, or a French creperie, everyone who starts a food service business is on a mission to bring something truly special to the local community.
Chris and I started Caffinity – a drive-thru coffee and espresso business based on thousands like it in the Pacific Northwest – with a clear business model, extensive research and impeccable training. The latter came from our roaster in Seattle, Caffee D’arte. Our startup didn’t just have romance – it had Italian romance. Amore! We would be bringing an authentic espresso experience to our new home in Northwest Arkansas, a place previously fueled by bitter dregs served thoughtlessly in convenience-store cups. Morning commuters would sing our praises, and pronounce us as the best part of their day. And indeed, many Caffinity customers did just that.
After a year and a half of working sixteen-hour days, six days a week the reality began to set in: Food service is less like romance and more like marriage. It’s easy to fall in love and get swept away with the idea of it, but what’s required to be successful is limitless amounts of dedication and hard work. While the quality of the product is important, running a food service establishment is really about your ability to manage people — namely customers and employees.
2. The Employees
First, let me be clear that there were a handful of employees who made Caffinity the success that it was. Thanks to them we won “Best Coffee” in local Readers Choice Awards every year we owned the business. Emily, Tiffany, Alex, Tawny, Anna, and Brock – they kept the customers coming back and pulled shots as good as any barista from Seattle to San Francisco.
With that said, there were many more employees who tried to rob us blind, didn’t care about a quality product and great customer service, or simply didn’t show up for work one day. Such is the nature of food service (see number one, above.) It’s not so much the employees themselves as how managing a certain type – in our case around two dozen girls with an average age of 20 – ends up affecting your life.
There are countless stories of the phone ringing at 4:00 AM, Chris rushing to get dressed, run out the door and arrive at one of our stores in time to open for the morning rush. The most memorable was the morning our first son was born. About an hour after the birth Chris got a call on his cell phone from one of our regular customers, wondering why our flagship North Walton Boulevard location was closed. We also missed a family wedding in Boston thanks to baristas behaving badly. Enough was enough.
3. The Burnout
Plenty of business owners decide to sell a business based solely on burnout. Having been there myself, I begrudge them nothing. There comes a point when you’re done, whether it’s three years or thirty years after starting the business. The real issue is what the burnout leads you to do – or not do – as a business owner.
In the case of Caffinity we reached burnout not long after opening our second location. We knew that the business would achieve a new level of profitability – optimal for hiring a full-time operations manager – with a third location up and running. We used our personal savings to open the first location, and got a small loan to open the second. We were unwilling to take on any additional debt to open a third location, not to mention the added physical fatigue that we knew would come from opening a third store.
When you feel yourself become unwilling to make what you know are the right decisions for the growth of your business based on personal or emotional reasons, take it as a sign that it may be time to get out.
More than anything else, selling our business gave Chris and I the freedom to take a much-needed break. The net proceeds from our sale represented over two years of corporate salary, a 10X return on our initial investment, and a chance to regroup and start another business. Considering our successful sale and the countless lessons learned it was three and a half years well spent.
Are you ready to sell your business? We’ve been there. Let’s talk.