Something in the world of floating have you stumped?
It’s not an easy decision to sell a float center. But when you do come up to that point, what do you do? Who do you talk to and how does it work? Should you hire on a broker? What sort of timeline should you expect?
Having never sold a business, Graham and Ashkahn aren’t exactly experts on the subject, but they offer informed advice on where to sell and how long it’ll probably take.
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Transcription of this episode… (in case you prefer reading)
Graham: Hey, how are you doing? All right, how are you doing, audience?
Ashkahn: Welcome. That’s weird if you address it to people in the real world, you know?
Graham: How you doing over there, Ashkahn?
Ashkahn: I feel uncomfortable. That’s how I’m doing.
Graham: I’m Graham.
Ashkahn: I’m Ashkahn.
Graham: Today’s question is “what is the best way to market the sale of my float business?” That’s kind of … Hopefully you’re selling it for happy reasons.
Ashkahn: So you can open two more float businesses.
Graham: Yeah, so how do you, If you get into this salty industry and you now have built a float center and want to get rid of it, how do you sell it?
Ashkahn: I mean, I feel like there is general advice on selling any type of business.
Graham: I feel like it’s like advice in fishing. Right? Because all you …
Ashkahn: If you give someone a float center …
Graham: If all you needed to catch was one fish, and that’s all you really need to sell a business is someone who’s willing to pay you money to buy it. So a lot of the strategies, there’s not necessarily a single best way, they’re just sort of casting different nets to hopefully reel in that single person who will eventually sign a contract and take over the business from you. What were you going to say?
Ashkahn: I mean, I was just going to say there’s … I mean, yeah. But to cast a wider net I guess you prepare yourself more, right?
Graham: Yeah. That’s what separates the good fisherman from the mediocre fisherman I think.
Ashkahn: And finding that right spot out in the waters.
Graham: Yup. And maybe the right motor on your boat to get there so you don’t scare away the really good fish.
Ashkahn: Yeah, and it’s kind of polycarbonate fishing poles as opposed to those old wooden ones.
Graham: I feel like this is really good advice. I think we’re nailing this one. As far as the best way to do it, I don’t know. But let’s talk about some different routes that people can take.
Ashkahn: So what are you talking about? Are we talking about what do they do in their business and to prepare information to help them make a sale? Or where are they trying to find someone to buy this?
Graham: Where. I think it’s market, it’s market the sale. Where-
Ashkahn: Like where are they doing outreach to find someone to buy.
Graham: Yeah. Where are they going to find it? Where are they going to catch these fish?
Ashkahn: Because I was going to say have your books in order.
Graham: Oh, for sure.
Ashkahn: Have a manager who can seamlessly take over, but we’re not talking about that. We’re just talking about-
Graham: And I guess starting a little earlier, just knowing that if you haven’t built your business for selling specifically and something’s come up and now you want to sell it, it’s pretty much the worst time to get a good deal on selling a float tank center. If you need to sell something soon and for a specific purpose and you haven’t really been preparing for it, then you’ll probably take a little loss on not being totally ready to take on ownership. Things like Ashkahn just alluded to, not having a manager who’s totally ready to run the entire thing and just having everything in this nice order where someone can look at all the finances and see exactly what’s going on, and especially if those finances aren’t the best in the world. Turning a profit or losing a little money per year makes a huge difference in the ultimate price that you’re going to get for your business.
The best time to sell it is when your business is humming along, it’s doing great, it’s been profitable for the last five years in a row. You’ve been preparing for a sale for the last five years so you kind of know all of your ducks are in a row and it’s easy to get rid of, and preparation-wise, I guess that’s all I’d have to say is it just takes some time and planning to get there, and as a result, there’s a lot of advice out there that says whenever you build a business, you should probably plan it as though you’re going to sell it, because you just never know what’s going to happen and when you might want to get out of the business on short notice.
Ashkahn: Yeah, it’s kind of like there’s a lot of overlap between running a smooth business and preparing it for sale. Like having your finances in a very legible or easy-to-understand order through the years for your business purposes, or having people trained up so that in your absence, the business can keep running. Stuff like that is nice to have in any situation, and so it’s not like you would just be doing that stuff because you’re trying to sell your business.
Graham: Yeah, and it’s funny listening to, well, I listen to some podcasts of specifically based around business sale and acquisition, things like that. There’s a good one that comes up out of Australia called The Deal Room podcast, which we’ll link to in the show notes. But one of the most consistent things that they say on the air, and that small business owners kind of say, is that in preparing to get their business ready for sale and get everything going, they’ve often decided to just keep running it. Once you actually get it totally ready, and it can take a year or several years to really prepare your business for the best possible exit that you can have, and in doing so, a lot of people find they’ve cut out the fat from their business, it runs sleeker, everything is a little more on top of it, they understand when things are dry in the float industry, in this case, when attendance is dropping off and how to raise it back up because you need these kind of contingency plans for a good operational manual for your business.
So, yeah, there’s just a ton of alignment between wanting to sell and your business going well to the point sometimes the sale just kind of seems inessential at some point.
Ashkahn: Yeah, I mean, unfortunately I feel like the opposite is also true. If things aren’t going well and you want to sell your business, you’re probably the least motivated you’ve ever been to get your books in order and have a manager trained up to take over things. That all sounds like a bunch of work that you don’t want to have to do for something you’re just trying to get out of. So there’s that situation, too.
Graham: So it’s understandable. Either way is interesting. I guess, going back to the question, though. Let’s assume all that stuff’s in order that way. They do have all of their sale ducks in a row. Their business is ready to sell if they were to find a buyer. Where do they find this person?
Ashkahn: Craigslist is one option. Lots of businesses do sell on Craigslist. Local brick and mortar shops and things like that.
Graham: I was talking to a business coach here in town who specializes in the sale of small businesses and things like brick and mortar franchise locations and stuff like that, and I asked him, at least for Portland and the Pacific Northwest, where he’s had the best luck finding buyers, and he actually said Craigslist. He’s a professional who people pull on board, and after preparing all the sale documents and getting that stuff ready, yeah. Finding buyers from Craigslist has been one of his highest rate kind of yield platforms, which is funny.
Ashkahn: Other than that, there’s the float collective Facebook group. That’s kind of that online float community.
Graham: Yeah, listing things up there never hurts.
So, I wanted to talk a little bit about pulling on someone like our friend in town, who’s a business, I don’t even know what they call them. Sale consultant or business seller, at some point when he’s actually selling the businesses. Business broker, maybe is the right term?
Ashkahn: That sounds right, yeah. I believe that.
Graham: We’ve never sold one of our businesses, so take everything we say with a grain of salt, too. We kind of understand theoretically about a lot of these processes and we’ve seen people go through them, but again, this isn’t something we’ve gone through personally, so I’m sure there’s a lot of small things like business broker that we’re kind of letting slip through the cracks.
But there’s this idea of pulling on someone who’s experienced specifically in selling small businesses and probably brick and mortar businesses and even more within that, maybe even they specialize in service-based brick and mortar businesses, and at the point that you pull on someone like that, they kind of take over the burden of where they’re going to list it and putting it out there, and you can obviously still, and should, be doing a little bit to reel in buyers on your own, but that’s sort of the exchange for giving them a percentage price of your ultimate sale, is they’re going to be doing a lot of that heavy lifting for you.
So, even if you do ultimately find someone through Craigslist, they’d be the ones making the ads, they’d be the ones kind of in initial communications, sending out documentation to do due diligence, all the kind of things like that for the getting the ducks in a row. So, I think deciding whether to do something independently or find a broker is kind of an essential question to answer, again, even if the listings and where you’re reaching out to people end up being the exact same end result.
Ashkahn: The broker might just help you prepare something to, some info to put on Float Collective.
Graham: Yeah, exactly, exactly. I guess, I don’t know. I was just going to pause on that for a second. I don’t have advice on whether or not to go with a broker or not. But it does seem like for a lot of people who are looking to get out of a business, they don’t necessarily have a ton of time on their hands, and I can definitely see how having someone broker a deal sounds really attractive.
Ashkahn: Yeah, I’m sure, like a lot of things, it’s probably less useful for a float center than it is for a more normal business. I’m sure brokers have an easier time or would have a lot more knowhow in selling a more common type of business than something so unique.
Graham: Right. An Indian food restaurant or something like that, just as a more normal-type of business in my head, just popped in.
Ashkahn: There are a lot more Indian food restaurants out there than float tanks. I can say that with confidence.
The other thing I was going to say was reaching out to other local float centers. I have at least seen one example of a float business selling to another location in town that then turned that into their second location.
Graham: Yeah, for sure.
Ashkahn: I guess your customers is another place. Oftentimes, people at float centers have … oftentimes, someone who’s going to open a float center in your area is probably one of your existing customers, and that’s kind of like one of the main people you’re looking for. The person who’s most likely to buy your business is someone who’s thinking about opening a float center in the area that you’re in and is excited about the fact of not having to find a location and deal with construction and all that sort of stuff, and often, those people are likely floating with you if they are somewhere in their plans to open a place.
Graham: Yeah, for sure. Yeah, in a similar sense, it’s a lot of the places you’d market your business in general. Like, if you have good connections in the wellness industry in your city and you know practitioners who have big mailing lists or send out a monthly wellness newsletter or something like that, getting a small listing in there might not be a terrible idea.
Again, you’re sort of just trying to play the numbers game where, out of everyone out there who could possibly want to purchase a float center, which I’m sure that there is someone. You’re just trying to figure out how to get it in front of their eyes so they even know that’s a possibility. Because those two things lining up, someone up there is thinking about owning a float center and thinks buying it might be a little easier in your area, and then you wanting to sell it and just trying to connect those two dots is sort of the name of the game in this case.
I would almost say do as much as you can by yourself and get it going. List things on Craigslist. Go onto the Float Collective and make a post. Try to reach out to your customers and other wellness professionals in the area, and if you’re coming up dry, at least you’ve probably gotten enough done on your own that pulling on a business expert to help you sell it is going to be a little cheaper and an easier process and maybe they can tap into connections or just be a little more diligent about doing things.
Maybe I’m settling on that as probably the route that I, for instance, would take if we were trying to sell a float center shop, is just see what doing it our own gets us and then move from there to getting some professional help, if we’re not getting any bites on the line.
Ashkahn: The nice thing is we have a certain level of knowledge about the float world that is specialized, that is kind of advantageous to us over what a broker would know.
Graham: Like us as float center owners?
Ashkahn: Yeah, with people, float center owners-
Graham: Not just you and I.
Ashkahn: There’s networks of float centers, there’s these Facebook groups, there’s this other stuff, as opposed to, I don’t know. If you ran a spa, you wouldn’t necessarily be like, “Oh, I know of the largest spa Facebook group community that I can go reach out to.” It’s just a little bit different for our world.
What do you think, what would you say is the percentage of people who wanted to sell that have managed to do it? If you had to take a guess. That’s a very hard question to answer.
Graham: Yeah, let me think about this for one second. So there’s different reasons for wanting to sell and I think that plays into it a lot. I think the least likely center to find buyers, in my experience, is places that have one to two tanks that aren’t really doing a whole lot else and that aren’t currently profitable, and I think for a lot of business people looking at that, it just doesn’t seem as appealing a concept to buy. I think the things that have closer to 80 to 90% success rate with selling are bigger centers that are four tanks or above, or a few tanks attached to other wellnesses, in which case it’s kind of more like a wellness center, it’s been established for a few years, has a good-sized existing client base and is actually profitable.
Again, that difference between profitability and non-profitability, and in the float tank world, the difference between really well-done construction at the beginning and construction that’s falling apart two or three years later and someone realizes that they have to redo their entire center and are now trying to sell it, makes all the difference.
I’d say anywhere from 10 to 20% on the low side of that scale. Your center really doesn’t look that appealing and is kind of falling apart up to yeah, maybe more like 80% on the high end of centers who are actually big and well-established and they’re profitable but they want to sell to move on to something else.
Ashkahn: Yeah, I guess it’s hard because I feel like the centers that are for sale are slanted more towards the, “things aren’t going well” side of things, or there were construction issues or just not getting enough people to come in.
Graham: And this is just a total firing from the hip kind of shot, but yeah. If you’re not profitable and trying to sell a center, I’m saying a quarter to a third of them, maybe, actually will end up selling.
Ashkahn: Because we’ve had people contact us about selling, or asking us to help people find them to buy it and then six months later having them contact us again and say that they’re closing, so there’s definitely been people who have been trying to sell didn’t manage to and decided just to call it and try to sell off the equipment kind of piecemeal instead of selling the business.
Graham: Yeah, and it does kind of make sense, in that if you’re not profitable, it means your client base isn’t huge, and if your construction is also falling apart at the same time, it means that investment you initially made in building out your walls isn’t really going to be passed on too much to the new owner. They’re going to have to do a big renovation anyway. So now your most valuable asset is, for sure, the float tanks. So at some point you just have to wonder, is it worth it to just sell off this asset that’s already 80 or 90% really of the total value of the business and just ignore the physical center, I think is why we see a lot of people kind of go that route.
Ashkahn: Because the float tanks just lose so little value.
Graham: Yeah, there’s so many more people out there that would love to have a good quality used float tank and save some money than there are used float tanks on the market, just going around. It’s not like the used car industry where everyone and their grandparent has had a car forever and there’s so many out there.
Yeah, I think that kind of covered some of the options and good venues, and I guess I’d just like to leave it by saying you’re asking more, “Where do you find people?” But I think when is almost a more important question to ask. If you have a year to two years to sell your business, that’s very different than if you’re trying to get it sold within the next three to six months, and I’d say a year to three years is almost a more realistic route for being able to find a good buyer and get a good deal on your business and things like that, and if you are aiming for the three to six month timeline, just be prepared to probably accept way less money than you’d like to for the business. You have to offer a huge discount for wanting to get out of it sooner rather than later.
Ashkahn: Yeah, because floating is such a small industry, timing is so much bigger of a deal just in terms of there being people out there who want to buy it under any circumstances, right?
Ashkahn: For more like an Indian food restaurant, there’s probably constantly, at any given point in time, a handful of people out there who would want to purchase an Indian food restaurant in this city.
Graham: I’m just going to say 20% of the population, on average. I, every couple days, think of that. So 50% of people hosting this podcast, then. Go on, sorry. I didn’t mean to interrupt your flow there.
Ashkahn: The chances that someone’s going to pick up their life and move cities across the country to come buy a float center is a lot less than someone who wants to open a float center in your area anyway and wants to take up this opportunity. The circumstances to even have someone in your area who’s thinking about opening a float business is a little bit more based on luck and timing and stuff like that than it would for other industries, as well.
Graham: So, good luck. Again, yeah, I hope the business is selling because things are going well, and any last thoughts on how to sell, or who, where? There it is. Where to find people that are going to buy the business?
Ashkahn: Same thing. I really feel like reaching out to local float centers and stuff like that is a nice way. It’s the most kind of focused around your geographic area, and maybe they have customers or have heard of someone talking about it or something like that. Maybe someone’s reached out to them, looking for float advice, and they know someone’s opening in the area and they can direct you over to them.
Graham: Cool. All right. Well, if you have questions of your own, cruise on over to FloatTankSolutions.com/podcast.
Ashkahn: That’s the site. You can click it right.
Graham: Get it right. Yeah.
Ashkahn: Yeah, you got it.
Graham: All right, bye, everyone.
Ashkahn: Talk to you tomorrow.
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