Nine steps to take for a successful exit strategy
By Dale Vaillancourt
You know the catering high you get after a successful event? Even though you’re bone-tired, you arrive home, put your feet up, and celebrate—perhaps with a cocktail—reveling in a job well done.
Much like any catered event, your career will end, too. If you want to enjoy that same well-earned satisfaction in your retirement years, you must carefully plan and execute your exit strategy.
Earlier this year, I successfully sold the catering business I founded 43 years ago. The steps I took to prepare my company for sale, however, started many years prior. If you’re looking to get the most out of selling your catering business, consider following the nine strategies that I employed. With the proper preparation, you can ensure you’re set up to fully enjoy your post-catering life.
1. Prepare to work hard.
Much like catering an event, preparing your business for sale is hard work. Help yourself by eating well, resting well and exercising. Be sure your spouse and children are on board and supportive. For a while, you’ll likely be doing double duty—running your operation and preparing it for a sale. Pace yourself, but schedule time each week to work on the sale prep. If you have an off season, use that time wisely.
Remember: Complete privacy regarding your intention to sell is essential. Customers and employees alike may run for the exits if they sense signing a contract with you or committing to work for you may be short-lived. Mum’s the word, except to your most trusted family and essential professional consultants, who are bound by ethics to keep things private.
2. Start with the numbers.
Are you profitable? Profitability will determine not only if you can sell your company, but also its price. Here are some basics to get you started:
• If you haven’t already done so, transfer any paper accounts to a digital recordkeeping system such as QuickBooks. Hire a professional bookkeeper or CPA to set this up and work on your books weekly. Sit in with them, and ask them to explain anything you do not understand. This not only allows you to analyze the current profitability of your business, but to calculate past performance and estimate future profitability. No buyer will be interested in your business if you cannot produce credible financial results over at least three years.
• Invest in catering-specific management software (if you haven’t already). QuickBooks won’t allow you to put together an order for turnips or turkey legs, schedule vehicles or employees, write a menu or build an ingredients list. If you are doing these things with a paper system, that needs to change. It’s inefficient and it hinders your ability to communicate to a new owner, who may not have any catering or food experience.
There are lots of software choices available. None worked for our specific operation, so with the help of consultants, we built our own in Microsoft Access. I tracked what we spent over 25 years building and refining the software and listed it as an asset. It is our single-most valuable one.
• Know your food costs. You should already know this…if not, get going. This can be done using simple spreadsheets or a dedicated catering business software. Once you know your food costs, start working with vendors to reduce them as much as possible. In addition, start to examine your processes with the goal of eliminating waste.
• Know your fixed expenses: rent, salaries and utilities. Again, you should already know this, but if you don’t, now is the time to begin. Numbers can be pulled from a profit and loss statement using your financial software. Again, examine your vendors and work with them to get costs down, making sure not to sacrifice quality.
• Adjust your pricing accordingly. Based on the above analyses, start charging what you are worth. Check out your competitors’ pricing.
• Evaluate the business in terms of risk. Will a buyer be willing and able to assume the risk of paying you for your operation?
• Stop with the owner perks. Personal food, fuel, lodging, vehicles and vacations are all tempting “expenses” you are likely incorporating into your business. Stop. To a buyer, they are just expenses. And expenses work to lower actual, verifiable profits.
3. Get your staffing in order.
Make sure your staff members are well trained and given the opportunity to improve. Document your management systems.
• For on-site staff, ask customers for feedback. Share this information with staff, and follow up immediately if there are issues. This type of customer feedback can also be useful when communicating about the human assets of your business to a potential buyer.
• For new staff, develop a training plan that is simple and easy to follow, and develop checklists for competency that can be shared with a buyer.
• Each area of employment (e.g., office, sales, managers, on-site staff, bakery, cooks, servers, etc.) should have a manual, specifically outlining all tasks. Keep it simple and task-focused. For example, office staff should be able to refer to a well-written manual that explains how to create a proposal. Bakery staff should be able to look up and easily follow your fudge brownie recipe.
• Build an overall professional employee manual outlining procedures and policies. Seek professional legal help for this as laws change frequently.
• For managers, build a specific review system, and base bonuses on scores.
• If you have weak or problematic employees, find ways to weed them out. Seek professional guidance from your state’s department of labor and your attorney.
• Hire extremely well from here on out.
4. Focus on quality.
When possible, weed out cheap ingredients or underperforming menu items. Customers order the good stuff—and talk about it. Simplify where possible.
• Upgrade staff uniforms and consider establishing a “good grooming” policy.
• Buff up your appearance by upgrading on-site equipment, such as chafers, utensils, etc.
5. Get your systems in order.
Everything should have a documented system that allows a qualified individual to step into and become proficient at their role quickly. Remember—it expands your pool of buyers if you have systems in place that can be executed by a buyer with either zero or 25 years of catering experience. Here are examples of systems manuals that we have in place:
• Marketing
• Lead management
• Booking events
• Scheduling staff and vehicles
• Food and disposables ordering
• Food prep, transport, setup, serving
• Services, such as plating, clearing, beverage service, etc.
• Bookkeeping
A great reference tool is The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael E. Gerber. The systems approach Gerber outlines in the book transformed our business.
In addition, make sure to organize your company documents in the following categories: Corporate; Real Estate; Tax Returns; Licensing; Employment; Vendor Contracts; Accounts Receivable; Accounts Payable; Insurance; and Retirement Plans. Store these crucial documents in a good safe or safety deposit box.
6. Update your equipment and other assets.
Whether you own or rent, fix broken or outdated items, or get your landlord to do so. Update signage and light it well; add solar lights if there’s no power source. Update landscaping. Add a fresh coat of paint. No buyer is interested in buying or renting a dump.
• Get a professional assessed value if you own. It is not a bad idea to get a professional inspection done as well, and fix anything on the list or at least bring things up to code. Keep and organize all receipts for the future buyer.
• Replace or repair anything that is out of order, and make sure equipment maintenance records are up-to-date.
• If you rent, renew your lease with very clear terms so a potential buyer knows what they are getting into. If necessary, relocate if you are in a bad neighborhood or a poor geographic location.
• Repair your vehicles and/or trailers. Paint and re-letter them if needed. Perform routine maintenance. Clean the interiors.
• Get your property taxes and/or rent current.
• Clean. Then clean again.
• Update your website. Nowadays, this is the face of your business. Nothing will scare off a buyer like a 1998 website.
• Develop a simple, well-organized file for all equipment. Include VIN, plate, serial numbers, etc. Record maintenance and repairs.
7. Take inventory.
It is very likely that your business will go to a buyer in what is known as an “asset sale,” which is the purchase of assets and liabilities. While there are many considerations when negotiating this type of transaction, tax implications and potential liabilities are the primary concerns. Bottom line: You need to know your assets, in detail, their current value, and replacement or market value.
Take a detailed inventory of everything in your operation. The inventory should include a description, date of purchase, approximate current value, and any pertinent serial numbers, warranty information, etc. Here are some ways you could categorize your inventory:
• Vehicles/trailers and vehicle/trailer contents (run a Blue Book on each one and put a copy of that in the file)
• Disposables (plates, napkins, foil pans, forks, etc.)
• Consumables: frozen, refrigerated, dry
• Smallwares: kitchen use and on-site use
• Cooking gear: ovens, pots, pans, etc.
• Washing gear: sinks, dishwashers, etc.
• Office equipment
• Office supplies
Be sure to date your inventory for each category and keep it current.
8. Enlist professionals.
Just like in your catering business, you will need assistance from others. Essential professionals include:
• Attorney who specializes in business sales
• CPA
• Bookkeeper
• Banker who is a preferred SBA lender. (While you are not the one acquiring an SBA loan, it is very likely the buyer will be, and probably with SBA backing.) Find a banker who can advise you on the sale/purchase process so you know what to expect. Pay them for their time, or at least offer to refer them when appropriate.
• Financial advisor. You will need one to advise you on retirement account transfers and how to handle (with your CPA) the substantial income you will realize once you sell.
• Business broker. If you’re extremely knowledgeable, you may not need a broker. But if this is your first time selling, you will need this specific professional for organizing, packaging and marketing your business, and advising you along the way. A good broker does way more than find a buyer. They will also be a great source of referrals to other professionals. The experienced broker we used worked on our behalf for years and didn’t collect a dime until the sale was complete.
9. Delineate your legacy.
When you depart your business, your legacy will exist in the minds of the public, your customers, your family, your vendors and your employees. Before you consider potential buyers, you must first consider what they will do with your company when you are gone.
When describing what you would like your legacy to be, consider these questions:
• What is the general perception of your company? Think quality, think value, think style.
• Is it important to you that you have been good at fulfilling your obligations? Think vendors, think customers, think employees.
• Is there a moral component to your operation? How have you treated people?
Use these questions to write a few paragraphs about the legacy of your company. Describe your relationships; catering is a huge people business.
Once you have your clearly delineated legacy, it will help you when you target potential buyers. Since you have such a great business, and have prepared it meticulously for a sale, you will get to choose a buyer who will uphold your legacy. This is a great position to be in.
Imagine pouring your life into building and operating a successful business, only to sell to a buyer who has no regard for what you created. Picture your long-time customers, vendors or employees being let down by a new owner who doesn’t deliver a quality product, doesn’t pay vendors on time or reduces wages right out of the gate. Believe me: Your legacy is important.
Final Notes
Some business owners have many of the items on this checklist taken care of already, and some owners very few. Just like a catered event, most of the work involved in selling your company will be in the prep. Follow the listed steps, and you will be ready to serve your catering business to the world.
ABOUT THE AUTHOR
Dale Vaillancourt co-founded, co-owned and co-managed a successful catering company in the Minneapolis-St. Paul area for 43 years. He prepared for sale, then sold, his business and related real estate in 2024.
To contact Dale, send an email to [email protected].
