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How a Closed Business Can Be Sold Despite Zero Customers

6 minute read

How a Closed Business Can Be Sold Despite Zero Customers

A closed door, with a piece of paper typed to the doors reading: "Closed due to COVID-19". Depicting how a closed business can still be sold to a small business buyer.

Brenda Krauss is a Senior Online Marketing Specialist for BizBuySell.com, BizQuest.com and FindaFranchise.com.

In March of 2020, when COVID-19 was declared a national emergency and much of the U.S. began shutting down, Andy Fischer, Business Intermediary for Murphy Business Sales in Florida, had just sold a restaurant. The story begins five months earlier, when Fischer received a referral from a real estate agent who had a client wanting to sell his restaurant.

The client owned a high-end Spanish restaurant located in Miami. He invested over $500k between improvements and working capital to start the restaurant, but had unfortunately been losing money ever since it opened. After a year and a half trying to make the restaurant work, he decided it was time to find a buyer that would help him recoup a portion of his initial investment, even if it meant just selling the assets of the business.

This transfer method, known as an “asset sale”, is popular among both buyers and sellers. For sellers, it provides an exit route for businesses with zero cash flow, in distress or even closed completely. Buyers on the other hand can acquire the “guts” necessary to quickly open a business. Some asset sales only involve equipment and inventory, while others can include business permits and even real estate. These types of sales are extremely common in the restaurant sector, where starting from scratch can take a year or even longer before becoming fully operational.

Setting an Asking Price that Will Make Sense to a Buyer

In some situations, simply tacking a price tag to each asset and listing them for sale individually or as a collective is all it takes to execute an asset sale. However, in this instance, the restaurant was tied to a multi-year lease, which needed to be accounted for in the deal. As such, it was important for Fischer to understand why the business failed.

The restaurant operated at the ground floor of a residential property and in a neighborhood with hardly any foot traffic and little parking. It simply was not an ideal location for a high-end restaurant and instead better suited for a casual endeavor. With that in mind, Fischer set out to paint a picture of what the restaurant could be worth if run successfully and not based on its current status.

He looked at all the assets, including the kitchen set-up, furniture, fixtures and outdoor patio. Next, he researched the market and looked at the sale prices of similar restaurants in downtown Miami. This helped him gauge how much a buyer would be willing to pay, which Fischer relayed to the owner. Not surprisingly, the price was lower than the owner expected, especially given his desire for a quick sale.

Fischer advised the owner to market the restaurant at a more reasonable price and be prepared to lower it over time. “In these types of situations, they always want to sell immediately. As a broker, I always tell them they need to be patient. It takes an average of 9 months to sell a business, he explained.

The owner was reluctant to lower the price. Fischer explained that he needed to look at it from a buyer’s point of view. The price needed to be attractive enough so the buyer would see it makes sense. The owner finally agreed to lower the price incrementally, starting at $350k.

Finding a Buyer and the Art of Working Out a Deal

As a business broker, Fischer had a wide network of contacts to market the restaurant. He listed it on BizBuySell and reached out to all the brokers he knew who specialized in restaurants. He also had many Venezuelan clients in the U.S. who were looking for investment opportunities. And since he was a member of the Business Brokers Association of Florida, he was able to co-broker the listing with other members.

Five months later he found someone who was interested in buying the restaurant. The buyer really liked the outdoor patio set-up and the kitchen had everything he needed. Plus, the permits were already in place, which would make the approval process for new ones much easier. He said he was planning on opening a mid-range restaurant, which was a good fit for that neighborhood.

Still, there were a few issues that needed resolving before the buyer would consider making a deal. The restaurant needed to have more parking, so Fischer reached out to the parking company and was able to negotiate for more spaces.

The other issue was the lease. The landlord was tough and insisted on drawing up a new 5-year lease with incremental rent increases. He also refused to return the seller’s security deposit. Nonetheless, after meeting with the landlord, the buyer was able to work out new lease terms.

“The lease was an important part of the transaction,” said Fischer. “They had 3 years left on it with 2 options to renew. The good thing was, they didn’t have a personal guarantee on it so they were able to get out of it.”

To motivate the buyer, Fischer offered an incentive. If the buyer agreed to close the deal by the end of month, he would get a discount. After some negotiation, the owner finally agreed to sell the restaurant for $132k. The buyer paid all cash.

For anyone interested in an asset sale, Fischer has a few words of advice:

  • For those who are looking to open a new business, a distressed business can save time and money. It only requires a few short months of downtime to do remodeling before opening it up.
  • It’s unwise to start a restaurant from scratch. It can take up to a year and a half before you get all your permits, set up you grease trap, etc. The permit part for a restaurant can be very complicated.
  • There are many good opportunities out there. It’s a good time to buy, as there are quite a few distressed businesses for sale.
  • For those who own a distressed business, there are plenty of buyers looking for opportunities. It’s not impossible to sell. You just need to price it right.

About Andrew Fischer

Andy Fischer has been helping clients to buy and sell businesses for over 20 years. Originally from Venezuela, he earned his MBA, and then worked for CitiBank, before starting his own investment banking firm. He spent the next 12 years specializing in mergers and acquisitions, tackling many large-scale, complex transactions, including those involving the fourth largest bank and the second largest insurance company in Venezuela.

Fischer then decided to move his family to the U.S., so he sold his company and settled in Miami, Fl. With his background in investment banking, becoming a business broker seemed like a natural next step, so he got his real estate license and opened a Murphy business brokerage franchise. For the past 10 years, he’s been handling small to mid-size transactions.

Fischer has been through many changes since his investment banking days back in Venezuela. Even with recent disruptions to the U.S. economy, he sees opportunities. In many ways, now is a great time to buy a business.


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Brenda Krauss is a Senior Online Marketing Specialist for BizBuySell.com, BizQuest.com and FindaFranchise.com.
Brenda regularly writes about small business trends, growth strategies and exit planning, and develops educational materials for entrepreneurship. She has over a decade of experience in marketing and communications for business, commercial real estate and financial services. In addition to writing, Brenda enjoys traveling abroad and exploring the outdoors.