10 things to know before selling your accommodation business
Selling an accommodation business should never be a spur-of-the-moment decision. There are a number of considerations to make before you decide to put your tourism or hospitality business on the market.
Is your business in a good shape to sell? Is the market favourable to sellers or buyers right now? Is this the right time in your life to make the move? Do you have the time and energy required to focus on the sale?
When to engage an accommodation Business Broker
To better understand the current market, and the many selling decisions you’ll need to make, contact a specialist Accommodation Business Broker, such as our team, the moment you think that selling ‘might be on the cards’. We can save you time and bring you up to speed with a preliminary phone conversation.
Finding the right broker from the get-go is crucial to your overall sales success, too. The selling process for an accommodation business can be fairly time-consuming and complicated, so it’s important to work with a business broker that specialises in the tourism, hospitality or accommodation market, and has the right level of knowledge and sales expertise.
An accommodation business broker must also be well placed to help you with all the preliminary work, such as putting together your sales prospectus, understanding your regulatory obligations, as well as what financials buyers will expect to see before making their offer.
Business Broking is as much about the people as the property
Your broker will be working with you over a period of several weeks or even months – it’s quite a journey. So, make sure you feel comfortable with them on a more personable level from the get-go.
You need to be confident in your business brokers’ abilities to help you with all the preparatory work, as well as hear examples of how they’ve effectively marketed properties similar to yours. Your broker must demonstrate that they have an existing database of potential buyers, know how to develop a marketing campaign unique to your business, as well as do the all-important negotiation for you.
You’ve found your accommodation Business Broker – what next?
You’ll need to provide your business broker with quite a lot of information about your business, so make sure you check the credentials of your consultant to ensure they’re reputable before using their services.
Following are the main areas for consideration, when selling your accommodation business.
1. Understanding the selling process
Selling a business is a multifaceted process. How do you determine what it’s worth? How do you find a buyer? How do you keep your competitors, customers and employees from knowing it’s for sale?
A business broker will explain the entire process and advise you on the best next step for you and your business sale at this stage.
2. Preparing your business for sale
Preparing your business for sale can take months or potentially years to ensure its in the best sellable position possible.
To get the very best price for your accommodation business, you’ll need to make sure you can produce at least two to three years of profit and loss statements that are accurate and show maximum profitability.
3. Understanding your regulatory obligations
An experienced accommodation business broker will be able to advise you as to whether there are any requirements in your state or territory regarding the type of information you need to give potential buyers too.
4. Vetting prospective buyers
There’s a growing number of people looking to quit their nine-to-five jobs and find other more lifestyle orientated avenues to create an income, and tourism and hospitality businesses tend to be top of the list.
Your broker will also act as a shield, vetting the many inexperienced buyers inquiring about businesses like yours for sale. This task in itself can be arduous and a significant time drain, but a qualified business broker knows how to handle questions from buyers and decipher who is serious and worth pursuing.
5. Valuing your accommodation business
Valuing an accommodation business is not entirely based on business financials. Your broker must have a strong understanding of what influences a buyers purchase decision and what constitutes value in the buyer’s eyes.
Assessing the value of your assets, estimating future profits and working out how much goodwill you have established is an area that an accountant will assist with, but your business broker adds more weight to the value with their target market knowledge.
Be aware also that, revenue is a vanity metric. Buyers are interested in profits, not revenue. Your buyers will be interested in recent performance (usually the last 12 months) and its future sustainability and viability.
Buyers love to see growing revenue and profit figures, alongside future business plans and recent investments, including refurbishments or new equipment that will put your accommodation business in good stead for the foreseeable future.
6. Potential business profits versus actual profits
Unfortunately, most buyers won’t pay more for potential. Buyers are typically looking to acquire an accommodation business that is already successful, not an unproven business model.
For most, the purchase decision is based on finding a lifestyle business. They want your accommodation business to meet their personal goals and aspirations from day dot. They may not be entrepreneurial or financially driven, so lifestyle factors could outweigh financial metrics.
7. Sales negotiations – don’t just focus on price
Accommodation business owners who focus on nothing but the purchase price often get out-negotiated. If you ignore deal structure, tax treatments, non-price financial consideration, and the many intangibles that buyers seek, then you could end up leaving money on the table.
8. Sales negotiations – honesty is the best policy
Believe it or not, there is no such thing as a perfect business. Hence, transparency and honesty are most certainly the best policy when selling your accommodation business.
The faster you are able to respond to each buyers offer (through your business broker) as well as the more transparent you are and willing to disclose information, the better chance you have of making your buyer feel comfortable and happy to move forward and closing the deal.
Hence, your eagerness to assist both your business broker and your buyer will mean the more secure and successful your accommodation business sale will be.
9. Closing the accommodation business broking deal
Your accommodation business sale could be made up of a number of components and your business broker will give you a detailed list of the types of items that are typically included in your agreements, such as the;
- Sale price.
- Deposit amount (usually 10% of the sale price).
- Settlement period.
- Manager’s residence.
- Units for lease.
- Working hours.
- Handover training.
- Pre-existing maintenance company arrangements.
And remember, you may need to compromise to some extent on things to get the best outcome or to get your sale over the line.
Once your accommodation business is sold, you’ll need to make the legal transfer, which includes;
- Transferring leases, licenses and permits.
- Finalising tax returns, activity statements and instalment notices.
- Transferring your business name.
10. Never judge a buyer by first appearances!
You never really know who you are dealing with or the buying power that your potential buyer has. But using an experienced negotiator in the form of your business broker will go a long way to ensuring you make the best of each selling opportunity.
Experienced buyers will often ask a seemingly endless number of questions in an attempt to dig up inconsistencies and red flags.
Someone asking what appears to be a simple question, on the other hand, could be a potential buyer that is new to the tourism or hospitality industry and has deep pockets and the willingness to make the move.
Entrust us with your accommodation business sale
At Accommodation Business Brokers we’ve been in your shoes, running accommodation businesses, so we know how to effectively communicate the opportunity a tourism and hospitality accommodation business brings to its new owners.
We’ve also associated ourselves with some of the industries best financial, accounting and legal experts to ensure that together we’re able to offer holistic advice in order to construct a viable and highly successful business sale for you.
Entrust us as your business broker and we promise, you’ll be pleased with the end result.
Contact us today for a no-obligation discussion.