Making the decision to sell is only the first step in what can be a long and challenging process - if you go about it the wrong way. But following a few simple guidelines can really help to maximise your asking price and minimise the amount of stress involved, as Elly Earls discovers
Deciding to sell your hospitality business is a huge step. Unfortunately, it's only the beginning of what is often a long series of meetings, negotiations, assessments, valuations and, potentially, repair work.
Moreover, in the current financial climate, you may have to accept a lower asking price than you had hoped to achieve. Yet, while there's no avoiding the fact that selling your property is going to be tough, there are several simple steps you can follow to make the process as painless as possible.
First and perhaps most importantly, you must choose your agent wisely. "Check on their experience in your sector," advises Nick Earee, divisional director at Fleurets.
"Ask what they've sold in the area of a similar type, understand who will be dealing with your sale and what they will be doing to market your property. Don't be misled by unrealistic sales advice that seems too good to be true because it almost certainly will be."
For David Creamore, director of London hotels at Christie & Co, there are several questions that must be answered by any prospective agent, including:
How long have they been in the industry?
â- Do they have any experience of hotel valuations in the locality?
â- Have they been involved in any challenging deals and what did they do to overcome these issues?
â- How would they propose to handle the transaction from initial instruction to satisfactory completion?
But it's timing and price that can really make or break a sale, according to Simon Chaplin, director and head of restaurants at Christie & Co. "A good national agent will be able to suggest when best to market and give a realistic assessment of a suitable asking price. If the timing and price are wrong, potential buyers can be missed," he says.
There are a number of ways to get a realistic idea of the price at which you should be marketing your property. "Look at recent adverts and agents' websites to see how your business compares to others," suggests Chaplin.
"If the price you expect is higher than other similar businesses, make sure you highlight the attributes that make it stand out from the rest.
"When setting an asking price, you need to look at trade levels, profitability, tenure (freehold or leasehold), condition and if the goodwill element is transferable."
In the current financial climate, it is also crucial to be realistic about what buyers can afford. "Often, setting a higher asking price will not encourage interested parties to come forward from the start," confirms Davis Coffer Lyons restaurant agent Rob Meadows. "It is much better to have people coming forward with low offers to negotiate them upwards than no offers at all.
"It is also important to attempt to conduct a quicker exercise, as a property that has been marketed for an extended period may draw negative attention from serious purchasers."
Once a suitable asking price has been agreed upon by yourself and your chosen agent, it's time to put together a marketing strategy that is relevant for your business. For James Shorthouse, head of Licensed & Leisure at Colliers International, marketing your property to the correct target audience is key. In some instances, where there is a small identifiable group of potential buyers, for example, a discrete off-market campaign will be appropriate, but under other circumstances a broader campaign is much more suitable.
"For a closed pub which may have alternative use possibilities, ‘For Sale' boards, press advertising and press releases can ensure that the important local market is fully covered, as well as trade buyers, who will already be registered with a specialist agent," Shorthouse adds.
"Marketing positioning is crucial," Meadows agrees. "If the business is specific, it will only be of value to purchasers who want to operate a similar specific business such as an organic pub or a muffin and cupcake bakery. It is important to realise what aspects have a transferable value at your business."
You never get a second chance to make a first impression, so, when preparing a property for sale, don't forget to take into account even the most seemingly insignificant cosmetic issues. "A premises that is shabby around the edges can imply that it is not doing well and there is not the money available to carry ongoing repairs," Meadows says.
Simple steps you can follow include tidying up car parks and gardens, making sure the flower baskets are stocked, repairing external joinery and replacing missing signage.
It's also important to keep in mind that, if you are a trading business, the inventory is generally part and parcel of the sale. "A buyer will want to know that when they take over on a Monday, they can trade on a Tuesday," says Chaplin.
"Items of a personal or sentimental nature can, of course, be removed, but these must be identified at an early stage so the purchaser does not receive any nasty shocks as completion approaches," adds Julian Troup, head of the UK Hotels Agency at Colliers International.
But any buyer's most important consideration will be the current trading position of your operation. "You should ideally provide the last three years audited accounts together with the last four VAT returns," Earee says. "If the accounts do not split the turnover then it would also be of benefit to get the split between wet sales, food sales, machine income, accommodation and so on."
For Troup, complete trading accounts are particularly important in the hotel sector. "All hotel sales are subject to a greater degree of due diligence being carried out by buyers' advisors and their proposed lenders; the days are gone of being able to rely on a single page of historic trading information.
"Sellers should also be able to highlight any non-recurring expenses, as EBITDA is king in the current climate."
Another big talking point, when it comes to leasehold sales, is dilapidations, and for Chaplin it is absolutely vital, if you have a "full repairing and insuring" lease, to ask your landlord to carry out a dilapidations survey before you go to market. "You can then negotiate or undertake any repairs that they may ask for, which will avoid your buyer ‘chipping' when they come to light further down the line," he explains.
If you follow the steps outlined above, the deal should, in theory, close itself, but it's important not to take your eye off the ball at any point. "When a deal is struck, it is only the beginning and you need to build into your planning some ‘wriggle room', either on timescale or price," Chaplin concludes. "Finally, remember, that while you may be selling for less than you want, once sold you are the buyer and can strike a bargain elsewhere."
case study: Create a bespoke brochure
Stanmer House, Brighton
In November 2011, award-winning pub operator Whiting and Hammond secured its seventh site, the leasehold interest in Stanmer House, Brighton. The Grade-I listed manor house, set in 4,600 acres of public parkland, has benefited from an extensive restoration, which saw it reopen in 2006 as a venue for weddings, meetings and corporate events.
The deal was handled by the Fleurets southern office and owner Mike Holland was ‘delighted' with the result.
According to divisional director Nick Earee, it is essential to work closely with the vendor to make sure you achieve the best price for the property, but also attract the right buyer.
"In the case of Stanmer House, we looked at the strengths of the business, including its fantastic wedding and conference business, and created a bespoke brochure, targeting potential purchasers; this also allowed us to capture the beauty of the venue," he says. "I'm delighted to say that the fantastic Whiting and Hammond pub co took the lease."
case study: Allowing the purchaser to proceed easily
Buccleuch & Queensberry Hotel, near Dumfries
The Edinburgh office of Colliers International sold the Buccleuch & Queensberry Hotel (and two adjoining cottages) in Thornhill, near Dumfries in May 2012.
According to one of the company's hotels directors, Alistair Letham, price maximisation is a difficult call in today's market. "Most deals are probably the reverse - price discounting from cash buyers coupled with a seller's need to sell," he notes.
"The sale of the Buccleuch & Queensberry hotel, a 12-bedroom traditional village hotel, was aided with the decision to include in the sale two mews cottages, allowing the seller to exit from all her property interested in Thornhill, and allowing the purchaser to proceed more easily with their plans to refurbish the hotel."
The refurbishment and upgrading of the property has already started and it will reopen shortly, ready for the late spring and early summer season 2012, with the improved facilities designed to appeal to locals and visitors alike.
Although the purchase price was not disclosed, Colliers International can confirm that the hotel was sold for close to the asking price of around £395,000. The purchase price of the two cottages was undisclosed.
Eight ways to maximise your asking price
1 Choose your agent wisely - an experienced agent with knowledge of your particular sector will be able to help you set a suitable asking price and market your property at the right time.
2 Market your property through the correct channels - it is vital to market your business professionally, convincingly and to the right target audience.
3 Be realistic with your asking price - prices have changed significantly over the last few years so marketing your property at an inflated price can harm the sales prospect.
4 Capex is king - remember the importance of capital expenditure. Buyers are likely to want an advisor to look at the building for them and areas where capex is required will be taken into account in the negotiations.
5 Speed is of the essence - a property which has been on the market for a long period can appear ‘stale' and become more difficult to sell.
6 Make sure your accounts are in order - many sales fail when poor accounts come to light, as you lose the trust of your purchaser.
7 First impressions count - even flaws in the most minor details can put a seller off. Make sure flower boxes are filled, repairs are completed and the private accommodation is clean and tidy.
8 Be open and honest - the greater the transparency during the negotiating period, the less chance there is of having further negotiation take place when the property is under offer.
checklist: seller's documents
Once a sale has been agreed, both parties generally want it to move to a swift and uncomplicated conclusion. By providing the following documents at the earliest opportunity, you can maximise your chances of this happening:
â- A clear and unambiguous sale contract
â- Audited accounts for a minimum of three years as well as your last four VAT returns
â- A copy of your current lease and licence
â- The land registry plan, the site plan, the licensing floor plans and details of any planning permissions that have been granted
â- Details of all employees working in the business: their names, hours of work, rates of pay, length of service, job description, dates of birth and any other material terms of employment
â- Certificates, including: Corgi gas safety annual inspection record, electrical periodic safety inspection record (usually every 3-5 years), fire risk assessment, portable electrical appliances test (PAT) certificate, asbestos report/audit, health and safety records, energy performance certificates.