Selling a business can be a complex affair, and every industry experiences its own problems and challenges. Initially, you need to establish your goals in selling, identifying potential buyers, and showing your business to the best advantage. If you are considering selling your business in the hospitality sector, such as a hotel, hostel, guest house or bed and breakfast, our expert team of business transfer agents with over 100 years’ collective experience can guide you throughout the process.
Selling a hotel business can present a cost-efficient route that could secure quick ownership to hospitality businesses for buyers. By recycling your business through ownership transfer, future hoteliers can utilise the existing structure of the business with minimal start-up investment required. The cost of building a new property and forming a brick and mortar business will largely outweigh that of resuming hotel operations from an existing property.
The business sale market for hotels is populated with industry leaders and existing hotel owners searching for acquisition opportunities to grow their existing hotel group. From veteran hoteliers, franchise owners to new entrants, business owners with funding earmarked for acquisitions are raring to acquire growing businesses. The Selling My Business team can help forge the link between prospective buyers and hotel sellers through a verified database of over 10,000 registered buyers.
There are many reasons you may wish to sell your hotel, from owner retirement, health reasons, alternative business interests or because you have naturally reached the end of your tenure as a hotelier. Selling your hotel provides an exit route that can generate substantial returns and present a lucrative opportunity for prospective buyers searching for a hotel to acquire.
As far as industry-specific challenges are concerned, hotels businesses and accommodation providers currently face significant Brexit staffing issues, following free movement restrictions imposed across Europe due to the UK’s departure from the European Union. Before we look at the process of selling your hotel, let us identify some further challenges that could impact the price you achieve from the sale and a prospective buyer’s view of a good investment.
Consumer spending and the economy
Largely reliant on consumer spending levels, the hotel industry suffers greatly during times of recession and a vulnerable economy. As the hospitality industry recovers from turbulent trading during the coronavirus pandemic, the industry is working overtime to compensate for substantial losses of income. Following the unprecedented sector standstill due to Covid-19, pressure on the household purse due to constant rises in the cost of living has a direct effect on business profits. We walk through a handful of challenges experienced by hospitality businesses and hotels.
Hospitality businesses that fail to harness the benefits of social media are missing out on an opportunity to personalise their brand and engage with customers on a higher level. Social media marketing requires a strategic approach that links with existing forms of marketing and advertising.
Rising staff costs
A rise in the National Minimum Wage (NMW) and the introduction of the National Living Wage (NLW) for those aged over 25, have significantly increased operational costs for hospitality businesses.
Selling a business requires significant planning to achieve the maximum value. It is advisable to begin planning several years ahead, so you can boost profits and ensure the business is in peak condition when it goes on the market.
So why are you selling your business? Maybe it’s due to retirement, or you simply wish to move on to a new venture – whatever the reason, you will need to articulate it well to buyers and instil confidence that your company is a sound investment. Preparing your business for the sale process is instrumental to advertise your hotel on the open market, negotiating a sale price and sharing company information on a confidential basis.
We will conduct a full appraisal to establish how much your hotel is worth and assist throughout the pricing process. When conversing with prospective buyers, you will need to present documentation that provides a snapshot of your business. Functioning as a sales pitch, the information should be carefully handpicked to cover the state of the financial health and operational structure of your hotel, typically included in the Information Memorandum.
The Information Memorandum
This is a document that contains general information such as why you started the business, its trading history, customer base, status in your market, and your reasons for selling. Also included will be an outline of its financial position, details of all assets and liabilities, and information about staff and supplier contracts.
You should obtain professional assistance when putting together this document, as it will be used as the initial method to attract potential purchasers. It will also be in your interests to hire a business broker with industry experience as they can talk with interested parties on your behalf, and allow you to remain at a distance from negotiations if necessary.
Negotiating the best deal
Once parties interested in your business have come forward, and appear to have the financial capacity to go through with a purchase, you should be able to identify one or two strong contenders.
More detailed negotiations can then follow, resulting in a period of buyer due diligence where the purchaser and their professional advisors look closely at your accounts, staff contracts, asset valuations, and other crucial business areas.
Letter of Intent
When an agreement in principle has been reached, the details are laid out in a Heads of Term agreement (also known as a Letter of Intent). They might include a warranty or indemnity to protect the buyer in the face of inaccurate information having been given.
You should be aware that a warranty or indemnity may result in a compensation claim being made against you, should the information you have provided to the buyer be inaccurate. The Heads of Term agreement may or may not be legally-binding, but it will contain information about payment methods, and whether you need to stay on in the business for a time following its sale.
This is called an ‘earn out’ arrangement and is sometimes necessary to encourage a sale if the buyer does not want to pay the full price as a lump sum. They pay a reduced amount, with the remaining being paid in instalments under certain conditions based on business performance.
During the negotiations stage with prospective buyers, you may decide to protect sensitive company data and financial information with a non-disclosure agreement (NDA). An NDA legally binds interested parties to secrecy that could otherwise fall into the hands of competitors, suppliers or employees.
We conduct due diligence into parties that genuinely express interest to help separate credible and financially stable, prospective buyers from those that may be ingenuine. The Selling My Business team will support you throughout this stage and conduct the necessary background checks and investigations to ensure that your sale processes smoothly.
For more information on selling your hotel business, call one of our industry experts at Selling My Business. We have a record of engaging in successful hotel sales and acquisitions across the UK and can begin your process today with a free consultation.
"I’m grateful to the SMB team for sourcing a buyer for my B&B which has been running for 15 years now. They did the heavy lifting and ensured that I was in the loop for key sale negotiations."
Jo – Bed & Breakfast, Brighton
Selling My Business are UK hotel valuation experts with a strong track record of securing successful hotel sales across the country. Our knowledge of the industry includes an extensive understanding of similar hotel sales to help establish industry best practice. Valuing a hotel business consists of calculating the value of company assets, including intangible assets such as copyright agreements. The physical property, internal structures, fixtures and fittings will influence the valuation of your business, including any new and historical constructions.
Hotel profit and loss will be influenced by annual room revenues and additional income streams, such as in-room dining, hotel amenities and leisure offerings. The growth potential of your hotel business will also contribute towards the value of your company and the exploitation of capitalisation opportunities. This can include extending your hotel to function as an events venue, such as for corporate conferences and weddings.
We have a dedicated, in-house, valuation team who are on hand to provide a hotel business valuation. Our industry experts are more than familiar with the business landscape on a national level, boasting over 100 years’ collective experience. The SMB team will explain how to value a hotel and leisure business, and the associated factors which influence the worth of your hotel.
The Selling My Business in-house valuation team have a wealth of experience in the valuation of hotels and similar assets in the hospitality sector. Our team of valuers work closely with leading hotel institutions to deliver a first-class appraisal service, assisting in the sale of all-sized accommodation businesses, including hotels, hostels, and serviced apartments.
The Selling My Business team are familiar with the intricacies of valuing a hotel business and can share knowledge relating to comparable sales. We will work closely and openly with hoteliers by explaining how to value a hotel business and we also offer a free hotel business valuation.
If you’re considering selling your business in the hospitality sector, the Selling My Business team can support your vision by valuing your hotel business and sourcing a buyer. Before stepping into negotiations with prospective buyers for your hotel, it’s important to understand the worth of your company, to start at a reasonable sale price and maximise market value.
Contemplating selling your business? Our free, comprehensive guide will walk you through how you can sell your company. Our FREE guide covers all of the essentials, including:
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