How to present your Inn for sale
First is the disclaimer, I am not one of those industry experts that is qualified to come in and do a valuation of your property. I have no specialized training in the Bed & Breakfast industry or appraisal of such property. With that out of the way, what I can tell you is I am a buyer who desperately would love to own tourist lodging property. I find the industry of small lodging absolutely fascinating and have studied it for close to four years now. Thus this website came out of my sheer inquisitiveness and enthusiasm.
Purchasing Our Inn
My husband and I have beaten quite a path on our way to purchasing an Inn, and while we aren't industry experts, we feel we have gained a view from the buyers perspective that we could share to help Innkeepers prepare themselves as they get ready to sell their Inn.
As a buyer looking at the Inn for sale there are a few criteria we considered important.
Price: Of course price was very important to us. We did not have cash to throw at the wind and seldom will you find a buyer who does. In the current tight economic times, everyone is very conscientious of where their money is going. Consumers want to know they are making good investments.
Value: This may not always equate solely with price, but the price certainly plays into it. We are looking for the intrinsic worth of the establishment as a whole which includes all tangible and intangibles of the business.
Location: My husband and I attended a training class for prospective Innkeepers, and one essential element to finding a success Inn is “Location, location, location.” The location of the Inn is not only important in determining the success of the business, but one's personal satisfaction with where they live.
Potential: Is there a possibility of strong future business growth, and are there numbers to back it.
Financial Records: Are there organized financial records.
Self Sustaining: Is the Inn self-sustaining. Can the Inn hold up under its' own weight or break even? Does the Inn support more than itself?
Structure Characteristics: Is the Inn an establishment we can see ourselves living in? We visited many Queen Anne Victorian homes, and my husband really had difficulty acclimating. I think we could make a go at it, but comfortable, maybe not!
Buyers like lists
Serious buyers will want complete records of the following
- Business Financials
- Utility Information
- Improvements made to the property
- Fixtures and Furnishings
So, as a seller, if you know what the buyer is looking for, why is there still a disconnect when it comes down to closing a deal on the property?
Not entirely unlike selling a home, owners tend to over-estimate what their place is worth. There was no denying we looked at some stunning properties, and if a bank issued loans on beautiful pictures, and picturesque mountain or stream, it would have been a slam-dunk! Being the buyer-type who needed financing, we quickly discovered bankers find the whole aesthetics thing rather academic. They want “the numbers – just the numbers, please.”
Through the Buyer's Eyes
As we ventured along our quest for that perfect tourist lodging property we couldn't help but keep a mental note of what each place was lacking that eventually took it off the bargaining table or didn't even get it to the bargaining table.
Our Red Flags
The Innkeeper has something to hide: This was the one who insisted we visited his beautiful home (in his eyes) before we could even see IF financial records existed. If you are a smart buyer you know that's an instant kill-joy! In the end, it could have been a wonderful Inn – who knows? Chances are, however, if you have to coerce people in, are you are hiding inequities in the property? This is wasting everyone's time! If you are a serious seller, be upfront with a buyer.
Inn shows years of neglect: Innkeeper has been there many years and there is typical maintenance that is simply sitting waiting for the buyer to take over. C'mon Mr./Ms. Seller, it might take a few years to get the business in shape, but don't put it on the market as a dump. Buyers can't go to a bank and ask for a “Fixer Upper” Loan.
Low Occupancy: Low occupancy is also known as “no income.” Right? If you want the buyer to take you seriously your Inn HAS TO HAVE INCOME. Unless you strike gold – you get that buyer who is independently wealthy and only wants a hobby, every other buyer, looking to build a business, is going to be laughed right out of every bank they walk into.
Business is dying a Slow Death: We have come across beautiful properties but the last three years of financials look terrible because
- Owners are semi-retired
- The Innkeeper no longer needed all the rooms at full capacity to support themselves
- Property was once very profitable but then one of the owners got sick and half of the business had to be closed
- Owners are tired of the property and now they only use it as a family guest house
- Close their doors because they could not continue to operate it.
“Heads on Beds” pay cash, beautiful mountains and streams do not! No matter how beautiful the property, how profitable it once was, what a great location the property is in, or what wonderful potential it has, in the end, it is a business and has to look profitable to lenders. If a buyer tries to take a “slow death” property to a lender, chances are they will be treated to a cup of coffee, enjoyable conversation about how lovely the community is, and then escorted to the door with the statement “we wish you luck with your future endeavors.” No deal!
Sellers can argue that the right buyer will come along and pay cash for what the property is worth. Think about it, if it takes 2-3 years to get a “potential buyer”, then you eliminate many from the finance pool by demanding that rarer “cash buyer”. It may be years before you are able to sell. Some sellers take less by opting to sell as a single family home instead of a business. We have witnessed Inns that sit for an amazingly long time!!
Seller's Call to Action
This should be a wake up if you are a serious seller. If you really need to get your Inn off the market, start 2-3 years BEFORE you need to sell your Inn and do the following:
- Get your finances in order and organized
- Hire someone who specializes in valuation and assessing the sale price of an Inn and targeting your financial numbers.
- Put stock in your marketing and give your occupancy one last heave-ho! Potential buyers and a bank will be impressed.
- Freshen up decor'. Remember no matter what century your Inn was built, modern decor is all the rage, for both guests and buyers. No one is shopping for old antique furniture.
- Now is the time to make necessary repairs and even do some minor updates. While you don't need to go all out, spending thousands of dollars, replacing cabinet hardware, changing out wallpaper for paint, or replacing old carpet will go a long way to impressing a potential buyer.
- First impression counts, so it's time to work on curb appeal.
Check this out, for more information on preparing your Inn for sale.