Inn Consultants and Brokers Since 1993

Rick Wolf and Peter Scherman (that’s Rick on the left and Peter on the right) are both experienced speakers who have presented on a range of innkeeping related topics at the state, regional, and national level. They gather and analyze research for the Innkeeping industry and welcome the opportunity to share it with others. Contact Us

The B&B Team
 

Anatomy of an Inn Sale

by Peter Scherman of The B&B Team

Competitive athletes share an above-average understanding of the human body and how it works. They rely upon this understanding to prepare for their events by knowing how to stay healthy, increase their strength, and hone their skills to come out a winner. The athlete learns that her body is not just skin and muscle, but dozens of organs that must work together perfectly. She relies upon her own abilities as well as the expertise of doctors, trainers, nutritionists, coaches, referees, and enthusiastic fans. That athlete is you, the innkeeper.

The decision to sell your inn is rather like deciding to take up competitive running, except that in this race, the dash for the finish line must be in tandem with your competitor, the buyer, who is more a running partner than opponent, though it may not always seem that way. It’s called “win-win” racing!

Once the decision is made, you must decide if sprinting, cross country, or a marathon is your preferred race. Like the runner whose finish line is a ribbon across the track, the finish line in the inn sale race is simple: the transfer of ownership from one person or entity to another. If you were running a race, you’d need to think about distance, grade, curves, course surface, timing and pacing, conditioning, and the competition. In selling an inn there is the property itself; the furniture, fixtures, and equipment; there are pricing and marketing, showings to prospective purchasers, offer and acceptance, contracts and side agreements, inspections, loan applications and approvals, income and inventory verifications, and, finally, an exchange of money and title. What happens when one of them fails? Like the human body, can the sale become stressed, ill, or even die? For anyone who has experienced a troublesome or lost sale, the answer is obvious.

After deciding to race (sell), the next step might be to consult a doctor (inn broker or consultant) for a physical to assess the overall health of the business and to help establish a price. Your trainer (again, the broker) can then advise on what conditioning you need before running (preparing the property, inventory, financial records, etc.). Lastly, your coach (hmm, who could that be?) will show you how to make it to the finish line without serious injury (a closed sale at an acceptable price). That broker may also have to act as referee along the way. This is your team.

After making the commitment to sell, listening to the doctor’s advice on pricing is critical. Pricing is very prone to illness, as people without experience often try to perform one of the most critical operations of the entire sale process. Instead of starting off their race in good trim, stretched, and warmed up, they begin with a price that, far too often, if not obese, is at least overweight. Just as poor diet and lack of exercise can lead to health problems and poor performance, an inflated price sets the stage for a prolonged illness, er, inn sale. You might end up in a grueling marathon when all you wanted was a quick sprint or a nice cross country jog.

Let’s assume that the innkeeper has done all the right things, is in good shape, knows the length of the race and how to train for it, and the inn is now for sale at the right price. Heart and lungs are good, brain is in synch. Now comes the time to train (market the property), toning the muscles to look buff (making repairs), taking professional pictures to show off in the best light, and packaging the presentation in one of those spandex suits (comprehensive prospectus). After all, when a prospective buyer takes in all that visual stimulus, you want him to come knocking. But here’s the next area of potential weakness.

Can you really go running with everyone who shows up at your door, prospectus in hand, wanting to preview the track? Is your prospective running partner in your league, or is he maybe a bit too thin to make the cut? In other words, do you know if he can afford your inn? Many inn sales experience leg cramps when, after negotiating a contract and expectations are high on both sides, the buyer is unable to complete the course, usually because he cannot get a loan. How frustrating it is to have the finish line in sight, only to trip on a rough spot at the last minute that, if you’d prepped the course ahead of time, could have been avoided. This disappointment often has a deleterious effect on the heart (crestfallen) and the knees (badly scraped). The remedy is pre-qualification. Unless you are comfortable asking your fellow runner (buyer) if he wore enough deodorant (has enough cash) to avoid being smelly after the race (we’ll just leave that one alone), prequalification is often best performed by the referee, who is used to making tough calls and knows it is part of the job. Got to love those referees!

But there’s more! The buyer is qualified and the seller has accepted a reasonable offer. You’re half way around the course when suddenly the buyer stops in his tracks. In a real foot race this would be good, but in this race, you need the buyer to finish with you. Everything seemed to be fine, but the buyer says that he’d like to have that rough patch of track smoothed over (roof repaired, water heater replaced, west wall repainted, etc.). There are some things you are willing to do, but basically you feel the course should be left as is. You’ve been running it for a long time (it’s never been a problem up to now) and the buyer can do all the smoothing he wants AFTER THE RACE!!! This particular situation can have an effect on the stomach and intestines (churning) and the blood pressure (elevated). Often times your doctor can perform a hasty problemectomy so that everyone continuing on the course will be satisfied and able to compete safely. Go, go, go!

What’s this? Now the officials are saying that you’ve cut a corner illegally; that for five years you’ve been operating with six rooms and the rules say you can only have four! The buyer cries foul and wants you disqualified from the race (he wants out completely), or at least penalized (you should reduce the price). If you did, in fact, cheat, the buyer is justified. This is often manifested in the heart (pounding irregularly) and the sweat glands (waking up in a cold one). However, your doctor says that you’re going to be all right if you can show that you didn’t really cheat but only looked like you’d cut a corner. After a hiatus involving several trips to city hall (and lots of deep breathing) you show the officials that those six rooms really are allowed (or perhaps you agree to a modification that will allow five rooms, which the buyer accepts), and you’re back on track. This is very good for the brain and mind (intense feelings of relief bordering on euphoria).

Coming into the home stretch both runners are tracking each other at a comfortable pace. The fans (your grandchildren in Albuquerque) are rooting you on; the referees are satisfied that all runners have complied with the terms; the judges (lenders) have signed off on the home stretch (the loan); the trainers have seen to it that your leg cramp no longer hurts; and, hand-in-hand (it’s just a figure of speech, folks!) with your buyer you cross the finish line exhausted but smiling. The baton has been passed. You are officially crowned “Former Innkeeper” and your running partner can now drop “Aspiring” from his title and add “Proud.”

A casual observer will see two healthy, smiling, breathless and sweating bodies. Only the runners and their teams will know all the pulled muscles and bruises it took to get there. You will always remember that the team of doctor, trainer, coach, and referee was with you every step of the way. Knowing that all those roles have been executed once again, your professional inn broker can now smile and go home for dinner.

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