by Rick Wolf of The B&B Team
All the recent news would indicate we are now entering a period of sluggish sales, inflated prices, and higher interest rates. What does this mean for the seller?…lower selling prices and a loss of control over the sale of their bed & breakfast inn? What does it mean for the buyer?…lower buying prices and more control over the purchase of their (new) property? All of the above is potentially100% true…if allowed to happen.
When sellers get their property and all their preparations RIGHT before offering it for sale, it creates a positive environment for the right price to be negotiated, creating a win-win situation for both buyer and seller. If you’re getting ready to sell your inn, ask yourselves the following questions:
– Is your inn ready for the marketplace?
– Are your books in tip-top shape?
– Are they current and up to date?
– Are you using an understandable chart of accounts?
– Do you have the most recent P&L and tax returns available?
– Have your reduced or eliminated large miscellaneous, casual labor, or personal accounts/expenditures that are understandable … only to you?
– Do you have all the reports to support occupancy, nights sold, ADR, REVPAR, Lodging vs. F&B revenues?
– Have you maintained a calendar of improvements you’ve made to the Inn?…and created a spread sheet with these costs?
– Do you have the records as to when the septic was most recently cleaned?
– Do you know when the HVAC system was last serviced?
– Have you touched up the chipped paint? Glued the corners of the peeling wall paper?
– Have you done a thorough walk-thru of your inn with the “eyes” of a buyer or are you suffering from seller’s myopia?
If you can’t answer “Yes” to all of the above, then you are not ready to put your property on the market “for sale” and experience anything other than potential (financial) disappointment.
Think about this clichéd comment for a moment: you have to spend money to make money. Well, in this scenario, it is not a cliché, but rather a viable and reasonable expenditure. You know your buyer will be bringing in an inspector/engineer for a full report on the infrastructure, so why don’t you order the report, now, and fix the little stuff, now, so that those little problems don’t become big issues later? A few hundred dollars spent now will save you potentially thousands during the negotiation process. Buyers will be pleased with this because they recognize you care about your property. You have saved everyone time by eliminating much of the “unknown” and have elevated your inn above others for sale, many of which have infrastructural issues and/or cosmetic issues needing to be addressed. Alternatively, and much more cost efficient, utilize the original report from when you purchased your inn. As necessary, update this critical document as your Inn’s maintenance record, showing when the improvement was made, by whom, and the cost….then, share that with qualified and serious prospective buyers and the same positive result will be achieved in the negotiating process.
In another article, I wrote about “Value vs. Price…There is a Difference”. This is a classic example of such. In the above scenario you have provided real value to your prospective buyer helping validate the price you are asking! In simple terms ask yourself why anyone would want to buy your problems? But if the problems simply aren’t there or have been greatly minimized, you can go on to a cleaner set of negotiations, leaving out the bruising exercise of negotiating who is to be responsible to pay for the repairs of this and that. This is how you have created added value as a part of your selling strategy and price.
As a buyer, you need to be aware of sloppy, poorly maintained, incomplete or unavailable books, unavailability of supporting numbers and often, a general malaise that surrounds far too many inns when they enter the marketplace. Likely this malaise is an indicator that there is potentially more here than meets the eye (and most of it not so attractive) so you should look with a more critical eye towards the business and as a result, approach the negotiating table with tactics and strategies to protect yourself from the great ($$$) unknown. If the above is not the case, then you are in a much better position to focus your energies onto the business at hand and proceed more aggressively with your due diligence and minimize the time required to investigate those great unknowns that the seller has provided for you!
So often it is the case that these transactions become adversarial because the sellers haven’t prepared themselves fully to sell, and the buyer is now in the position to dictate terms that will most likely be unacceptable to the seller, and then the battle ensues!
Sellers, it is your responsibility to yourselves not to let a ready, willing, and able buyer pass you by, and that is where your selection of the right broker and their advice comes into play…but more about that in future articles. Yes, you are ready to move on, but if you start the process right, you will sell your inn for the right price, most likely quicker than others and the buyer will have purchased their new inn at the right price, and the sky is clear enough for all parties to see that they both have, indeed, “Won!”
