Thinking about selling or leasing your Inn?
Stephen Taylor, Managing Director of Guy Simmonds, the leading national licenced property agents shares his top tips to help to make this process run as smoothly as possible.
For freeholders, there are essentially 2 options to consider, when deciding to exit your business:
The first option is to sell the freehold entirety as a going concern (freehold premises, goodwill and fixtures and fittings). This naturally facilitates your exit from the premises and business completely, clears the outstanding mortgage (if you have one) and enables you to invest in another property with the hopefully large capital sum you will receive upon completion.
The second option (a speciality of Guy Simmonds for over 35 years), is for you the freeholder, to retain the valuable appreciating freehold property as an investment, and create a new free-of-tie lease. This results in you receiving an attractive ‘cash’ up-front premium for the business/lease (and fixtures & fittings), in addition to a sustainable quarterly (index linked) income. We advise many freeholders upon the creation of these leases, advising upon the amount of the premium we can achieve, in addition to setting the rental at a correct, pragmatic and sustainable level – for the mutual benefit of freeholder and lessee. We then of course find a suitable lessee for the freeholder. This option is increasingly popular with our clients who prefer the relative safe haven of an attractive rental return from their own property, rather than sell the freehold and invest the proceeds elsewhere. This is especially pertinent in the current economic climate, whereby bank deposit accounts pay a meagre interest rate, and the uncertain money markets are not without increasing risk and obvious volatility.
The value of your business (freehold or leasehold) will be determined by several factors, but will crucially include a calculation/multiple relating to your turnover and reconstituted net profits. You must have verified annual accounts available for your lease/business to be correctly valued. If correctly valued and subsequently marketed, then the market is still buoyant at Guy Simmonds.
Our top tips, within our 8 page, unique Seller’s Pack, also include a selection of the points below. This is honed from our 35 years of experience selling businesses, and helps our vendor clients portray their business in the best possible light, thereby maximising the sales value, and enhancing the prospect of a successful sale or lease assignment.
∙ ACCOUNTANT – Instruct your accountant to send the agent your previous years (up to 3) full annual verified trading accounts, including your latest VAT returns. Without full accounts a purchaser will not proceed, and delays may mean a ‘slow deal becomes a dead deal’.
∙ SOLICITOR – Appoint a solicitor, who is fully experienced in the conveyancing of licensed property. You will need to subsequently provide relevant documentation, in order to sell or lease your business, including: Details of employees and details of all contracts, copies of all relevant licences/certificates/reports, fire certificates/risk assessments, relevant safety certificates, leasing/rental agreements, schedule of suppliers/contracts/insurance etc.
∙ STAFF – take the advice of your solicitor regarding the rights staff have. Essentially, the purchaser will be responsible for taking the staff on under TUPE regulations. You may wish to opt for full transparency from the outset that you are intending to sell the business and consequently you can reassure them that their employment will continue. In our view honesty and transparency are always the best option.
∙ IMPRESS – Make your living accommodation as appealing and attractive as you possible can. Many prospective purchasers are often raising capital to buy your business by selling a desirable home, and will wish to move into similarly appealing and immaculate accommodation.
∙ VISUAL APPEAL – People often (rightly or wrongly) form their initial impression within a minute! Ensure the outside is free from any rubbish, the outside elevations (hanging baskets?) and paintwork etc are attractively presented, and your gardens/lawns are as immaculate as possible.
∙ DECORATE – Invest if necessary, some time, effort and a little money in simple decorating tasks to ensure the premises are presented as well as possible. Neutral colours are usually best, and convey an image of quality and cleanliness.
∙ PETS – Potential purchasers are often immediately turned off by ‘Bruno’ lying in an unmade bed and ‘Tiddles’ licking clean last night’s dinner plates!. Try to confine pets to specific areas and make sure there are no pet odours.
∙ STAFF – ensure the staff are especially welcoming.
∙ AMBIANCE – Ensure the premises are warm and inviting (eg light open fires/log burners, fresh flowers, put the lights on etc) Put the coffee pot on!
∙ REMEMBER – It is important to remember most prospective purchasers, initially view a business from the customers’ viewpoint…”