If running a pub successfully is fiendishly tricky in this competitive trade, then selling one needn’t be too daunting.
It won’t be easy, of course, so these tips should come in useful. Nevertheless, you’ll need more than this article to see you through the process.
To get a realistic business valuation and improve your odds of achieving a smooth, satisfactory sale, you’re well advised to engage a lawyer, accountant and perhaps a business broker.
But back to the good news about publicans looking for a return on their years of hard work.
While it’s still a competitive trade with no shortage of short-lived experiments, there remains an army of experienced and aspiring publicans ready to move if your pub is flourishing – or if you can convince them it has the ingredients to prosper under the right ownership.
If you own the freehold, then selling a pub could be lucrative indeed – even if the business itself is struggling, since demand for quality property in prime locations is outstripping supply.
The property boom means that sought-after inner-city Sydney hotels, for instance, are netting as much as $34 million at the time of writing.
Consumers are more discerning than ever when it comes to food, while bars offering a wide choice of craft ales, wines and spirits in a well-designed environment are often rewarded with healthy takings. If your business ticks all these boxes, you could land a lucrative sale.
Follow these steps for a smooth and profitable sale.
Any savvy buyer will want to investigate your business thoroughly – from understanding your clientele to taking a deep dive into your paperwork. Make the process easier by getting your affairs in order.
Before you put it on the market think about value-adds.
Look at your premises from the buyer’s point of view. Does the decor need updating? Do the bathrooms need refurbishment?
A fresh look needn’t break the bank but could help you achieve a higher selling price that more than offsets your outlay.
The value of your business is not just about profit and turnover; it’s also about reputation, which is easier to measure than ever via sites like TripAdvisor. Improve your TripAdvisor rating as much as possible.
Valuing your business
There are three valuation methods commonly used to value pubs and hotels in Australia today: capitalisation of net operating profit, summation (lessee’s plus lessor’s interests) and direct comparison. Find out more from the Green Finance Group.
Before you’re ready to open negotiations you need to do what business owners in any sector must do: organise your paperwork. Get your accounts up-to-date and in order and provide detailed turnover and forecasting documents.
If you are selling stock, prepare a comprehensive stocktake, detailing any marketing deals negotiated with suppliers. Check your licences are up to date and retrieve related paperwork. Gather together paperwork related to the lease.
Wrap up any special arrangements you have (such as discounts or tabs) with customers, suppliers and staff members.
If you own a pub or bar franchise, it’s important to read your franchise agreement thoroughly before selling. Usually, the franchisor will need to approve a new owner first. Find out more.
Going to market
The success of a pub is based heavily on its reputation. Shouting too loudly about the sale of your business in these circumstances could harm its reputation – people often don’t like change.
However, the more information you disclose about the business, the easier it is to attract buyers.
If you’d rather keep the sale secret for as long as possible, then put feelers out for buyers discreetly, championing the merits of your business without giving its identity away.
Do say in your BusinessesForSale.com advert: “A busy rural pub in a tourist hotspot.” Don’t say: “Newtown’s oldest pub for sale.”
Here are some attractions you might flag if they apply to your pub:
- Strong takings and/or profits
- High footfall or location in a busy business district or tourist hotspot
- Scope for adding more seating, little local competition, local residential/commercial development planned. Focusing on ‘potential’ rather than present profits is a good way to downplay unremarkable turnover
- Strong social media metrics and ratings on TripAdvisor and similar platforms
- Recently refurbished in modern style (reassures buyer they won’t need additional capital for a refit)
“Country hotel buyers these days are typically astute investors, maybe a group of investors, rather than individuals with a romantic notion of owning a pub,” Peter Moore of Melbourne Commercial Group told CommercialRealEstate.com.au.
So if you own a country pub, especially with a stellar reputation in a prime location, you could be mindful of investors as well as hands-on buyers. Investors’ interest will be piqued by terms like ‘high yields’, ‘local property boom’ and ‘
Ready to sell your business?
Thinking of buying another pub with the proceeds? Check out our pubs for sale.