One of the reasons so many people buy a B&B or guesthouse is so they can use it as a nice way to earn an income as they start to wind down and think about retirement. It’s a wonderful lifestyle, for sure, but if you are a business owner who’s thinking about retiring from the hospitality trade, you must make sure you do it the right way.
A common issue we, at Stewart Hindley, face when advising our B&B or guesthouse clients, is the where owners who want to retire start to trade their business to suit themselves. For example, so that they can start ‘taking it easy’, they might only open for shorter periods or just during high season. Whilst this seems logical, a declining trade does present a problem when it comes to selling – particularly for potential buyers who are looking for a commercial mortgage.
Impacting your B&B sale – and your retirement
As a general rule, most lenders make a decision based on historic trade (usually the past three years). Whilst they like to see projections, they won’t necessarily take them into account, especially if the borrower is new to the hospitality trade. This means that when the business has traded ‘quietly’ or for only part of the year, the turnover does not show a true reflection of the business.
Obviously, the owner can choose how they want to run their B&B or guesthouse, but limiting your trade will make it difficult for potential purchasers to raise finance, as this normally reduces the value of your business and the price you eventually achieve. This, then, can impact your chance of selling the business and actually retiring as planned.
To get the best possible price for a B&B or guesthouse, it should be trading at its full potential and have positive reviews on sites such as Trip Advisor, Booking.com, etc.
The difficulty for new to trade buyers is that they don’t have a track record which the lenders can take into consideration. Instead, they’ll be forced to examine the business’ trading records – which will be skewed due to partial trading. Hence they may be reluctant to take a chance on buyers who have no/little experience and who want a business which apparently doesn’t perform.
Maximising the sale
If you are thinking of selling, get the wheels in motion before trading down. That way, you’ll get the best possible asking price for your business, your books will look healthy and you’ll attract more buyers. After all, the value of your business should be a benefit to the bricks and mortar value of your home.
It is important to understand what information a lender requires so that you can maximise the sale of your business – allowing you to enjoy a comfortable and fulfilling retirement.
If you are thinking of selling your business and would like some free advice, please call us on 0845 272 4000 or send us an email. As an experienced finance broker, in many instances we can arrange a line of credit for your potential purchasers, helping you get the retirement that you’ve earned.