“Sometimes you just need to agree to disagree.”
INN SUCCESS
Hospitality Property Exit Strategy and Planning
ost Hospitality Properties that aim to exit through sale want to do so during periods when the profits are high and
the Inn can reap the maximum profits. Having a well-defined exit strategy can help an innkeeper exit at the time of their choosing when the business is doing well and the market conditions are advantageous. This ensures maximum profit for the owners.
An Inn having no exit strategy may face limited options in case of unforeseen developments that may call for its disposal. To avoid a scenario where owners of an Inn want to sell but are limited to the option of selling it at a lower value, Inns should lay down clear exit strategies that provide for an array of options. This would help maximize the value of the Inn when the time to exit comes.
Sometimes the Inn owners may be affected by sudden illnesses that had not been foreseen. Family issues such as divorce or sudden deaths in the family may also affect the owners of the Inn. Such issues can take time away from the focus needed to effectively run the Inn. An exit strategy that is meant to take care of such eventualities can help a hospitality property avoid going under and stay afloat despite the issues affecting the owners.
Unfortunately, business owners are often misled into thinking about the value of their Inn
in terms of standard industry multiples which means they have unrealistic expectations of the price. In reality, the relative quality of the hospitality property ahs to be taken into account, locations differed maintenance etc,. Owners should understand that value is very significantly affected by the underlying quality of the subject Inn.
A good exit strategy plan starts with the hospitality property evaluating the potential buyers and what will be important to the buyers in question – look at it from the buyers perspective. The Inn needs to be evaluated for its strengths and weaknesses so as to identify which areas to improve in order to attract the potential buyers. This process goes a long way in calculating the worth of the business and by having a good exit strategy, the Inn can improve the probability of its success by coming up with measures designed to increase the entire value of the Inn.
What is the value of my Inn? This is an age-old question that all owners ponder as they consider whether to sell their most important investment. However, the questions they should ask first are: how will buyers go about determining the value of my Inn? And, what can I do to enhance what someone is willing to pay in order to acquire what I have worked so hard to create?
If business owners can view value through the eyes of buyers then they can take action to plan for a successful event down the road.
You can ease the buyers concerns by having sustained cash flow and expenses from previous years. You need a proven track record to demonstrate the Inns’ earning potential. Preferable is three years of business profit & loss statements, along with tax returns to back it up.
Something to think about!
It’s Never Too Early to Have a Plan for the Future of Your Business
M
by Pattie Detwiler