- May 3, 2018
- Posted by: Ben Edwards
- Category: Blog
While vacation rental purchase and sale transactions continue to increase throughout the professional management community, vacation rental company owners are being aggressively solicited to selling their business. Vacation rental Company Owners (VRCO) are primarily receiving letters in the mail from larger, more national company’s trolling the industry for willing sellers. These transactions can be successful with proper seller consultation, otherwise sellers are relying on the buyer to provide deal insight, terms and value of the business. As a VRCO, if you’re relying on the buyer to provide this information, expect to be disappointed on multiple levels.
At the least, selling a vacation rental business is a material event for a seller. Garnering maximum value when selling your business is paramount. While there a numerous tips and strategies to increase the value of your business the following tips will help you garner more when pursuing a sale:
- Engage with Prospective Buyers That Wants To Buy Your Business. As I mentioned earlier, many VRCO’s are being solicited via form letter. These solicitation letters equate to the road signs that say, “I buy houses”. I would bet that no one reading this article has called the “I buy houses” telephone number to sell a piece of real estate. Businesses for sale should be positioned to a small number, typically less than 10, of interested parties. This process properly positions the opportunity to prospective buyers and will most assuredly precipitate a a higher value. Often times, certain businesses are worth more to one buyer than the next and it is those offers that generate optimal results.
- Have A Clearly Defined Valuation Process. In leading up to the ResortQuest Initial Public Offering (NYSE: RZT), a market was established for valuating vacation rental companies. Within a few years, ResortQuest had amassed more than thirty-five (35) vacation rental company acquisitions. While the clear majority of vacation rental industry transactions are based upon a multiple of Earnings, Before Interest, Taxes, Depreciation and Amortization (EBITDA), a successful sale boils down to what a willing seller will accept from a qualified buyer. This process is most effective when both parties are speaking the same valuation language. Knowing valuation metrics and preparing a business for sale under these guidelines will allow sellers to accentuate key drivers that will most assuredly increase the sales price of your business.
- Monetize the Growth and Qualitative Attributes of Your Business. When preparing your business for sale, it is crucial to develop a Confidential Offering Memorandum (COM) that clearly details WHY your business should be valued at a higher rate. A well-crafted COM develops selling points that serve as a foundation for higher value. Tangible selling points should seek to detail the year over year unit count growth and tie that growth to increased revenue and subsequent increased in EBITDA. Revenue and Earnings growth, along with well-defined qualitative attributes should increase the sale price of your business, when properly presented within a Confidential Offering Memorandum.
These tips, along with other key strategies will help ensure you get the most out of selling your business. Vacation Rental Company Owners should be thoughtful and diligent when pursuing a sale of your business. Moving forward with a review of your business without a clearly defined selling process penalizes a seller in the purchase and sale process. Knowing market terms, deal points and valuation details will help ensure you sell your business for maximum value. Should you or members of your team have questions about the purchase and sale process, feel free to reach out to Ben Edwards with Weatherby Consulting to help make your vacation rental transaction a success.