- December 11, 2017
- Posted by: Ben Edwards
- Category: Blog, Resources
If you are seriously considering selling your Vacation Rental Business for sale and want to garner maximum value in the sale for your business, there are several steps you should take before moving forward.
More time spent preparing the business for sale is certainly better than less, but there are a number of steps that can be taken within the months prior to positioning your business for sale. The following information provides key points to consider in order to make the sales process a success:
- The purchase and sale process should be a formal business transaction. Negotiations do not always result in the successful sale of the business. Always start the process with a well-constructed Non-Disclosure Agreement (NDA) to include a Non-Solicitation provision. Those parties unwilling to execute an NDA should not be considered, no matter the relationship. A transaction advisor can help navigate this process, ensure the business sells for maximum value and provide access to market rate terms/deal points.
- When preparing your business for sale, it is important to smooth out any rough spots prior to marketing the business for sale. The key is to tackle those areas of the business that diminish the value of the business or hamper the sale prior to going to market. In certain cases, Vacation Rental Managers (VRM’s) may be missing contracts, have poor assignment language or have under-funded trust accounts. It is rare that a transaction advisor cannot help a seller work through a best practice approach to remediating these issues. Disclosure is also important. Prospective buyers will appreciate open and honest communication around these issues. No matter the issue, problems will always surface. It is always better to attack those issues, as compared to sweeping them under the rug.
- Vacation Rental purchase and sale transactions are grounded in finance. Those companies with consistent and increasing financial performance fair better in the sales process than those businesses that are unorganized and underreported. When creating and preparing financial statements, consistency and accuracy are paramount. The majority of vacation rental company owners generally prepare their financial statements with an eye towards reducing net income in an effort to improve the company’s tax position. This presentation is at odds with what a business owner wants to depict in the successful sale of a business. The goal when selling the business is to maximize the net income of the operation, as vacation rental businesses are generally sold on a multiple of earnings. Since the primary driver in the sale of a vacation rental business are the earnings of the business, it is imperative to normalize the income statement and add back those expenses that are germane to the business. This is one of the many areas where a transaction advisor can help in the sale of the business and ensure the business is positioned for maximum value.
- Would you want to buy your business? Are there qualitative issues surrounding your business or is your business too dependent on one distribution channel, an employee or a few homeowners? While there is plenty of technology to help create efficiency in the business, there is no substitute for hard work in day to day operations. Ensuring that your business puts forth a quality product is a center point in any operation. Conversely, being overly dependent on certain revenue sources or allowing a singular employee to yield control, or leverage, over the business or a potential transaction is problematic. Creating a well-rounded marketing plan and reviewing your organizational structure will ensure that your business is not painted into a corner when it comes time to sell.
Selling a vacation rental business is a material event and one that should be thoughtfully considered before moving forward. Prior preparation, along with a focus on certain key areas in the business will help ensure the business is poised for maximum value. If you are concerned or curious about positioning your business for sale, please feel free to give Weatherby Consulting a call today. We routinely provide valuations at no cost to business owners that may be interested in perusing a business sale.