Listed pub changes hands

Related tags Credit crunch Question Real estate

A well-known pub in Oxfordshire has changed hands through Colliers Robert Barry. Burford House Hotel, in the Cotswold town of Burford, is described...

A well-known pub in Oxfordshire has changed hands through Colliers Robert Barry. Burford House Hotel, in the Cotswold town of Burford, is described by the agent as a very special high quality business with eight bedrooms and a restaurant.

The new owner is Thomas Peter Hawkins, who purchased the property for his son Ian and business partner Stewart Dunkley.

Ian has been in the service industry for 36 years while Dunkley has been a chef for 25 years. They plan to expand the lunchtime menu and introduce evening dining using local and organic produce.

The 16th-century site is Grade II-listed and sold off an asking price of £1,150,000 for the freehold. Adjusted net profit for last year was over £100,000.

The Agents

Richard Aston

Associate Director

Davey & Co

What effect has the credit crunch had on the value of

my business?

You do not have to look very far in the industry without

hearing those dreaded words "credit crunch", but the

question that we are frequently asked is "what effect has the credit crunch had on the value of my pub?"

To answer the question, with relevance to leasehold pubs, we first have to establish how a business is valued.

There are many different methods employed to value a pub, however the most commonly used is the profits method. This method uses multiples of the adjusted or reconstituted net profit from your accounts by adding back any personal or one-off expenditure to show the annual return expected for two full-time owner operators, as cash purchasers.

This figure is important as any potential purchasers'

Accountant or Financial Advisor will use this when preparing a business plan, and to ensure serviceability of any loan.

If the business does not have accounts, you will instantly eliminate any purchasers who need to raise finance to

purchase your business and in a lot of cases, purchasers who raise finance against their own house or investment property.

This is one area where the credit crunch has affected

business valuations, and indeed overall saleability. If you

reduce the number of potential purchasers who are able to

consider affording your property, you reduce your

opportunity to demand a decent premium.

To summarise, a business with a healthy set of accounts that can be used to substantiate the premium to potential purchasers is a good proposition that will demand and achieve a healthy premium. Whereas a business with little or no accounting information has less chance of securing a sale due to losing potential purchasers who need to raise finance.

Related topics Property law

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