Bettesworths managing director of commercial and residential property agents Matt Bettesworth reveals that taking a property to market at the right time is a key point in planning.
“The main thing when preparing to sell a business is thinking about the seasonality – when you’re going to go to the market.
“The most popular selling period in the property market is spring, but it’s not the only time. That also depends on location; if you’re based in the south-west, for example, you’re more likely to be seasonal.
“The vendor needs to think whether they’re going to ‘do’ the season or not, really, if it’s right to sell before the season or after the season.”
Get your documents sorted
Managing director of independent national business agent Davey Co, Paul Davey, explains that going through an extensive checklist of documents, paperwork and accounts is paramount in preparing a pub for sale.
“Make sure your accounts are up to date. Make sure you’ve got a copy of your VAT returns ready for sending to people who need to see them, or provide the agent with them so they can assess it correctly.
“Making sure you’re up to date with your gas rating certificate, your electrical wiring certificates and all the other associated certifications that will need to be checked by a prospective buyer speeds the process up.”
Bettesworth adds: “Most banks, or anyone looking to loan money on a commercial property, will ideally want three years of up-to-date profit and loss accounts from the accountant, and quite often the past four VAT returns to establish the recent turnover.
“An early conversation with the accountant to get all that information prepared is important.
“If it’s a leasehold concern, make sure you’ve given consideration to any dilapidations surveys or schedules that may be need to be attended to.
“Also keep an eye on the inventory, fixtures and fittings, because that’s something that’s quite often forgotten about until the last minute – so that needs to be prepared as well.”
Bettesworth highlights that while ensuring that supplier and staff contracts are ready to be transferred to a new owner, managing concerns that existing employees and customers may have is an important consideration.
“One of the biggest concerns of any publican selling is upsetting staff and customers when going to the market,” he says.
“Staff can be concerned about their job security and customers can be fickle and decide not to support the pub if they feel it’s being sold.
“Usually, certainly with staff, a seller can sit down and explain that their jobs are safe and secure.
“Nine times out of 10 the people buying a property will want to inherit the staff anyway because they’re going to need them.
“You can’t change a customer’s perception, but the idea of going to the market and losing all your customers isn’t actually one that comes to fruition.”
Making a first impression
“It’s common sense, what I would term as general housekeeping, painting and decorating,” according to Mike Phillips, director of hospitality business transfer agents Stonesmith.
“It’s about first impressions. It sounds like a cliché but you only get one chance to make a first impression and if the paint’s peeling off the windows, or there’s bits of the walls missing – where a pool cue has gone through or something – it’s easy to rectify. It’s a quick fix. Often people don’t bother.
“The thing about it is that most buyers will view as customers first of all before making a formal viewing. If the impression isn’t right, it can impact on whether you get a formal viewing and the levels of interest you receive.”
While, according to Davey, making a pub look good on paper should be prioritised over making it look good in person, tweaks in presentation are still well worth doing if possible.
“The important things are the commercial considerations for somebody to want to be attracted to that business to take it on.
“When selling a business, you’re not selling a house so you don’t need to think in terms of stage management in terms of the presentation of it. If it needs some tweaks to make sure that it presents to its best, then do that.”
Matt Bettesworth sets out that the goal is to get the property in the best order possible without spending too much money in the process.
“If you’re going to spend £10,000 on a new bathroom suite for the owners accommodation, is that going to get you £10,000-plus more back at the sale?” he queries.
“Quite often going concern businesses items like that don’t really add value, so it’s more a case of decoratively making sure that the property is in good order. An exterior paint job would be more important than upgrading or spending large capital sums.”
“There’s always one thing after another in terms of regulatory compliance issues,” says Davey. “It leads a lot of people to wanting to sell their business because of it.”
He cites GDPR (the general data protection regulation) as the latest example of a compliance hurdle that buyers and vendors will look to navigate before completing a sale.
Davey says: “If a pub does a lot of social media marketing or it has a database, a buyer with a switched-on solicitor is going to want to make sure that the business is fully compliant with all of the social media, data protection and latest legislation because the liability will transfer to the new owners if that’s not attended to.
“None of these issues will prevent a sale, they could just prolong the time it takes to get to an exchange of contracts or completion.
“It’s not going to necessarily turn a buyer off, it just makes the sales process longer and less efficient. Working with a switched-on agent to advise them on this stuff is going to prevent any delays.
“On occasion, if it’s taking a long time to get all the ticks in boxes for exchange and completion, some buyers can get a bit bored and frustrated with that and all of a sudden they’re tempted by another site.”