By: Mike Handelsman
Selling your hotel is a life-changing event. The decision to sell can be brought on by a variety of factors, including a change in location, finances or lifestyle.
Whatever the reason, sellers should be aware of online resources that can make the transaction more efficient and effective.
According to a recent Yahoo poll, two-thirds of Americans dream of owning their own business. Potential buyers are always looking, and many of them look online.
Hotels frequently are bought and sold online. Beyond simply giving you access to buyers who you might not otherwise meet, selling a business online makes economic sense. Putting your hotel for sale on an online business marketplace is cheaper than placing a newspaper classified ad and will ensure much more widespread exposure.
However, before listing your hotel in an online business marketplace, you will want to remember four key points: preparation, using Web tools to your advantage, providing the right information and screening buyers.
Preparing to sell a hotel
Selling a business is not something to rush. Ideally, many months should come between making the decision to sell and putting your hotel on the market. This allows you to properly assess the financial situation of your business and create reports detailing potential growth and revenue. It will also give you enough time to modernize any outdated systems that might deter buyers once the business hits the market.
Have all the information potential buyers might want - past performance, business costs, strengths and weaknesses, for example - prepared in advance. Business must go on as usual while the hotel is for sale, and once buyer inquiries begin coming in, you might find yourself too busy to put together all the necessary information and keep the business running.
Using Web tools to your advantage
Online business marketplaces offer a variety of tools that can help make preparation for selling easier.
For starters, it is crucial to price your business accurately.
According to BizBuySell data, hotels sold for an average of $1,111,000 last year.
The data also indicates that hotels typically sell for an average of 94 percent of sellers' original asking prices. If you want to sell your business for around $1,150,000, you'd do well to ask for $1,223,000.
Of course, the price your business will sell for depends in large part on your revenues and profitability. According to BizBuySell data, the price-to-revenues multiple for hotels averaged 1.63 and the price-to-cash-flow multiple averaged 5.39.
In other words, a business with annual revenues of $500,000 would likely sell for $814,000. An alternative valuation might be arrived at using the company's cash flow information. For example, if the business had an annual cash flow of $100,000, the valuation would be $539,000. Most buyers are more interested in cash flow numbers rather than revenue numbers.
Online marketplaces often provide information that helps you define your selling price.
A comparables report can provide specifics based on comparable establishments, chosen geographic area, gross income and cash flow ranges. This kind of report, which is available on sites such as BizBuySell.com and BizComps.com, can provide general rules of thumb about pricing.
An online marketplace can also provide a listing of brokers who can provide additional help in buying or selling a hotel.
The option to upgrade a listing to premium status can also help users sell their business more quickly and easily through the ability to include more descriptive text in an ad search result, as well as highlighted, eye-catching placement.
Basic listings often give sellers the chance to capture potential buyers' attention with one headline. If this is the option you choose, make sure the title is concise and clear, but attention-getting. The title should convey why potential buyers should be interested in finding out more. If there is anything about your business that makes it particularly desirable, such as location, make sure to include it in the headline as a selling point.
Providing the right information
Confidentiality is a significant factor for business sellers. In order to keep the hotel running smoothly during the selling process, you will probably want to be extremely careful not to let customers, employees and competitors know you are selling. This means that certain details should be kept at a minimum when posting an online ad.
At the same time, it is not a good idea to post so little information that nobody will be interested in the listing.
The key is providing the most information possible without giving away the identity of the business. It is important to give viewers an idea of the general location of the business, but do not post the business street address, phone number, or e-mail address in the listing. Instead, create a separate e-mail address and phone number for inquiries from potential buyers. If you have to provide further detail, have the recipient sign a nondisclosure agreement.
Do tell potential buyers why you are selling the hotel. If you are honest, people will tend to be less skeptical, and you will probably sell your business faster.
Once you list your business for sale, you might find that certain questions come up repeatedly in inquiries. This can serve as a good guiding point for what you should change or add to your listing if ongoing editing is possible.
Another potential issue to prepare for is inquiries from people who are not serious about buying. Sellers often encounter people who have the dream, but no realistic intention of going through with a deal.
It is difficult for online marketplaces to screen potential buyers, so sellers have to determine whether prospective buyers are serious or are just kicking the tires. The best way to do this is by asking potential buyers direct questions about how long they have planned on buying, how they plan on financing the establishment and how much money they have for a down payment. This kind of informal interview will allow you to determine early on whether the prospect is worth pursuing.