Sell Your Entertainment and Recreation Business

Selling your entertainment and recreation business is a complex process that requires a well-planned strategy to attract the best opportunities. This guide will take you through the steps to determine the value of your business, assemble the right sales team, develop an exit plan, market your business to prospective buyers, and successfully navigate negotiations to close the deal.

1. Understand the Value of Your Entertainment and Recreation Business

The first step in preparing your business for sale is to assess its value. From golf courses and marinas to nightclubs and theaters, the sector is home to a diverse range of businesses, each with its own unique characteristics that contribute to its overall value. To start, most business owners and potential buyers rely on pricing multiples to assess the market value range. This market-based approach helps you to objectively evaluate and set an asking price for your business.

Market-Based Valuations and Pricing Multiples

The market approach estimates the value of an entertainment and recreation business based on data from similarly sized and recently sold businesses in the same sector or geographic area. Pricing multiples are determined using the sales price, cash flow, and revenue of businesses that have been sold. For owner earnings under $1 million, seller’s discretionary earnings (SDE) is the relevant cash flow metric, where discretionary expenses are added back to the company’s bottom-line profits.

Entertainment and Recreation Business Valuation Multiples

Average earnings and revenue multiples for entertainment and recreation businesses sold on BizBuySell

Entertainment and Recreation Businesses Sold (2017-2024)	Average Earnings Multiple	Average Revenue Multiple
Art Galleries	2.19	0.64
Bowling Alleys	3.30	0.76
Casinos	2.65	1.29
Golf Courses and Service Businesses	2.84	0.69
Marinas and Fishing Businesses	3.12	0.96
Nightclubs and Theaters	3.16	0.65
Other Entertainment and Recreation Businesses	2.62	0.86

Source: BizBuySell Insight Data
Market Valuation Reports: Art Galleries, Nightclubs & Theaters

Entertainment and Recreation Business Earnings Multiples

The entertainment and recreation sector usually sees valuations that are within an average range, although each business's valuation is influenced by factors such as the local market, financials, and operations. When developing an exit strategy, it's important to take into account market averages to establish a starting range.

For entertainment and recreation businesses, the average cash flow multiple is 3.28. So, using the average earnings multiple, an entertainment or recreation business with annual owner earnings of $250,000 could be worth over $800,000 on the open market.

Average Sales/Revenue Multiples

When assessing a business's value, cash flow or earnings multiples are commonly used by business owners, buyers, and brokers. However, there are situations where revenue-based valuations prove to be useful. Business owners in the entertainment and recreation industry typically aim to sell their businesses for a percentage of their gross annual revenue, with the average revenue multiple 0.90.

For instance, if an entertainment and recreation business generates around $500,000 in yearly sales, the approximate sale price would be $450,000.

Gathering Financial Documents to Value Your Business

To assess value, determine an asking price, and prepare your entertainment and recreation business for sale, it’s essential to gather financial documents from the current year and the past two to three years. Providing potential buyers with comprehensive, organized documentation and solid bookkeeping will demonstrate the past performance of your business and future forecasts. Among the many documents you’ll want to gather are:

• Profit and loss statements
• Current balance sheets
• Cash flow statements
• Statement of SDE
• Tax returns for the business
• Insurance policies
• Supplier and distributor contracts
• Copy of the current lease
• Employment agreements
• Note for seller financing, if applicable

2. Enlist Professionals to Help

As the business owner, you have a deep understanding of your business, but it’s important to enlist the right experts to help you maximize the value you receive for the business you’ve built.

An Accountant

Adding an accountant to your team will bring expertise in organizing financial records and producing accurate financial statements. They will thoroughly review your records from the past three years, which potential buyers will closely inspect during due diligence. When it comes to managing finances, having a CPA on your sales team can make all the difference, from providing tax advice to recasting financial statements and guiding asset allocation.

An Attorney

An attorney experienced in business acquisitions will protect your interests throughout the process of selling your business. They’ll guide you through legal implications, such as non-disclosure agreements, letters of intent, offers to purchase, negotiations, and drafting buy-sell agreements. Lawyers commonly have a fixed rate for their services and can offer legal assistance at every step.

A Business Broker

Business brokers are well-suited to navigate the sale process and are valuable members of your team. From start to finish, they will serve as knowledgeable intermediaries, ensuring a smooth business sale experience. They provide market valuation, pricing analysis, and strategic guidance, imparting essential advice to maximize the value of your entertainment and recreation business. Brokers typically work on a commission basis, receiving 10-15% of the final sale price.

3. Plan Your Exit

Regardless of whether you're selling your entertainment and recreation business to a trusted business partner, passing it down to a family member, or listing it on the open market, it's essential to have a well-defined exit strategy in place. Ideally, you should start planning your exit three years before listing your business for sale. This timeframe allows you to understand the value of your business, optimize expenses, organize your books, and put a capable management team in place, solidifying the business’s earning potential for potential buyers.

Time Frame and Market Trends

The time it takes to sell a business can vary depending on several factors. Be prepared for the sale process to take anywhere from six months to a year. In 2024, entertainment and recreation businesses listed on BizBuySell took a median of 185 days to sell. Factors like the purchase price, market segment, type of business, buyer type, rent/lease considerations, and location can impact the duration of the sale process when selling your business.

Factors That Impact Entertainment and Recreation Business Value

As you plan your exit, consider the factors that make your entertainment and recreation business attractive to potential buyers. Adopt a buyer's mindset and assess your business from an objective standpoint. This is the time to implement any improvements that will enhance the business’s value.

While some factors influencing value are beyond your control, focus on improving those that you can affect, making your entertainment and recreation business stand out from others on the market.

4. Find Buyers

Finding the right buyer for your entertainment and recreation business begins with a targeted and efficient marketing campaign. Determine whether the sale will be confidential, as maintaining confidentiality often helps preserve the business’ value. While discretion is generally preferred, there may be exceptions if your business is widely known and respected.

When deciding how to market your business for sale, it’s important to consider who is most likely to be interested in acquiring it. Your marketing plan will incorporate multiple channels, including classified ads, online listing sites, and professional networking, to ensure broad exposure and engagement. If you choose to work with a business broker, they will handle the marketing strategy, but it’s important to stay informed and receive regular updates on inquiries, signed non-disclosure agreements, and serious prospects.

When creating a listing on business-for-sale marketplaces, it’s important to create an impactful listing. It may be the first impression for potential buyers, so take the time to create a comprehensive and compelling listing. The top five components of a successful listing are:

1. Include key financials: Along with the asking price and cash flow, include information on revenue, EBITDA, FF&E, inventory, and the year the business was established.
2. Provide geographic information: While maintaining confidentiality is important in most sales, include as much geographic information as possible and include at least the state and county details.
3. Write a headline: Create a headline that will pique interest and motivate buyers to learn more about the opportunity.
4. Select multiple categories: When listing a business for sale on sites like BizBuySell and BizQuest, sellers have the option of listing a business under more than one category. Take advantage of a secondary category option to maximize exposure.
5. Include photographs: Include descriptive photos of the business or use stock photography to keep the listing confidential.

5. Negotiate Terms & Close the Deal

The final steps in selling your entertainment and recreation business involves negotiating the terms of the deal and closing it. Depending on the complexity of the deal, the due diligence phase can take a few weeks to a few months. The buyer will want to review your financials, business structure, operations, contracts and liabilities, customer data, employee information, legal issues, physical assets, and intellectual property. It’s not uncommon for issues to surface, so be prepared to negotiate. Modest adjustments to price or financing terms can alleviate many issues that arise.

Once final terms of the deal have been agreed upon, it’s time to close the deal. At the closing, your sales team will gather to review and sign all necessary documentation to complete the transaction. After the sale is complete, it’s time to transfer the business operations to the new owner. Your attorney and broker will assist in the final post-closing process.

By following this guide, you’ll be well-prepared to value and sell your entertainment and recreation business successfully. Remember to seek professional advice from accountants, attorneys, and business brokers who specialize in the industry to maximize the value you receive and navigate the complexities of the business sale process.