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September 2007

Top 10 Commandments: Preparing You and Your Inn for Sale

Who needs to think about this? All innkeepers! When do you need to think about it? Now!

Why should you prepare? All good things come to an end, but not necessarily when expected. Unexpected things can and do happen…health issues, death, grandkids, winning the lottery. Everyone should have a plan that allows for greater control over the exit process.

When should you prepare your exit strategy? Ideally, before you buy your inn. If you haven’t already done so, now’s the time. To simplify the process and maximize the results, you should regularly work toward that strategy of exiting your inn. Without sacrificing service or hospitality, you should mentally be “for sale” at any point in time and be ready for the sale at all times.

Preparation comes in many forms, and you should prepare for life after innkeeping by preparing your inn for your departure. Prepare yourself for the challenges that lie ahead and think about the process of selling your inn. Now for the Top 10 Commandments of preparing your inn for sale:

  1. Do you have all the reports to support occupancy, nights sold, ADR, REVPAR, and revenues by lodging…and as appropriate, food and beverage, special events, and gift shop sales?
  2. Are your financial books in tip-top shape and up to date?
  3. Are you using an understandable Chart of Accounts?
  4. Do you have the most recent P&L and tax returns available?
  5. Have you reduced or eliminated large items noted only as “miscellaneous, casual labor,” or “personal accounts and expenditures” that are only understandable to you?
  6. Have you maintained a calendar of improvements you’ve made to the inn?
  7. If you have a septic system, do you have the records as to its maintenance history, capacities and location?
  8. Do you have the purchase, maintenance and service records for the HVAC systems?
  9. Have you touched up the chipped/peeling paint…inside and out? Glued the corners of the peeling wall paper? Caulked the bathrooms? Fixed the leaks? This applies to both the front and the back of the house.
  10. Have you done a thorough walk-through of your inn with the eyes of a buyer, or are you maybe suffering from a case of seller’s myopia?

If you answer “No” to any of the Top 10 Commandments, then you are not ready to actively put your property on the market. If you answered “Yes” to all 10, then you are ready and you will be in the best possible position…one of control over the sales process.

A couple of other thoughts: don’t embark upon new capital projects unless absolutely necessary. Be sure your inn is clean! Clean! Clean!

While addressing the above, begin to prepare emotionally. Innkeeping is a chapter in your life. Know that you will sell someday, and know why you are selling. Be prepared to sell when you’re not ready and finally, be ready to let go. Letting go can be harder than you think but can also be a relief.

It’s important to understand what adds and decreases value, or what increases sales time. Know what you have and what you’re selling. Are you selling a lifestyle investment or a business grade investment?

What adds value?

  • Solid revenues.
  • Good inn condition with quality appointments and furniture-fixtures-equipment (FF&E) that are marketable and appropriate.
  • A good website, marketplace presence and reputation.
  • Comfortable owners’ quarters
  • Cash flow!

What decreases value or extends the time it takes to sell?

  • Poor physical condition.
  • Poorly maintained records.
  • More real estate than can be supported by the inn’s revenue. In other words, if the inn, gardens, and parking occupy one acre, plus there’s an additional nine acres of woods, that additional land may not add value to potential buyers.
  • Unrealistic pricing increases the marketing time and creates negative perceptions…and perceptions can and do become reality!

Know what it takes to sell your inn: good location, a good business, in good physical condition, with good financials, your good motivation, a good price and with good representation.

To put this all in perspective, money may not be everything, but it is important! Enjoy what you do every day. Be prepared to sell your inn by knowing that your inn, emotions, and financial affairs are in order. Being ready will make it easier when the time comes. Good luck!

Rick Wolf, partner with The B&B Team, is the former owner/innkeeper of the Captain Fairfield Inn, Kennebunkport, ME, where he and his wife operated their inn for six seasons. He now brings his experiences in innkeeping, branding, and marketing to innkeepers nationally. Rick works with buyers and sellers of B&Bs and country inns in Maine; through The B&B Team, Rick offers his consulting services nationwide. Rick cut his branding/marketing teeth with firms like Levis Strauss & Co., Perry Ellis, and Outlast Technologies before entering innkeeping.

As an inn consultant and broker licensed in several states, Peter Scherman has been involved in dozens of inn transactions since 1993 and has consulted for countless current and aspiring innkeepers. He has written numerous articles on the subjects of buying and selling inns, inn valuation and financing, feasibility, environmental issues as they relate to innkeepers, and more. Peter is an experienced instructor who has spoken at state, regional, and national innkeeper conferences on issues relating to the acquisition, transfer, valuation, financing and other aspects of innkeeping. An incidental passion is photography, especially of inns, which he exercises as time and opportunity permit.

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