BEST PRACTICE // For Sale

Is it a good time to sell your venue?

There are more buyers than sellers for hospitality businesses right now.

WORDS Ken Burgin

THINGS AREN’T AS gloomy as you’d think. The market for cafés and restaurants is upside down right now, with more buyers than sellers. Who’d have thought? Business broker Paul Leach works in Sydney, Brisbane and Canberra, and says he’s never seen a situation like it, with buyers chasing sellers and offers increasing above pre-COVID levels. Leach attributes the interest to people who’ve lost jobs wanting to create their own business, or lockdown has given them the impetus to make a career change.

Well-located businesses (especially in the suburbs) with access to JobKeeper and rent reductions have seen an increase in profits, and the chance to diversify and streamline operations — hence the reluctance of many owners to sell. Sale price multiples remain at one to two times annual profit, depending on the ease of operation, quality of the lease and local prices — it’s not based on what you paid for the business.

One essential value driver is profitability, so a good set of numbers and bookwork to verify this will be crucial. “Bookkeeping is storytelling for stakeholders to enable decisions and compliance: business owners, banks, investors, ATO and buyers,” says Bookkeeper Christine Green. “Start cleaning up and organising your accounts, so you have a history ready for sale time.”

Think of the whole process as exit planning, and even if you’re not ready to sell, start anyway. It’s very satisfying to update systems and make your business more efficient, profitable and easy to run. An offer may arrive that you can’t resist.

Buyers are looking for a business that will make them money, so the current profit is important but not always essential. It’s good to know the buyer’s motive, eg: site acquisition for growth, location for a broader strategy or profits to fund owner-investors or family. They may see an opportunity in a poor-performing business they can buy cheaply and turn around for their own plans.

But as a seller, there’s a limit to what you can ask for an unprofitable place. You can say it has ‘loads of potential’, but that story has been heard many times. As the vendor, you should do everything possible to make the buyer confident and enthusiastic about their decision.

Buyers are looking for trustworthy and credible information. If the bookkeeping seems wrong, they get nervous and it can drive the sale price down. Some buyers accept bookkeeper’s or accountant’s reports; others want to see the original Xero file and matching documents. Drawnout due diligence can drive down the price, so make it easy and transparent. Have everything at hand, so verification is painless: documents attached in Xero and an electronic filing cabinet to validate the books. Ensure your wages are award compliant and check that POS reports match Xero sales figures, which flow through to BAS reports. If staff super and BAS payments are behind, they’ll know the business can’t meet its compliance obligations and is probably unprofitable. Does this match the story you’re telling?

Have your operational systems wellorganised, easy to learn and ready to use — rostering, recruitment, food and liquor ordering, menu changes, social media and marketing, website updates, security, COVID compliance and daily operations. Plus all the passwords and login details needed for a smooth transition. It’s like selling a master key; turn it in the engine and everything just works. Think of the whole process as exit planning, and even if you’re not ready to sell, start anyway. It’s very satisfying to update systems and make your business more efficient, profitable and easy to run. An offer may arrive that you can’t resist.■