Q: A couple of months ago, I was asked for hints and tips to consider when buying a hotel. My latest question comes from a couple who are hoping to retire and would like some tips on choosing an agent to help them sell the business.
A: Agents are agents are agents; there is very little difference in terms of the functional service they provide, so instead you need to choose between the quality of what they offer, and look at what they will do for you and your business. My first piece of advice is always to ask a lot of questions; think about them in advance and work out exactly what you want to know. This list of initial questions will help you benchmark between the different agents and give you a good gut feeling that they know what they are talking about and that they will do well for your business.
Once you have got your list handy, research business sales agents; these can be either hospitality specialists, or local specialists and having a mixture of the two is a good idea as well. Hospitality specialists bring the advantage of having an excellent understanding of the industry and the issues of selling a hotel business. They may even have a list of potential buyers that they could introduce you to. A local specialist will bring an understanding of the area, knowledge of local markets and will have a list of potential local business owners who can take the business on as a going concern without upping sticks and moving to a new area. There are perks to both.
Once you have your shortlist, contact them and wherever possible arrange a face-to-face meeting. I have always been an advocate for ‘chemistry’ and a good gut feeling, and I would suggest the same goes when selecting your agent. If they wind you up, they may well wind others up, and they are likely to also identify buyers who won’t mess with the existing way you run your business, making it harder work for you and more of a challenge for them to.
Some things I would want to know:
Their track record – Websites and sales literature can be very beguiling, but put them under a little bit of pressure. Ask them about the last three or five businesses they have sold, including completion dates, value bracket and average time from process start to finish. If they are local, it is likely you may know the businesses; if they are national and work with hospitality businesses, then you may not be so sure. What this will identify is how frequently they are appointed, whether they handle sales of a similar size or scale to yours and also whether they are in touch with the market at the moment. None of these elements are deal-breakers to using them, but they will give you a level of expectation and comfort.
References – as well as their most recent sales (some of which may still be going through), ask them for three references that you can call for feedback. Whilst they may not be able to put you in touch with previous vendors (it depends why they were selling), they should have satisfied buyers which will confirm that they are good at what they do.
Do they like your property? – Not only whether they like it (of course they do – they are hoping to gain you as a client) – ask specifically about what they like and what they think are the USPs of the business at first glance. A good agent will be able to make a fair assessment off the bat, picking up the things that you know your guests already love about you. You can also use this as an opportunity to ask about how they would market you and whether they have an existing client list, to gauge their enthusiasm.
Predicted sale times – You can’t hold an agent to their answer on this one – there is a lot of minute detail that they will need to know before they can give you a true picture, however asking how long they think it will take to sell is still useful. It will show that they know and understand the market and will also give them opportunity to ask additional, intelligent questions. At the end of the day, your property could sell in days or in months, depending on whether there is a suitable buyer etc.
Ask about pitfalls and how you can help – see if they can immediately see anything you can do to improve the value or which need to be addressed in order to support the sale. This is valuable and free advice and can help you get prepared even if you don’t plan to sell just yet.
Ask for a guide valuation – you need to go into sale with your eyes wide open. Some people find that they can’t yet afford to sell and take a year to restructure and grow the business before preparing for final sale. It will also give you a guide as to whether an agent is pessimistic or optimistic for the current market.
This should give you enough information to make a decision about the agent, and to appoint someone that you know and trust. Don’t forget, make sure you negotiate the terms in advance and that they are written into the contract you have with the agent. Give them an appropriate lead time to secure a sale (perhaps three months), then be clear about what happens if they don’t sell by then. Do the rates get better for you, do they lose their exclusivity on the sale etc.? Be clear on how you can protect yourself from a never-ending biased contract.