Thinking of a change?

Perhaps you run a medium-sized city centre hotel and fancy a slower pace of life, running a small Bed and Breakfast (B&B) on the coast. Or you want to trade up from a small hotel to a larger one. Maybe you’re considering self-catering, so you no longer have to cook breakfasts every day.

Here are some useful points to consider if you are thinking of a change, or selling your current business to buy a smaller, larger or different one.

Location research

Stay where you are, or move to enjoy a different lifestyle? Relocate to a lively city or picturesque village, seaside resort or historic town? Wherever you choose, make sure you visit in winter too, and check out how busy it is.

What attracts visitors? Is it the countryside, heritage, shopping, nightlife? Are there good pubs and restaurants nearby or within a short drive? It may seem obvious, but do your research before commiting to your new location.

Check out the market

Checking the potential market is important, especially when moving to a different part of the country. Who will your customers be: holidaymakers, business people, lorry drivers?

Is there adequate demand in the area for another guesthouse or holiday cottage? Contact the local council or the tourist board for advice – they may be able to tell you the number of bed spaces and average hotel occupancy rates. Send for tourist brochures, look at websites and assess the competition.

If you’re looking for self-catering properties, contact self-catering holiday agencies in the area to find out how many weeks a year you could expect bookings, and the customer demographics.

Try Googling ‘self-catering cottages in Cornwall’ or ‘Bed and Breakfasts (B&Bs) in Bournemouth’, or visit websites like www.laterooms.com and look at the room rates. Some businesses let you check availability on line, so you can see how full they are next week, for example. You could even phone to enquire about booking a night or two.

Choose your new business

Obviously your budget will dictate the size and type of property you are able to buy, but also think about how many bedrooms do you want (or need)? Are you looking for an investment or a lifestyle property? Prices are relatively higher for a lifestyle business (one that is trading under the VAT threshold) and most banks won’t lend more than 50%.

You could buy an existing guesthouse or choose a residential property and install en suite bathrooms, a basic requirement for most customers.

For self-catering properties, you might consider residential houses, cottages and apartments – or holiday cottage complexes, small blocks of apartments, wooden lodges in holiday parks and farmhouse Bed and Breakfasts (B&Bs) with holiday cottages in the grounds.

How about a complete lifestyle change? You might look at an equestrian holiday centre with self-catering apartments, a dive training centre with accommodation or a self-catering complex with a pool and leisure facilities. Some owners are even converting large hotels into luxury serviced holiday apartments.

Register with an agent

Register with an agent early if you are selling your business. They can give you useful advice and will be able to sell your business ‘off market’ by marketing it to a database of potential buyers, so your staff and guests don’t need to know.

If you are buying, once you’ve chosen your location register with a national business agent. They’ll also give you useful information about the market and access to properties being sold ‘confidentially’.

Selling your business

Bear the following points in mind when preparing to sell your business:Have a three-year strategy for selling and build up your business and its profits over the three years.For Bed and Breakfasts (B&Bs) trading below the VAT threshold, work on increasing your turnover and profits.Make sure all your accounts, contracts, licences and fire risk assessments are up to date.Star ratings are important for buyers as a guide to the quality of the accommodation, and how much money they will have to spend to bring it up to the standard they want.Present the property well – decorate, do repairs, update where necessary.Don’t extend the property before putting it on the market as the expenditure will affect the profit and turnover - and whatever you do may not be to the buyer’s taste.However, if you’ve applied for planning consent to extend and think you’ll get it, wait for the result before selling, because that will add value.

Buying your new business

If buying an existing business check it has all necessary licences and planning permissions, and that the appropriate fire risk assessment has been carried out. Is it quality assessed by VisitBritain or the AA?

Find out as much as you can from the sellers about business turnover, breakeven point, where they advertise and where their visitors come from. Look carefully at the accounts – turnover and VAT returns are good guides to occupancy levels. Can you improve the property or make changes to the business? If so, there’s room for growth.

Have a structural survey carried out and get a valuation report, which will give you the market value and will look at accounts, goodwill, trading prospects and more.

Some of the key questions to ask the seller or agent when buying might include:Is it making an operating profit?What is the average occupancy rate?What is the average room/unit rate?What is the revenue per available room/unit?What are the customer demographics? What is the mix of business and leisure? If it’s predominantly business, is it mainly from one company? Why is the business on the market? How long has the owner been here? Where is the owner going? If they’re setting up another hotel or self-catering business around the corner, they may take all their customers with them? Are there any local developments coming up that will impact on the business?For more advice on buying or selling a business, visit www.businesslink.gov.uk