Selling a Hotel - Four Vital Steps in Communicating With Prospects
By Mike Handelsman, Group General Manager, BizBuySell.com
When the time has come to sell your hotel and you have listed it for sale online, it is a great feeling to receive interest from potential buyers. Let's face it - selling a business independently can be a lot of hard work and a major time commitment, and when people show interest in what you are selling it can translate into a quick, painless sale.
Unfortunately, for a variety of reasons communication between a buyer and a seller is not always simple. Hotel owners who list their establishment for sale on the Internet often have to deal with many inquiries from browsers who enter into a conversation without any serious interest in purchasing a business. If hotel sellers are not savvy in how to address this type of situation, they might find the selling process to be longer and more frustrating than necessary.
By following some simple communication guidelines when selling your hotel online, you can ensure you don't get caught up in a communication trap.
Step 1: Be Knowledgeable About Your Business
It is essential to know your business before you put it up for sale. It sounds simple, but the fact remains that many business owners list their establishment for sale online without having a clear grasp on how much their business is worth and what facts to communicate to potential buyers.
The first step is to get all the financial information of your hotel in order, including cash flow and revenue numbers that span from the time you first owned the business to the current day. After you list your hotel for sale, you'll undoubtedly have to field legit financial questions from potential buyers, and you won't want to come off looking irresponsible or uninformed about your own business.
From there, make sure you know what your hotel is worth. One of the easiest ways to obtain this information is to access a comparables report online at sites such as BizBuySell.com. This type of report will provide you with an accurate valuation of your hotel based on factors such as gross income, cash flow and geographic location.
Once you have this information, you'll be armed with concrete evidence to back up your asking price should buyers ask about it or attempt to propose a price that is out of the range of what you are willing to accept. hen you have made yourself an expert on this basic information, you can confidently put your hotel on the market and begin communicating with prospective buyers.
Step 2: Identify Serious Leads
Once you have listed your hotel for sale online, it's time to sit back and wait for the buyer leads to come in. Unfortunately, it is likely that some of these leads will not be from serious prospects, and it will be up to you to decide if an inquiry seems legit enough for you to devote a large amount of time and effort into following-up.
Unfortunately, it is difficult for online business-for-sale marketplaces to screen potential buyers to find out if they are genuinely willing to act on their entrepreneurial dream. This means that as a business seller you will have to develop the skills to determine this for yourself.
Some of it comes from experience. The more prospective buyers you deal with, the more skilled you will become in figuring out their validity and true motives.
But much of your ability to screen involves making sure you become and stay aware of small signs that can provide valuable clues into the mind of a lead. For example, does the message you received from a prospective buyer include many details about what specifically the buyer is looking for and why they are interested in buying a hotel? Does the lead mention if he or she is a first-time or experienced hotel-buyer? Is it thoughtfully-written? In most cases, the more effort a prospective buyer puts into making contact, the more serious he or she is about buying. If the buyer sends a message that shows they have done some research instead of simply shooting from the hip, it is a good sign that you can correspond with the buyer confidently.
In addition, once a potential buyer has made initial contact, you can ask them some simple questions to quickly gauge how serious they are about going through with a transaction. These types of questions include how long they have planned on buying a hotel, how they plan on financing the business and how much money they have available for a down payment. If the contact provides vague or unconvincing answers, you'll probably not want to invest too much time and effort into keeping the conversation going.
Step 3: Know What to Communicate
Once you know who you should put the most effort into dealing with, you'll need to know what to say. Aside from the business itself, communication is possibly the most integral part of a business-for-sale transaction, and can make or break a smooth sale.
As a business seller dealing with one or more serious prospects, you'll want to be open. Almost all buyers will be interested in learning the reason why you are selling your hotel. Is it because of a change in location? A financial reason? Whatever the case, it's best to be open and honest with a potential buyer to appropriately establish trust. Without trust, it is very unlikely that any worthwhile lead will want to pursue your listing any further. Buyers are not seeking an unrealistic, overly positive spin on your business. Even if it's less than perfect, most contacts will always respond better to the truth.
However, when it comes to buyer-seller communication the "when" can be just as important as the "why." Can you show potential buyers that your decision to sell the establishment came as the result of a well thought-out, long-term plan to achieve your personal and business goals? If so, make it known that you can provide a copy of the plan upon request. If a lack of communication indicates that your decision to list your hotel happened too quickly, it will likely send up a red flag that your business is in trouble and economic threat is on the horizon, and the potential buyer will probably ignore your listing completely or cut communication short.
Don't be afraid to provide insight on ways a potential buyer might be able to increase capacity, market share and profitability. Buyers will often pose these types of questions as a way to not only find out more about the business, but also break down the often natural defensiveness a seller might display during the process. When this is the case - and the buyer seems legit - don't hesitate to collaborate. It will only help to build trust and keep the lines of communication clear.
Step 4: Keep Communication Flowing Through Purchase and Beyond
Now that you have found the perfect buyer, you'll have to continue effective communication throughout and after the purchase process. It might seem like most of the hard work is done, but now is not the time to drop the ball in terms of communication.
At this point, the seller and buyer will need to agree on a purchase agreement, which typically deals with how the buyer intends to pay for the hotel. Most buyers cobble together a variety of payment methods to complete the sale, each of which you should make sure to clearly discussed and identify with the buyer. There is a good chance that the buyer will be going through this for the first time, which creates the perfect opportunity to put your know-how to work and keep both parties on the same page.
Supply the buyer with a clear schedule of payments with escrow agreements attached to any payments that are due prior to the final closing, as well as warranties that act as an extension of due diligence. If you are financing part of the purchase price, you should also fully communicate the repayment schedule, collateral requirements and interest details.
You also need to communicate to the buyer exactly what level of access he or she will have to you for training and operations inquiries once you have handed over the hotel. When both parties are clear on these terms, there is little chance of post-sale conflict.
There are a lot of details to cover during the process of closing a sale, and the key to the least frustration for both parties is being straightforward and willing to help whenever you can. As long as you keep communication flowing freely throughout the entire selling process, you're sure to be pleasantly surprised at how smoothly your transaction can go.
Mike Handelsman is Group General Manager for BizBuySell.com and BizQuest.com, the Internet's two largest and most heavily trafficked business-for-sale marketplaces. Both sites feature business valuation tools that draw from the largest databases of sales comparables for recently sold small businesses and include two of the industry's leading franchise directories. Since 1995, BizBuySell and BizQuest have offered tools that make it easy for business owners and brokers to sell a business and for potential buyers to find the perfect business. Together, BizBuySell and BizQuest list more than 75,000 businesses for sale at any time and have over 850,000 monthly visits. Mr. Handelsman can be contacted at 415-284-4390 or mhandelsman@BizBuySell.com Extended Bio...
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