Mr. Handelsman

Finance & Investment

Five Crucial Steps to Selling a Hotel or Motel Online

By Mike Handelsman, Group General Manager, BizBuySell.com

Selling your hotel or motel is a life-changing event.

The decision to sell can be brought on by many factors, including a change in location, finances, or lifestyle. Whatever the reason, sellers should be aware of basic steps that can make the transaction more efficient and effective.

Statistics from the BizBuySell website show that hotels make up one category of businesses that are frequently bought and sold on the site. As more and more business owners are choosing to take a do-it-yourself method when it comes to selling, we are noticing a growing number of hotel owners using online outlets to put their business on the market, as well as a growing number of would-be hotel buyers browsing our site.

Unfortunately, we also see many hotel owners attempting to sell online using largely ineffective methods. These situations are usually the result of a lack of research and preparation before listing a business, and can greatly increase the amount of time a business is on the market, can make the selling process more frustrating than it should be, and can result in a much lower selling price.

The good news is that if hotel owners looking to sell devote time to researching proper selling methods and follow simple steps, the process can be a breeze.

With access to over 50,000 business-for-sale listings on BizBuySell at any given time, we have developed a set of five basic steps business owners can follow when listing their business for sale. They include preparing to sell, using Web tools to your advantage, providing the right information, screening buyers and closing the deal with due diligence. If hotel owners learn the details of these steps and take them into account, they are bound to find the selling process pans out as a great success.

Step 1. Preparing to Sell Your Hotel

As with any type of business, selling a hotel is not something to rush. Ideally, many months (if not years) should come between making the decision to sell and putting your hotel on the market. This allows you to properly assess and document the financial situation of your business and to create reports detailing potential growth and revenue. It will also give you enough time to modernize any outdated systems that might deter buyers once the business hits the market.

Remember - just because you have started the selling process and know you will soon no longer be responsible for the business does not mean you don't have to keep it up to date while it is on the market. It is important to put yourself in potential buyers' shoes and consider the type of hotel you would like to purchase if you were currently in the market.

Also, make sure to have all the information potential buyers might want - past performance, business costs, strengths and weaknesses, for example - prepared in advance. Business must go on as usual while the hotel is for sale, and once buyer inquiries begin coming in you might find yourself too busy to put together all the necessary information and keep the business running.

Step 2. Using Web Tools to Your Advantage

Once you feel confident your hotel is up to standard to go on the market, it is time to turn to some simple online tools for help with valuation and listing. In fact, online business marketplaces offer a wide variety of features that can help make preparation for selling easier.

The first step online is to price your business accurately. Online marketplaces often provide information that can help you define your selling price.

A comparables report provides specifics based on comparable establishments, chosen geographic area, gross income and cash flow ranges. This kind of report can provide general rules of thumb about pricing.

An online marketplace can also provide a listing of brokers who can provide additional help in selling a hotel. While more and more business owners are choosing to sell on their own, business brokers remain in high demand, and can be an invaluable resource for providing assistance with the selling process.

The option to upgrade a listing to premium status can also help users sell their hotel more quickly and easily through the ability to include more descriptive text in an ad search result, as well as highlighted, eye-catching placement.

Standard listings often give sellers the chance to capture potential buyers' attention with one headline. If this is the option you choose, make sure the title is concise and clear, but attention-getting. The title should convey why potential buyers should be interested in finding out more. If there is anything about your hotel that makes it particularly desirable - such as prime location -be sure to include it in the headline as a selling point.

Finally, including a photo of the property can help to differentiate your online listing from others that buyers may see. Whether your photo is of the outside or the inside of the hotel isn't as important as simply including an attractive photo that makes the online buyer want to learn more about your hotel.

Step 3. Providing the Right Information

The key to selling a hotel while maintaining confidentiality is providing the most information possible without giving away the identity of the business. It is important to give viewers an idea of the general location of the business, but do not post the hotel's street address, phone number, or e-mail address in the listing. Instead, create a separate e-mail address and phone number for inquiries from potential buyers. If you have to provide further detail, have the recipient sign a nondisclosure agreement.

Do tell potential buyers why you are selling the hotel. If you are honest, people will tend to be less skeptical, and you will probably sell the business faster. If your listing makes it seem as though you are hiding something about your hotel - even if you aren't - potential buyers will be quick to pick up on it and shy away.

Once you list your hotel for sale, you might find that certain questions come up repeatedly in inquiries. This can serve as a good guiding point for what you should change or add to your listing if ongoing editing is possible.

Step 4. Screening Buyers

Another potential issue to prepare for is receiving inquiries from people who are not serious about buying. Sellers often encounter people who have the dream, but no realistic intention of going through with a deal. After all, there are a lot more people who are interested in becoming a hotel owner than people who are actually capable of becoming one.

It is difficult for online marketplaces to screen potential buyers, so sellers have to determine whether prospective buyers are serious or just casually browsing. The best way to do this is by asking potential buyers direct questions about how long they have planned on buying, how they plan on financing the hotel and how much money they have for a down payment. This kind of informal interview will allow you to determine early on whether the prospect is worth pursuing.

Step 5. Negotiating and Closing the Deal

Once you have found a promising buyer who checks out, the issue of negotiation will undoubtedly come up. Consider this: In a typical business sale, the negotiating skills of the buyer and seller can result in dramatic swings in the final selling price - regardless of how diligently the seller has prepared the business for sale. If the seller isn't up to the task, all the work that has gone into the listing can be undone in a single negotiation session.

And unfortunately, that's just what is happening to many hotel sellers who decide to sell on their own. The good news is that it doesn't have to be that way. Equipped with a basic understanding of the negotiation process, hotel sellers acting independently can learn how to stand their ground and get every dollar they deserve. Other business intermediaries, including business brokers, and/or attorneys and accountants can be valuable resources during this phase of the process.

The overarching principle of successful negotiation is doing so from a position of strength. Hotel sellers should come to negotiation fully prepared with well-researched, documented valuation information. This way, you will have a strong basis for sticking to or very near the price you are requesting.

Listing on an online marketplace also helps negotiation in that it stirs competitive interests from possible buyers. If buyers can see there is a lot of activity surrounding a listing it will only help to create more demand for your hotel.

After you have negotiated with a buyer and decided to go through with a deal, you will have to go through a process known as "due diligence," in which you and the buyer work out contingencies.

A lawyer can help with due diligence and ensure the terms of the deal are clear. In addition, it is likely that the buyer will bring an accountant into the process to review the figures you have provided.

You should also be prepared for the buyer to insist that you advise them at no charge for a certain amount of time (a fair amount is 30 days in person and maybe another 30 days over the phone) once they take over the hotel. They will want to ensure that they properly learn what they need to know to run the business, and there will be no individual more qualified to assist them than you. If they require additional consultation, you might want to request an extra fee for your guidance and time.

Once all the specifics have been properly taken care of, you can rest assured your hotel will go on successfully while you pursue ownership of a new establishment or move onto other ventures.

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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