The Right Time to Sell Your Venue?

When is the Right Time to Sell Your Venue? - by James Matthews

I’ve spoken with over a dozen venue owners this past month, and so many have the same anxieties and questions when considering departure.

‘How do we sell discreetly to avoid couples cancelling or staff leaving?”??

“Will a new owner care for our teams and our couples in the way we have?”

“How do we get a fair value for the company we’ve built?''

I don’t claim to have all the answers, but here are some of my thoughts that might help venue owners understand the options.?

The Right Time to Sell?

The very reasons keeping you in your business are often the same that make you wish you could leave, uncertainty, turbulence and change.

First, it was covid-related closures, postponements and cancellations;

-then the hospitality staffing shortage;

-then the energy and cost of living crisis;?

-next will come the increased cost of debt, reduced funding options and unstable property prices;?

-then will come the Law Commission’s changes to the Marriage Act, with increased competition from pubs, restaurants, boats and marquee venues.

You want to be present as a reassuring presence for your team and your couples through turbulent times, but at some stage, you may want to retire, move house or change career.

The good news as a wedding venue owner is that weddings will always be around, and if you have developed a sustainable and desirable venue in the right area, you will always have value in your business.????

The key to selling your venue at the right time for the best price, and with optimum tax efficiency, is quite simply forward planning and carefully selecting a compassionate purchasing partner who understands and respects your needs as a business owner seeking an exit.

Selling as a residential house?

Suppose your wedding venue was originally a private home or farm that gradually evolved to offer occasional weddings. In that case, it is worth considering whether its value is as a residential house or as a wedding venue.

If any of the following apply and are unlikely to change, it is likely better to sell as a residential property:

• You don’t have full planning permission & licences to hold weddings at your venue year-round on a commercial basis.
• Your home lacks much of the infrastructure needed to host weddings at scale.
• Neighbours object to the noise or traffic from weddings at your venue.
• You only offer a small number of weddings each year.

You should complete all contracted weddings before you sell, which requires you to only take deposits for weddings you know you will be able to deliver. Cancelling a couple’s wedding damages confidence in the industry and should be avoided, even if you return their deposit.?

Be prepared for cancellations and loss of staff if your couples and team get spooked when your property goes on the market. Most estate agents have an option to sell “off market'' and have a list of buyers to match with sellers looking for a discrete sale, but without going to the open market, it is hard to get the best possible value for your property.

If you are selling your venue as a residential house, ask around locally to see which estate agents have a good presence in your area for houses of a similar style and value.

Selling as a business?

Selling as a business is usually the most profitable way to sell an established wedding venue, as you will be paid a premium for the business you have built up, in addition to the “bricks and mortar” value of the property itself.

It also avoids the need to cancel weddings or make staff redundant.

If the following apply, you may get a better price and have an easier transition if you sell as a business:

• You have a reasonable number of future bookings, ideally weekdays as well as weekends
• You have a steady stream of incoming bookings
• You already have, or can get, the planning consents needed for operating as a wedding venue??
• You are operating a popular and viable venue

The purchaser will need to understand exactly what they are buying, so the due diligence process is more complex than a residential sale. In addition to the survey and title deed checks for a residential property, the purchaser will check employment contracts, bookings, reputation, accounting practices and health and safety records, and will need a full inventory of all the furniture, fixtures and stock that you will be selling as part of the business.

How is a wedding venue valued?

There is a simple way to establish the value of any business using a multiple of the businesses' EBITDA; the venue's gross profit before taking interest on loans, tax or depreciation into consideration.??

The multiple varies depending on the sector, and the confidence in the market. The standard range is currently between 6-10 x EBITDA for wedding venues, depending on numerous factors. Many venues are owner-operated and have grown organically over many years, with accounting practices leaning towards tax efficiency rather than improving the EBITDA. Adjustments will be made to “normalise” the accounts, so there is no benefit in spending time and money in massaging the EBITDA before getting a valuation.??

It is also sensible to get a “bricks and mortar” valuation of the property, either from a valuer (￡1500 - ￡10,000, depending on the property size) or from a friendly estate agent. Valuers tend to be more realistic in their valuations; estate agents may round theirs up to tempt you to sell.???

Depending on the type of venue, the business value may be more, or less, than the property value. For example, for an impressive country house in a large estate, the property value is likely to be significantly higher than the value of the business, but for a successful rustic barn venue with a full diary of future bookings, the business value may be higher than the value of the barn and its surroundings.??

The value in your wedding venue business is largely dependent on the property.? This is a high value asset to the business. The operations of your business depend on it. If couples like the location, the setting and the facilities you offer at the venue, then they will buy from your business. So, if you sell the property, there is no value left in the business. The business and property support each other's stand alone value. A commercially successful wedding venue is one where the business value exceeds the property value, as the owner will achieve the higher of those two values when they exit.

It is better to think of the property as an essential part of the business and expect to get a valuation based on the EBITDA multiples, or if the property is worth more than the business, based on the property value plus an additional amount to take into account the bookings already in the diary.

Wedding venue agencies?

There are reputable estate agents specialising in commercial properties such as hotels, pubs and restaurants, but not in wedding venues, and there is a simple reason for that.

Unlike other hospitality businesses, when it comes to weddings couples book over a year in advance. As soon as a venue goes on the open market, its value drops as couples lose confidence and cancel their weddings, or the team starts looking for more job security elsewhere. Without the bookings, you don’t have a business to sell, or worse, you are left with a handful of weddings to deliver, but without a team to deliver them.

Instead, wedding venues sell by word of mouth and almost always within the wedding industry. If the person buying has the same vested interest in discretion as the person selling, and if they share the same high standards and values, there is no reason that couples or employees should either know about or be concerned about, a change of ownership.?

In summary

If you have spent time developing your venue business, and want to look after your couples and your team, you will be looking for an ethical, long-term custodian of your business who will offer you a fair price, will ensure the sale progresses with absolute discretion and who can build on the foundations you have created.?

I hope this brief note will help those owners understand a little more about the options available to them.

I am always happy to have a conversation with any venue owner to help them explore their options, in complete confidence. If the venue isn’t suitable for Xenia I’m happy to make an introduction to others that operate with the same level of professionalism and discretion within the industry. So, feel free to reach out to me on LinkedIn or by email.