The sale of any business is a process. In this issue we consider a snapshot of a few parts in this process, including the initial enquiry, qualification of that enquiry and the physical property inspection.
Enquiry and Qualification
The initial enquiry for a motel business that is available for sale in the market starts with a minimum required level of information being provided by the enquirer. This includes details about themselves and what they are looking for. This forms part of the initial qualification process by the broker. A large part of the broker’s role is to ensure that a business’ confidential information and data is not provided to those who have no real intention of buying the business.
Any motel owner selling their business does not want unqualified buyers having access to their confidential information. For example, details about their customers or financial data getting into the hands of non genuine parties. Those selling their motel should always work on the premise of seeking fully qualified buyers, meaning fully funded parties that have a genuine intent to buy. There are many ways to complete this and discussions with a specialist motel broker as to how they will handle this process will assist. This will save considerable time and money for the seller over the course of the marketing campaign.
Once a buyer has been fully qualified (as far as they can be) then one can have confidence that the sensitive business information that they are providing will be handled appropriately. The use of Confidentiality Agreements should be standard operating procedure to assist with full confidentiality being maintained. Those buyer enquiries that refuse to sign such document effectively then have qualified themselves as non genuine buyers. Immediately, those that should not have access to sensitive business information have been exposed.
Physical Property Inspection
Skipping way ahead in the process, if all business data is in order, the next stage is the physical property inspection. As opposed to the residential real estate industry where the advertising of how many inspections have been conducted is seen as a positive thing, the sale of a business is quite the opposite. The number of property inspections conducted should be as few as possible, if the qualification process is completed correctly. The “more the merrier” is not best practice for the sale of a business, as opposed to a residential property. Only fully qualified buyers should ever gain access to the backend of a motel business.
Upon inspection a potential buyer wants to look at the good, the bad and the ugly for as long as they like. The seller wants the buyer to have a quick look around, say yes they will buy it, and leave so as to avoid any employees or customers finding out that they are selling. It can be an awkward situation when the seller, broker and buyer are talking about sensitive business specific information and a staff member, customer or supplier walks through the door. The busiest times of the motelier’s day are therefore simply not suitable for conducting an inspection, and all parties need to be acutely aware of the sensitive and confidential situation that they are in.
The motel broker must arrange a mutually suitable time for all parties for an inspection of the property, taking into account the busy and quiet times of the particular motel business. These times will vary from motel to motel depending on the type of clientele and income departments the business has. Buyers will inspect a motel at whatever time suits them, however for the seller, for much of the day it is inappropriate to carry out a thorough inspection. The motel broker is to manage the process to avoid any damage to the business as a result of the inspection. The percentages would confirm that most buyers do the right thing when it comes to the physical property inspection, however the minority will not. Such as arriving in reception unannounced and wanting to look through the property.
Some may stay at the motel unannounced as a paying guest, having a quiet look around without disturbing anyone, which is quite acceptable, albeit this is not a thorough inspection.
The seller of the motel business can be involved in the physical inspection or can leave it to the broker. This being said, normally the broker would be in attendance at inspections and should control the inspection so that there are no unexpected issues that arise. The property needs to be an open book with the seller being as transparent as possible and allowing the buyer to look as in depth as they wish, throughout the entire property.