Put your house in order

Thousands of pub leases and freehouses change hands each year. Sadly, in many transactions, vendors fail to carry out the essential work that would get them the best possible price for their asset.

The complicated process of selling a business should begin long before a vendor even contacts a property agent to carry out the formal procedures of advertising and marketing a pub property.

There is a wealth of paperwork, accounts and business documents that a licensee needs to prepare, before an accurate figure on the potential value of a lease or freehouse can be assessed.

This vital information is required to achieve the best valuation figure for a business, and it's a sad fact that many hosts are not the best at coming up with it.

Many licensees do not even bother to give their properties the essential make-over or minor refurbishment needed to show off their pub in the best light to potential buyers.

Preparation is vital to the successful marketing of a leased or freehold pub, according to Fleurets' divisional director of chartered surveyors Andrew Whelan.

Full accounts that track the previous three years of business should be provided by the vendor, together with all operational and financial documents relating to the operation.

Ideally the best-prepared licensees will already have an advanced exit strategy pinpointing the best time to sell a lease or freehold.

In the case of property held on a lease the optimum selling period comes after a rent review as purchasers will rarely conclude a sale until a review has been settled.

Sale timings should also come about two or three years after a significant refurbishment, which would normally ensure that fixtures and fittings are in good repair. If a property is well-maintained and in good shape, this should be reflected in high trading levels.

"Proper planning for a sale should include advice from your accountant to ensure the tax bill from the sale is kept to a minimum and at the time you decide to sell, the turnover and profitability of your business should be at its maximum," Whelan says.

Whelan advises that purchasers are often attracted by the quality of the living accommodation, particularly where a prospective licensee has a family to house or is looking for a comfortable lifestyle for themselves.

"Vendors have countless things to get ready before they start talking to agents, so it is vital they start collating all the information they will need because poor paperwork may well delay a sale and jeopardise the successful sale of a premises," he adds.

Choosing your agent

Local research to select the right agent is paramount to ensure a vendor has the best chance of selling for the highest price, says Christie+Co director Bill Colquhoun.

Colquhoun recommends that sellers contact two or three different agents before selecting the one to market their pub.

"Your initial meeting with agents will give you the opportunity to establish a rapport and assess the professionalism and success of each one and establish what costs are involved and what service you can expect," he advises.

He urges licensees to seek examples of other pubs an agent is dealing with. In particular, find out which ones the agent has actually sold in the same area, and see if any are pubs similar to your own.

"This is the acid test, more so than what is currently on the market because the agent who lists plenty of pubs available for sale is not necessarily the agent achieving the most sales," he comments.

He says it is crucial that the agent who makes the initial visit to you is the agent who will be actively selling the lease or property.

"One of the most crucial considerations for the prospective seller is which agent has the best track record in their region for selling similar-style businesses and has the ongoing market presence, professionalism and personnel to inspire confidence.

Neil Morgan, director of Christie+Co has drawn up the following five-point checklist of advice to help vendors select the right agent:

l Check on telephone numbers of agents as more than one number does not mean a firm has national coverage as some agents just have one call centre

l Agents' fees should be judged on price being achieved and timing, not simply on the cheapest rate

l Make sure you have three years' profit and loss accounting information and if you are midway through a trading year provide quarterly VAT returns

l If the pub is leasehold provide a copy of the lease together with details of current rent being paid

l After choosing your agent and before the business is actually marketed, gather together details of members of staff names together with salary and job description and draw up a list of fixtures and fittings to be included in the sale.

Call in qualified assistance

Choosing the right agent is vital but how do you choose when the property world is littered with unqualified and unregistered operators?

Anyone can become an estate agent so vendors must ensure the one they select is fit for the job, says Fleurets divisional director Simon Hall.

Hall stresses that a reputable firm will be associated with a governing body that has rules and regulations.

A check to see whether a firm is registered with the Royal Institution of Chartered Surveyors, otherwise known as RICS, or the National Association of Estate Agents (NAEA) will help ensure that the agent is part of a professional set-up.

That apart, vendors must ask other questions to ascertain whether the agent is best-suited to deal with the sale.

Market knowledge, industry contacts and a track record of dealing with sales of your type of pub are all needed to ensure your deal can be transacted at the best price and within the optimum time-frame.

An agent should be able to provide a structured marketing campaign outlining the activities they will undertake to sell your business.

One tip is to use an agent with an extensive database and an interactive website, as the internet is fast becoming the most popular method for searching for properties.

A good agent will normally provide initial advice free of charge furnishing you with recommendations to help you decide whether to market your business through his firm.

It's a good idea to get a clear understanding of how fees will be payable and you should ask whether there will be any money demanded upfront.

If this is the case, ask yourself whether this has any bearing on the advice you have been given.

"Some agents will provide unrealistic advice to secure this upfront payment knowing that their costs are covered and once you have signed you could be tied in for what might be six or 12 months," Hall warns.

"The 'No Sale - No Fee' approach will ensure the agent has to perform to be paid anything at all," he stresses.

Hall says trade organisations such as the BII are always available to give advice and in the cases of pubco leases, area managers are well placed to lead you in the right direction.