Stephen Taylor
Managing Director
Guy Simmonds
To what extent will current economic woes influence the licensed property market and people's desire to enter the licensed trade? There is much doom and gloom around - both domestically and in world markets - but a number of factors are working to the benefit of the licensed property market.
Firstly, there is little connection between domestic property values and licensed business values. A domestic property is a dwelling; a pub business is a profits-producing machine, valued according to very different criteria.
Undoubtedly domestic property values will fall (perhaps by 20%) over the next couple of years. But the degree to which any fall in house prices will impact upon pub values is likely to be limited. Provided a business is correctly valued according to long-established principles based on net profits, it remains the case that affordable, available lending will bring the business well within the reach of private prospective purchasers who can demonstrate professionalism via experience or suitable pre-entry trade training.
Banks have had their fingers burned by over-aggressive lending on poor security to high-risk borrowers, but lending on licensed businesses has always been much more rigorously underwritten, and we are finding that banks are still happy to lend to finance sound commercial propositions.
The recent dramatic downturn in equity markets has resulted in investors looking for safer harbours for their money - and quality licensed ventures provide an excellent investment vehicle to produce revenue and capital gains.
Concern about job security is causing many to want to control their own destiny and acquire their own business to provide an income, home and enjoyable lifestyle.
These factors are resulting in our experiencing unprecedented levels of interest. Demand for licensed businesses remains very strong, both from corporate clients hungry for freehold acquisitions and private purchasers.
A mutual feeling of satisfaction for the seller and buyer is still the main determinant of a successful sale. Prospective purchasers are very active and determined to acquire good value. Sellers should recognise the importance of using a long-established professional agent with all the necessary support services such as finance, training, and specialist legal services - and the crucially important ability to advise correctly on the value of the business.