If you are running a pub and you want to sell it or just want to check the value of your running business, you need to know a few details about how to value a property, or if you are approaching an agent for that, how he will do it for you. Many factors determine the value of a pub, including location, size, layout, amenities, and more.
We all know that buying or selling a business is stressful enough without worrying about whether or not you got a good deal. That’s why we want to help take some of the stress out of this process by giving you all the information upfront, so there aren’t any surprises later on.
You must understand how to value your pub. There are three valuation methods commonly used today, and each has its unique advantages and disadvantages.
Capitalization of Net Operating Profit
This method uses the NOP as an indicator of future earnings potential for the business. It then discounts this figure by a percentage based on risk factors such as market conditions, competition, etc., which can vary from one location to another.
The second method is the summation (lessee’s plus lessor’s interests), which takes into account both sides of the lease equation, first being the lessee’s interest in equipment and fixtures and second being the lessor’s interest in land/building, when valuing a business for sale or purchase.
Finally, there is the direct comparison method. You compare your pub with other pubs of similar scale within the area being valued using similar criteria such as size, trading hours, type of license held, etc.
Each method has its advantages and disadvantages that will affect the valuation outcome. It is essential to know which method is most appropriate for your situation so you can make an informed decision on whether selling or buying a pub/hotel makes sense for you.
By following these steps, you can value your pub in no time.
If you want to understand the pubs better, visit us at www.braysbrewpub.com.