Hey, Let’s Sell Our Pub Via A Competition!

09/03/2009 by info.

Competitions to win a house started at the start of the residential property slump because the owners could not get the price they wanted for their property in a falling market. It was hoped that although one person was not willing to pay the asking price by selling 20,000 tickets the owner could obtain the money they wanted.

Now business owners, unable to obtain the price they want for their business are starting to run a competition in desperation to offload their businesses.

There are currently two pubs you could win that I am aware about, the Filly Inn, in the New Forest, which the owner say is worth £400,000 Leasehold. Yeh right, so is my pen! http://www.win-pub.com/

And now the Plash Inn, in Wales, which is all the tickets are sold the owner will gross £600,000 for their Freehold pub http://www.winapubinwales.co.uk/

Now the simply question I would ask is, if they wanted to sell and couldn’t sell at the current asking price why not simply reduce the asking price rather than run a competition?

The answer probably is that they need the amount of money the competition would give them to get out of debt, and that is often the main criteria for business owners valuations of their own businesses.

Business owners think well, I bought it for £100,000; I have spent £10,000 on it I have an overdraft of £5,000 so I would need £115,000 net proceeds to get out of debt and recoup my investment. So they place the business on the market at £130,000 even though it is worth only £80,000.

Interestingly enough neither of these pubs is willing to disclose how much or little money they are making, so are you simply entering a competition for a poisoned chalice?

Somehow I think they will find that 30,000 – 40,000 people would not be willing to buy tickets knowing that firstly they would need a license to run the pub, secondly that they would need a significant amount of working capital in addition to their £10 - £20 stake, and finally knowing that running a pub could ruin them financially, as they would not know how to run a pub.

Let’s keep an eye on the links to see what happens, my personal opinion is that they are simply wasting time and at the right price these pubs would sell.

Posted in Selling Your Business, General | 1 Comment »