Last summer, we mentioned that the hospitality and travel sector was one of the worst impacted by the pandemic. Things have recently changed as the threat of COVID-19 has diminished. However, hospitality companies must still take the right steps to thrive.
For many business owners, focusing on increasing value is an important aspect of their business practices. Whether this is to boost current profits or in order to best prepare for a future sale, value is absolutely crucial.
Hospitality businesses are some of the most commonly sold businesses out there, so it’s important that you can provide value to buyers in order to increase your chances of a profitable sale and beat the competition.
Here, we provide advice that can help you to not just maintain your current business value, but increase it over the years up until the point of sale.
What is value in a hospitality business?
Many elements of a business hold value – from the basics, such as your current worth, to the security of your customer base, there are plenty of ways in which you can work to improve value.
Value is viewed differently by business owners, buyers and customers. Each of these are important to your business and how you implement strategies that work to increase value.
Also Read
Particularly in hospitality, you’ll find factors that influence value include:
- Profits, income and financial health
- Market price
- A secure customer base
- Business appeal, general condition and location
- Effective management
- Online presence and advertisement
Hospitality businesses are unique in the sense that they constantly fluctuate in value and often consist of multiple areas of revenue. This means that more time is required to be spent on increasing value if a profitable sale is desired.
Despite this, there are still universal ways in which value can be viewed by a future buyer. Don’t be put off by fluctuations – all the efforts that you make will be contributing to value somewhere within your business.
How to increase the value of a hospitality business
There are plenty of ways in which you can seek to increase the value of your business. By spending time improving on these areas, you’ll not only drive profits and improve revenue, but you’ll put yourself on the right track towards effecting a profitable sale when you’re ready.
Here are some tips on how to maintain and improve the value of your hospitality business:
Know your current worth
Understanding the current value of your business is the starting point that you need to ensure that you can improve. Seeking a professional evaluation of your business will help you to understand where you can improve and why.
It can be difficult to accurately calculate the value of your business. If you are not sure that you can do this yourself, it is advisable that you enlist the help of a business broker who can do this for you.
A future buyer may be heavily persuaded by a clear depiction of growth with adequate evidence to prove this – being able to clearly show an increase in value based on raw data, you’re more likely to secure a serious buyer.
Keep detailed records
For similar reasons to the above point, keeping detailed records is crucial to your business’s value. A future buyer will be interested in reliable information relating to revenue, margins, management and staff; ensuring that they have this information available makes a sale easier.
Having detailed records will also help your business in the meantime, as you will be able to track progress clearly and identify when certain areas need work.
There are times where records are needed to provide evidence should any issues occur in your business practices. These may not be serious, but they could cause you trouble should you not have sufficient evidence to back yourself up. Keeping track of your business in all areas holds significant value.
You might find that you have to cut costs to boost your bottom line. Detailed records will help with that.
Improve your service
The hospitality industry is highly competitive. By setting your business apart from the competition with unbeatable, top-quality service, you increase current value and add value in the eyes of a future buyer.
Great service leads to a positive chain of events – satisfied customers will recommend your business to others, increasing profit from new customers and encouraging a promising online presence.
A future buyer will be drawn to a business that already has a great reputation, whether this be through word of mouth or online. Focusing on service provides value to business owners themselves, to customers and to buyers and potential investors.
Maintain great staff
Having a reliable set of staff working for you will automatically help to increase business value. If you can easily leave your management team to run day-to-day operations whilst you spend time on more complex matters of your business, you’ll already seem valuable to future buyers.
A buyer will often be interested in maintaining great staff. If you can prove that your staff work well and work to increase the value of your business, you’ll put yourself in a great position for a smooth sale.
Great staff also equals great service, which pleases customers and in turn, provides positive word of mouth for your business. Keep in mind how each element of your business affects the other.
The hospitality industry is hugely competitive and businesses have to constantly work to improve their business practices and promote their expertise in order to keep up.
Paying attention to business value is crucial – not only will increased value provide benefits for current business owners but it will work to ensure that a future sale can go ahead with ease.
Hospitality is extremely broad, so it is evident that there will be an abundance of ways in which you can increase your business’s value. Spend time researching these areas, and seek further advice if you think it’d help.
If you are selling a pub for example, you may pay close attention to how your business is viewed by your customers and how well you can retain a loyal base. A restaurant may be more concerned with how well it’s food is rated and how the premises looks to customers dining there.
No matter what area of hospitality your business is in, aiming to increase the value of it should be a vital part of your business strategy from day one.