HOW TO BUY OR SELL A MOTEL BUSINESS

This article is written to show hotel owners how to sell a motel property, and for those entrepeneurs that want to buy a motel property. First, we will go over some of the basics about the industry, and then dive into the good stuff.

What is a Motel?

The term motel refers to a managed building that provides guests with overnight accommodations in exchange for a fee. This fee will vary based on location, services offered, and quality of the motel. So as you can imagine, the motel guests can experience quite a different experience in their stay, depending on which motel they decide to stay at. Motel owners often choose to target a specific type of customer through their pricing model and by their different marketing strategies, as well as by offering certain services or features.

What is The Motel Industry?

The Motel industry is part of the hospitalilty industry in where guests are accommodated or lodged in the motel for the length of time they decide to book their stay for. Motels are not the only form of overnight accommodation in the hospitality industry. Hotels, Hostels, Motels, Resorts, Inns, Bed & Breakfast (B&B), and guest houses are all a big part of this booming industry. Motel businesses are one of the best businesses to be bought, or sold, in the business selling community. They are in very high demand, and can be quite costly because of the high level of income they can bring in when they are managed well, and in a great location. They are a dependable business, with a steady and repeating source of income.

The Hotel Industry Is Recovering and Growing

According to the hotel industry analysis done by AHLA, the U.S. hotel industry is projected to reach 1.3 billion occupied room nights in 2023, which exceeds the 2019 total. This 2023 projection is an improvement of 56.9% from 2020’s low of 831.64. million occupied room nights. From 2021 to 2022, the demand for U.S. hotels went up by 11.1%.

Great Hotel Industry Trend Analysis Article

A New Era for US Hotels Source: American Hotel & Lodging Association AHLA

When Is The Right Time To Sell A Motel?

Just like when you are considering selling any type of business or property, the Motel industry is no different. It’s imprtant to decide when the right time is to do so. If your selling, it’s best to sell when business is booming if your looking to make the most money from all your hard work in building up the business. The opposite is also true, that if the market has been bad, and you just want to cash in your chips and get out, then that would be the right time for you. The real answer to this question is that the right time is when you are ready!

When Is The Right Time To Buy A Motel?

When you are thinking about buying a motel, the right time is again, once you are ready! But, in order to get the best deal it’s good to buy when the market is bad, but getting better, so that you know when you buy it you will buy it for the lowest price possible, and higher profits are on the way. You will then grow the value of your motel rapidly, and your motel business will also be growing in profit each month as the market is growing. In these conditions, you get the best of both worlds.

Understanding Your Motel’s Potential Buyers

As you start to prepare to sell your Motel, you need to understand that there are two types of buyers that purchase a motel. The first type of buyer is the established motel business owners that are already managing and running existing motels. The second type of buyer is the enterpreneurs that are new to the motel industry and thinking about buying their first motel.

Established Hotel Business Owners

Many of the potential buyers that may show some interest in buying your motel are already in the industry with their own motel business. They will have a lot of experience in the industry. They will know exactly what they want, and what they are looking for. If you want to find a buyer for your motel that is already an established motel business owner, you may want to have your commercial real estate agent business broker advertise your motel business for sale in official property or trade magazine websites.

Entrepreneurs That Are New To The Motel Business

You may also want to think about selling your motel to a buyer that is new to the industry. There are a lot of potential business buyers that are out there looking for businesses to invest their money in. They may be thinking about expanding their business holdings and delving into the motel or boutique hotel business.

Selling or Buying A Hotel Business

If you are thinking about selling a hotel, motel, or other type of hospitablity business, the primary objective here is to get the highest price to make the most amount of money for all your hard work in building or running a successful and profitable motel business. If you are thinking of buying an existing motel business, the key thing that you are looking to do is to buy a successful and profitable business at the best price so that you can make the most money possible. We put together this guide on how to buy or sell a motel business to help you prepare for your next steps so you will be ready once you think you are ready to get started. First we will talk about selling your motel, and then we will talk about buying an existing motel business.

8 Steps To Sell Your Motel Business

How To Sell A Motel Business

There are a few steps you need to take to get ready to get your Motel Business listed for sale that will help to make the selling process go more smoothly. It’s important to start the preparation of getting your motel business property ready to sell as soon as you can.

Steps To Sell A Motel Business

1. Compile Your Business Records and Reports 2. Value Your motel Business and Property 3. Perform Any Needed Improvements or Maintenance 4. Hire a Commercial Real Estate Agent Business Broker 5. Additional Items to Consider When Selling Your motel 6. Bring Your Own Buyer 7. How Long Will It Take to Sell Your motel Business? 8. How Much Does A Business Broker Charge?

1. Compile Your Motel Business Records and Reports

The very first step to selling your motel is to pull all your financial documentation, and business documents, together and organized so that you are ready for a potential buyer, and your selling agent business broker, to go through. If you can, it’s a good idea to pull together three years worth of these records. You don’t have to pull it all together in order to get your business listed for sale. Start with what you can, with the understanding that you should keep working on pulling together more. Your business broker will just need some of the information to get started and get your listing up and visible for potential buyers.

Types of Business Records and Reports

• Profit and Loss Statements • Balance Sheets • Accounts - How Many Guest Accounts • Property Maintenance Records • Motel Guest Ratings • Motel Guest Demographics • Additional Guest Services • Full Tax Returns • Annual Reports • Inventory Reports • List of All Your Vendors, Partners, Maintenance Companies, and Suppliers • Any Current Lease Agreements or Loans • Licensing, Permits, and Inspection Reports

Profit and Loss Statements

Also known as P&L statement is another important piece of information for you to provide to your business broker, and they will need this information to show the value is there for any potential buyers or investors. Atleast one year, but preferable information on the last three to five years would be perfect.

Balance Sheet

A complete balance sheet, and a trailing twelve months, also known as a T12, or a TTM, of the revenue generated over the last twelve months is another piece of documentation that is important to pull together and have ready for any potential buyer.

Accounts

Potential buyers will want to see how many accounts or guests that you have had stay at your motel over the last couple of years. So it’s important to start to put this information together to have it ready. This is one piece of information that can help identify the value of the business.

Property Maintenance

It’s important to show that you have been maintaining the property. It would be a good idea to have one to three years of history to show how much you spent on keeping the property well maintained. Whether it’s painting, furniture replacement, fixture replacement, or property upgrades, it’s good to show that you have been taking care of the place.

Motel Guest Ratings

If you have any way to document any good reviews, or ratings, from guests that have stayed in your motel, this would also be beneficial to show any potential new buyers. It shows that your customers are happy, and satisfied, giving your motel a good reputation. Whether it’s your own social media pages, or website, yelp reviews, social media influencer pages, any where that you can show that people are talking about their stay at your establishment will show that they are making a good investment that will have a good amount of repeat customers.

Motel Guest Demographics

If you have done any research, and compiled any reports, these may be a good set of information for a potential new buyer. This is something you should be doing to keep growing your business to keep your motel at capacity and making the most profit that you can. Who are your guests? Are they local to the area, are they from another state, are they from another country? What brings them to the area? Are they retired, are they young, or middle aged. Do they have kids, is it typically family’s that come to stay at your motel? Are certain seasons or months more popular? If so, why? Do your guests book through your website, or another website? How do they find you, how did they hear about your motel?

Great Motel Market Research Article

Hotel Target Market: How to Find Your Most Lucrative Prospects Source: Social Tables

Additional Guest Services

Treating your motel guests well will build a larger list of returning clients. Do you provide free breakfast for your guests that want something simple and convenient. Does your motel have a cafe or restaurant, and do they offer room service options? Do you have a gym for your guests to get in some exercise while they are there? Do you provide free wifi? Is there any entertainment opportunities whether it’s in the motel room, or on site, or close by, to keep your guests entertained while they stay at your establishment? Do you partner with any local businesses to offer discounts for your motel guests? Document these types of things so that you can provide a clear understanding of what it is that you offer your guests. The types of things we mentioned above are just some examples of what you may want to start thinking about pulling together to have available for any potential buyer. It’s important for them to see how you are doing things. They will see ways they can add to what your doing, or modify it, to increase revenue, making the business a sound investment to buy your motel. Capitalizing on continuous growth opportunities are an important aspect of business ownership. Even if it is things you are not doing today, if you have ideas that you feel would work for them to grow the business, it is nice to provide those. You should also pull together one to three years worth of tax returns, and annual reports. Inventory reports to show the value of your inventory that will be owned by the new buyer. It’s also important to document a list of all your vendors, partners, maintenance companies, cleaning services, and suppliers. You should pull together your current lease agreements, loans, licensing permits, and recent inspection reports.

2. Value Your Motel Business and Property

Now that you have your business paperwork in order, and ready, you should start thinking about the value of your business. How much do you think you want to sell your business for? It’s good to do this first on your own, so you can give your business broker a number that you have in mind so that they can understand a ballpark figure that you are looking to get out of it. They will put together a number based on market research and the information about your business that you provide to them that can help them come up with a good listing price.

How to Value a Motel Business

Putting a value on your motel business can be hard to do. The good news is that for most motels, the value is pretty high because a good motel to stay in is in high demand. The value of your business will be dependent on several factors, including the location of your motel, equipment, brand or name popularity, your assets, and local competitors. It will also depend on the information that you provide to your business broker such as your business records, and the current market conditions for your area. The bottom line is that your business is worth what someone is willing to buy it for, and the better the records and documentation is to prove the value, the better chance that they will see how valuable this investment can be for their portfolio.

Factors That Can Help Determine Your Motel Business Value

• Property Value • Inventory Value • Motel Location • Quality and Maintenance of Your Facility • How Many Guest Rooms You Have • Age of Your Motel • Features and Conditions of the Property • For Franchise Motels - The Term of Franchise Remaining • Other Local Motels Listing and Actual Sale Price

3. Perform Any Needed Improvements or Maintenance

The next step to selling your motel business is to get ready for potential buyers to see and tour. Most importantly, give it a good cleaning inside and out. Maybe even do some pressure washing in the outside areas and walkways if it needs it. You may want to apply a fresh coat of paint, or a little touch up, inside and out. This will add to the curb appeal, and the new buyer will see that you care about your business and how it looks for your customers. You should replace anything that is broken, and perform any upgrades, repairs or maintenance, on anything that needs it. This will give any potential buyers confidence that they aren’t buying something that will require them to put in a lot of time, energy, and money on getting it ready for how they want their motel guests to see it.

4. Hire a Commercial Real Estate Agent Business Broker

Listing your business with a professional business broker is the best way to sell any business. A business broker has the expert industry knowledge of the motel business to get it listed at the right price, and to bring in the right buyers to get it sold for you. If you’re looking to buy or sell your motel business you should use an experienced professional who understands the market and can save you both time and money. For more information, contact Michelle Mendenhall as she is a Certified Business Broker that is a member of the IBBA (International Business Brokers Association), and a Commercial Real Estate Specialist. Michelle Mendenhall Professional Business Broker, IBBA Commercial Real Estate Sales & Leasing Associate Phone: 916.459.7526 DRE #02116152 LocalGirlGoesCommercial.com michelle.mendenhall@localgirlgoescommercial.com michelle.mendenhall@expcommercial.com Your confidential and proprietary business information will be kept confidential, and protected from being disclosed to people that it shouldn’t be by requiring a Non-Disclosure Agreement to be signed for getting access to certain information. Your Business Broker should sign an (NDA) and have potential buyers sign an NDA, to protect your business. Your business broker will communicate with potential buyers, and any leads they receive from their advertising platforms. They will have those initial conversations with any potential buyers, and won’t engage you until they have someone that has some good potential for actually buying your business. They will also arrange any meetings needed, and show your business to the potential buyers. This may include income verification to show that they can afford to buy the business, to eliminate unqualified buyers or the random time wasting window shoppers that have no intention to buy anything. Your business broker will get your Motel listed on the best advertising platforms for your business to gain as much exposure to potential buyers as possible. When they find a buyer that is ready to make an offer to buy your motel, they will ensure the proper papwerwork is documented, signed, and navigate your transaction through the escrow, inspections, and closing process, as appropriate. They have a lot of resources for marketing, and putting your Motel for Sale listing in front of the right buyers.

5. Additional Items to Consider When Selling Your motel

There may also rules or contractual agreements in place if your motel is part of a franchise, or with certain suppliers. These are all important items to consider and have ready to discuss when a potential buyer shows a strong interest in buying your motel.

6. Bring Your Own Buyer

Sometimes when a business listing is published, a buyer may come from the current owner’s local competitors, long time employees, regular customers, business acquaintenances, or even vendors. You never know who may want to buy your business, so if you have any ideas or insight that you could share with your business broker, you sould share this information as it may get your business sold very quickly.

7. How Long Will It Take to Sell Your Motel Business?

Unless you have a buyer ready to go, it may take six or eight months to sell your business, and possibly even longer. The main factor will be the business market in your area, whether there is a strong pool of entrepeneurs looking to buy in your area, and the price point you choose to list your business at. The size of your business is also an important factor because if your business is very large, with a very high price, the number of qualified buyers is much smaller. The best way to speed up this timeline is to price the business at a good price, and have your paperwork in order and ready to go to impress any potential buyers to entice them to buy your motel.

8. How Much Does A Business Broker Charge?

A business broker typically charges ten to fifteen percent for their services during the sale. If you business does not sell, they do not typically charge a fee. They will provide this information to you as you start your conversations about using them to sell your business. This is a fair price for them to earn a living, and cover their really expensive advertising and marketing costs as they work to find the right buyer for your business. You have to remember, your business broker typically has a staff, and brokerage, that will be taking some of that commission too.

12 Steps To Buy A Motel Business

How To Buy A Motel Business

There are a few steps you need to take to get ready to buy a motel business to help you to look for the best business opportunity to buy. Review our Buy A Business page for more detailed information about buying a business.

12 Steps To Buy A Motel Business

1. Decide Whether You Want To Buy or Lease 2. Hire a Business Broker 3. Compile Your Financial Records 4. Look Into Getting A Small Business Loan 5. Review Listings From Your Business Broker 6. See the Business In Person 7. Letter of Intent to Buy A Motel Business 8. Purchase Sales Agreement PSA for Buying a Business 9. Review Their Paperwork - Do Your Due Diligence 10. Licensing and Permits 11. Secure Capital To Make the Purchase 12. Finalize the Business Purchase

1.

Decide Whether You Want To Buy or Lease

The first question is really to decide where you want to get into the motel business. Next, you will want to determine whether you want to buy or lease a motel business property to run your business out of. Most motel businesses own the property, and the buildings. This is a big decision, and it may come down to your financials as a motel can cost from a few hundred thousand dollars up to and more than ten million dollars for a single motel.

2. Hire a Business Broker

The best type of business broker is a commercial real estate agent that has an IBBA business broker certification. The business broker will help you find the best Motel Business available in your price range. An example of a great business broker is Michelle Menenhall at LocalGirlGoesCommercial.com.

3. Compile Your Financial Records

Pull together all of your bank account statements, the last couple of years worth of tax returns, copies of your latest couple of payroll paychecks, investment account statements, and anything else that will help you fill out your request for a loan so that you have it ready.

4. Look Into Getting A Small Business Loan

Unless you have the cash available, you will probably want to look into getting a small business loan. Loan interest rates do vary, and you may have to come up with twenty percent down, depending on which bank you use, and what their requirements are. You may also be able to get seller financing, which would be something you can talk to your business broker about.

5. Review Listings From Your Business Broker

Once you sign up with a business broker, they will send you over details about motels for sale listings that they think will be a good match for you, so that you can review them. You should take these listings, and rank them in order of your preference, and let you business broker know which ones you may like to schedule a time to go look at. This will help them determine which types of listings they should pull together to review with you, to make sure they are looking for the perfect motel business for you.

6. See the Business In Person

Now it’s time to start looking at the motels that you narrow down as your favorite ones with potential. When you are looking through the motel, it’s important to look to see if it is well kept, clean, in good shape, everything seems to be working properly, so that you can be confident that the current owner is taking care of it. You should do a quick drive by on your own, before setting up a tour with your business broker. Things do not always look as good in person as they do online. Please do not bother the current owner, staff, or guests. You have to remember that not all business owners tell their employees or customers that they are selling the business so that they don’t leave.

7. Letter of Intent to Buy A Motel Business

Once you find the perfect motel to buy, your business broker will work with you and put together a Letter of Intent to buy the business, known as an LOI that will be submitted to the seller. The letter of intent is where you will negotiate the terms and the price to buy the business from the seller.

8. Purchase Sales Agreement PSA for Buying a Business

Afte the LOI is submitted, the next step is the purchase sales agreement. This agreement will document the final purchase price, and everything that you will be buying in the deal. It may include the tangible assets, inventory, equipment, furniture, and buildings. This is another document that your business broker will put together for you.

9. Review Their Paperwork - Due Diligence

Now that your offer has been accepted, and you are ready to buy the motel, it’s time to start looking through their paperwork and make sure that everything looks good. This is called doing your due diligence to make sure the numbers make sense, that you will be making how much money you need to make, and what was declared is accurate. This is the time to ask for additional documentation to validate their numbers if you need to as well. You should review any contracts, agreements, leases, tax records, and bank records. Everyone can make mistakes, and it is during this process where you may find any mistakes that changes the value of the business.

10. Licensing, Inspections, and Permits

During your due diligence period you should have discussions with the seller to ensure they are up to date on all of their licensing, inspections, and permits. You need to find out you may need to move into your name, if they are not under the business. You should also find out if there are any training, or certifications, that you need to do in order to run the business. A business owner that is legally operating in good standing, should have all the necessary things already in place, but you may have to have them updated. You definitely want to look into that to be certain. The licenses and permits that you need may vary from state to state.

Some of the Types of Things the Business May Have or Need

Fire Inspections Health and Safety Protocols License Sellers Permit Business License Alcohol Selling License Insurance Policies Workers Compensation for Employees

11. Secure the Capital To Make the Purchase

Now is the time to work with your bank, or investors, to secure the funding for the purchase. It’s critical that the money is lined up and ready to go for escrow, or whatever process is being used to complete the transaction.

12. Finalize the Business Purchase

Your business broker will usually work with escrow throug this process once the offer has been accepted and it is signed and under contract. For businesses, there are government agency approvals that may have to happen, and these will all be organized by your business broker and with the escrow office. Your Business Broker is there for you to answer any questions, to get additional paperwork that you may want to review, and to keep moving the deal forward for a quick and successful completion. It may take 30 to 60 days, or more, for the sale to complete. With the right business broker, this whole process is easy, organized, and exciting. After the purchase is finalized, you will get your keys, and should have all the information you need to begin your journey as a new motel business owner. Usually the seller will stay on for a while, as part of the contract (make sure it’s included in the deal), to train you and your employees to ensure that you have a successful transition of the business for you to be successful. Have Fun! Check out our guide for more information on buying your own business. At ViralStudioX, we highlight products and services that you might find interesting. We frequently receive free products from manufacturers to test. This does not drive our decision as to whether or not a product is featured or recommended. If you click a link on this page, then go on to make a purchase, we might receive a commission – at no extra cost to you, and does not impact the purchase price of any products that you may purchase.