How to Sell an Entertainment & Leisure Business

Share Guide
How to Sell an Entertainment & Leisure Business

Want to know how to sell your entertainment & leisure business but unsure where to start? Don’t worry, this guide will walk you through the process from start to finish.

The London Stock Exchange Group estimates the UK entertainment industry is worth £38.9 billion. It sees consistent spending on activities such as cinema, theatre, and a multitude of activities relating to the music industry. 

The leisure sector is valued at £111 billion. Showing us that Brits enjoy spending their free time making memories with family and friends.

Staycations have become increasingly popular, with 60 million of these holidays taken in the UK last year, it highlights the value of the leisure industry. Family staycations rely on entertainment & leisure activities such as children’s soft plays, and outdoor adventure activities.

Businesses within this popular industry are very appealing to buyers.

Read on for a walkthrough on valuation advice, how to prepare your business for sale, negotiation tips, and finalising the deal.

How to Value an Entertainment & Leisure Business 

By combining your business’ assets and its goodwill attributes, a holistic and accurate valuation of your business can be determined.

Your business’ assets will differ depending on the type of entertainment & leisure service your business offers.

To use a theatre as an example:

  • Typical assets featured in a theatre’s valuation include:
  • Technical equipment, such as: lights, speakers, & rigging
  • Props, costumes, & musical instruments
  • Fixtures, such as: seating, shelves, turnstiles, & curtains
  • Point of Sale systems
  • Property value, if owning and selling the freehold

It is important to honestly assess the age and condition of your assets for an accurate valuation.

Having higher-quality assets saves the buyer problems in the future, as they won’t have to replace any items immediately, therefore providing better value for money.

Calculating the goodwill value of a business is tricker, but it is no less important than the physical assets in gathering an accurate valuation.

Remember to consider the following (using a child’s soft play as an example):

  • The capacity of children your centre can accommodate, i.e. the number of children able to play at once.
  • The working capacity of your centre. This is calculated from the average number of children per day, and average time spent per child. We recommend gathering data from your systems over the past two years.
  • Customer reputation, such as your following on social media or reviews on websites such as TrustPilot.

We understand some owners may hold an emotional attachment to their business, which can make it difficult to remove your bias from the valuation.

For this reason, to estimate an accurate price, we recommend seeking advice from a business broker.

At Intelligent, we have a dedicated expert team with years of experience in calculating the value of hundreds of entertainment & leisure businesses.

We use a tailored approach depending on the business’s characteristics but using the same baseline formula as shown below: 

Adjusted Net Profit

This calculation takes into consideration any exceptional costs that the business has incurred. These exceptional costs are not considered part of the normal course of business and should therefore be excluded

Market Multiple

We analyse buyer behaviour and transactions regionally and nationally. We overlay our experience, sector knowledge and understanding of market trends to provide a real time market multiple

Assets & Liabilities

An asset is something that the business owns and is a key factor in determining the businesses value. These include such things as property, stock and equipment. A liability is the opposite of an asset and includes things such as loans, tax and mortgages

Use Our FREE Business Valuation Calculator for an Instant Valuation

How to Prepare an Entertainment & Leisure Business for Sale

In preparing your business for a sale it is important you have all the necessary information in advance. It’s a good idea to be prepared for any questions an interested buyer may have.

Not only does this make for a more efficient process and stress-free seller journey, but it also helps you to look more professional and confident to buyers.

It’s not just that.

By fixing any problems with your business you can be assured that you will receive the best possible price.

Although it will vary depending on your sector, below we have highlighted key actions you should take when preparing your entertainment & leisure business for sale.

Conduct Repair Work

Ensuring any maintenance and repair work has been carried out is a simple yet effective way to increase the value of your entertainment & leisure business.

This makes your business an attractive option, as, if this work has been undertaken it will save the buyer hassle after the sale.

But don’t carry out a complete refurbishment or buy brand new expensive equipment just before your sale.

The buyer may want to change the appearance or layout of the premises to suit them. Equally, you won’t regain the cost of new equipment in your sale price.

Hygiene & Cleanliness

It may sound obvious, but hygiene is a top priority for potential buyers.

So, it’s crucial to ensure the highest standards to maintain buyer interest.

Fortunately, this is a remedy which is relatively simple and affordable to do.

Review Your Finances & Documents

Interested parties will expect to see at least three years of financial statements. So, have these prepared and ready to show.

This enables a potential buyer to have an overview of your business’s financial health and stability.

The financial documents you will need are as follows:

  • Cash flow
  • Profit and loss
  • Balance sheets

It is during the buyer’s due diligence when any falsehoods would show within the business’s finances, so make sure you’re 100% honest.

Other important documents to gather include:

  • A list of all assets, such as fixtures, fittings, and equipment
  • Up to date hygiene certificates
  • Other legal documentation, which may include leases, insurance, licences, and other permits that should all be fully compliant and up to date
  • Incorporation documents
  • Management structure
  • Employment contracts, which should be reviewed by yourself for the buyer’s convenience and to guarantee a strong staff team will be in place
  • Stockist information, to demonstrate you have secure stockist relationships already in place

Review Your Business’s Operations & Management Structure

It is important to have an organised business structure, especially in cases where owners are heavily involved with day-to-day management.

This makes your business more attractive as some buyers may only be interested in businesses that can be operated in a hands-off manner.

To achieve this, you might consider asking your current managers and/or team leaders to take on more responsibilities on a day-to-day basis.

Negotiating the Sale 

After successful enquiries and viewings, an interested buyer will progress into the negotiation stage.

It is at this point where you will decide what’s included or excluded from the sale price. By having your documents prepared in advance, you’ll be able to negotiate more efficiently.

Remember: this is a two-way process. Naturally, the buyer will be inquisitive, but you should also be assessing their potential to run a business successfully.

The agreements will be written down in a ‘Heads of Terms’ or ‘Letters of Intent’ document.  Which is to be signed by both parties. This document will consist of the final sale price, the sale’s terms, and a thorough itinerary of everything included in the price. Essentially, this is finalising your negotiations, however, its not legally binding at this point.

Payment & Legal Advice

You must then decide on a payment procedure. You have a couple of options here. Your buyer may be able to pay in a lump sum. Or, you could offer a payment plan, with a larger total sale price. This is known as owner or seller financing.

It is important to have a good solicitor you can get legal advice from as you may be at risk of a buyer default. If you’re unsure of where to turn for quality legal advice, we can help by matching you with one of our trusted partners.

Using an Intelligent trusted partner, you’ll save time and money. Sellers complete on average 4 weeks earlier than the industry standard and our negotiated savings are passed on in full.

That’s not to say seller financing is a bad option, it could work out as a viable compromise for both parties.

The buyer and their team of professionals will then carry out the necessary due diligence checks.

You can read about this in our in-depth guide, but it essentially involves scrutinising your premises, finances, assets, liabilities, clientele and reputation, as well as external threats and competition.

Finalising the Sale

You’re here, you have arrived at the final stage of selling your business!

If due diligence checks are cleared it will allow the buyer to commit to a final, legally-binding ‘Purchase of Business Agreement’.

This document will likely highly resemble your ‘Heads of Terms’ or ‘Letters of Intent’ from the negotiation stage.

However, any if any problems are raised during due diligence, it would usually lead to renegotiation of the price and/or terms of sale.

In a worst-case scenario, the buyer may drop out of the deal completely. This is why it is essential to be completely honest throughout the entire selling process.

Also, consider:

You will need to obtain any necessary permissions from landlords and banks for the transfer of premises, equipment, and liabilities.

Once these documents are finalised and the money is transferred, you will have officially sold your business.

Congratulations! 

Just one more thing.

What about the handover?

Handovers can either be immediate or transitional.

An immediate handover is when you have a sudden shift in ownership and management. This means the running of the business will immediately be transferred to the new owner and you will have no more involvement from that point. 

Alternatively, together you may opt for a transitional handover. This allows for a smoother exchange of ownership.

The transition period (where there is an overlap between you and the buyer) length is usually a few weeks or months.

This is decided upon between you and the buyer.

We recommend a transitional handover where possible. It is more attractive to buyers and is more likely to result in successful new ownership.

There it is, your ultimate guide to selling an entertainment & leisure business.

It may seem like hard work, but with a little preparation and planning, you can achieve the best possible price for your business.

By selling with Intelligent, we will take away the stress of selling so that you can focus on your business instead.

Our dedicated expert team will work hard to fully understand your entertainment & leisure business and what makes it unique, giving you peace of mind.

Click Here to Use Our FREE Business Valuation Tool

Get quick and easy insight into the real value of your business, without any obligations.

At Intelligent, all of our experts use a specific formula that will give you a free and highly accurate baseline valuation so that you've got a figure to work with that most realistically resembles the value of your business.

Timed popup