Posted on: 29 March 2016
Those who have seen a pub on sale tend to get that sneaky feeling that attempts to convince them to make the investment. While the returns of most pubs make them viable businesses, you still need to cover all the bases to ensure that the investment offers total value for money. Whether it's a freehold or a lease, you need to be certain that the business will make sense in the short-term as well as in the long-term. Here are a few pointers that will guide you in making the right decision regarding the purchase of a pub.
Location – You need to look at the location of the pub and estimate the average number of punters they would expect on different days and occasions. Whether it's a rural or metropolitan location, you should ensure that the stream of the clientele and their spending power will keep the business profitable. The security of the area and factors such as ample parking space should also be considered as they might affect the operating hours and attractiveness of business.
Market Research – The punters are the best source of information regarding what they look for in their pubs. Interacting with these patrons provides you with the firsthand information that will help you identify the additional investments and refurbishments they will need to add to the purchased or leased property. Going to other competitor's establishments also offers you an insight on the average pricing, menu items, and the areas of improvement. Meticulous market research will improve the decision-making on the initial and ongoing investments that you have to make to the property you acquire.
Cost – The overall cost of purchasing the pub should include the initial cost of purchasing or leasing the property and the cost of refurbishments. As the buyer, you should also include the licenses and inventory handed down by the seller as part of the pub's value. These costs should fit within the allotted budget. The running cost of heating and maintaining the property should be justified by the expected cash flows.
Financing – While pubs are stellar performers during good economic times and resilient businesses during downtimes, they should still justify the cost being incurred to purchase and run. Those seeking outside financing should ensure that the interest rates can be justified by the returns being provided by the pub. Independent valuation is important since it provides security for those wishing to obtain outside financing.
After making these considerations, you should ensure that all communications and transactions are done in a legal and traceable manner. Securing the services of a lawyer at a small fee is never a bad idea if you want to protect yourself from liabilities.Share