Is your STR business ready for you to exit?

“Is Your Short-Term Rental Business Ready for Your Exit? Key Steps to Prepare for a Successful Sale”

You have invested years of blood, sweat, and tears into building your STR business, but at what point do you decide it’s time to exit?

For every entrepreneur, this is a decision that you will have to make at some point!

Making that decision could be one you decided with a very clear vision from the very start of your business journey, with a razor focussed growth and exit plan, but for others, it can be a complex decision involving multiple business partners where some want to sell, and others want to stay and expand further, and in some cases, the discussion of selling is raised only when they are approached by a potential buyer.

There really isn’t a one-size-fits-every business owner(s) for the right or wrong time, but as someone who has been through the scaling and selling process twice, knowing how much of a roller coaster the selling process can be, I can’t emphasise enough why preparing your business for a successful sale from the start is essential.

A well-planned exit can be the difference between a stronger negotiating position and achieving a more profitable seamless sale transition or missing out on the business value you’ve worked so hard to build and a transition which is messy and difficult.

Know Your Reason for Selling

Knowing why you want to sell is the starting place for planning your successful exit.

Are you hoping to capitalise on companies that are in the market to acquire other businesses to expand their market share, or perhaps at the other end of the decision spectrum, maybe it’s a lifestyle choice?

Do you want to get off the treadmill and the daily grind of being in the business, and it’s time to retire and enjoy the rewards of your years of hard work?

Your reason for selling may impact how you position your business to a buyer and how quickly you need or want to sell, but having a clear exit goal and timeframe will help you stay focused throughout the preparation and selling process.

Assess the Market

Knowing what’s happening in your STR property rental market will identify any business acquisition trends or economic pressures. Can you see potential future growth in your market? Are some niche STR stay markets, such as glamping or apart-hotels, doing better than others to build a picture to help you understand if there is an opportunity to sell your business?

Undertaking market research to find out if other STR businesses have sold for a premium or at a discounted price, how many properties they had in their portfolio and how that compares with your business will gauge where and how to position your business for a price and investment appeal.

Knowing what your business offers a buyer and whether there is a demand for the type of properties that you own or manage, particularly If you have a niche business portfolio or hold the market share in your area, could increase your market appeal and strengthen your negotiating position.

Organise and Optimise Your Financial Records

Your business’s financial health is a critical component of your sales negotiations; prospective buyers will want to know that your business is financially sound and that it has a proven track record of profitability.

Work closely with your accounting team to ensure that your financial statements, tax records, and rental booking data are accurate, organised, and up to date to provide prospective buyers with information quickly and transparently.

Highlight and emphasise consistent revenue streams from rental bookings and other services, brand loyalty and customer contract retention and value, and clear expense records to demonstrate your business’s health and investment potential.

Having transparent financials will increase buyers’ confidence, build trust and may even increase the business’s valuation and a subsequent offer.

Streamline Operations and Documentation

Buyers want to see that your business is not solely dependent on the business owner for it to operate efficiently and that it can run smoothly even without you leading it from the front.

This is where investing in a robust tech strategy is going to give you ROI because your systems and processes for your customer journey experience will be established and easy to demonstrate to a buyer, and the transitioning of any business is going to be easier if the business uses a tech solution which can be easily integrated with the buyer’s business operations.

Never underestimate the value of building a professional, highly skilled team in your business. Tech has its place, but people have valuable knowledge and build relationships and brand loyalty with your customers.

Evaluate Your Business Portfolio

What are you selling?

Are you selling the whole or part of your business?

If you own or manage multiple properties across different locations, assess each one’s profitability and potential for future growth. Identify high-performing properties which could be more attractive to a buyer and decide if you have any underperforming properties which you may want to offload before the sale.

If you are a property manager, ensure all your customer’s management contracts are comfortably renewed in preparation for a sale and that they are legally transferable to a new owner.

Look at your business operating costs as a ratio of business revenue and identify in advance if there are costs that you can reduce to improve your profitability.

Buyers will be looking for assurance they’re acquiring a stable, profitable portfolio with minimal risk.

Strengthen Your Brand Loyalty

A strong brand reputation is a powerful business asset.

Buyers are not only acquiring your properties; they’re buying into the trust and brand you’ve built with landlords and guests. If your business has a distinct brand, loyal following, or a strong online presence, these are real estate worth emphasising to a buyer.

Focus on:

• Customer satisfaction, direct and repeat bookings.
• Customer (landlord) contract retention
• Social media presence and social proof from positive guest reviews.
• Segmented email lists of past guests
• Local business collaborations and partnerships.

Your Succession Plan

Think about what the transition process will look like for you, your team and the new owner and start planning how you’ll support them through the transition process, during and after post-sale completion.

After building my skilled and loyal team over several years, I knew that they brought value to the business and would be a great asset for business continuity and customer retention. Therefore, I did my utmost to protect their employment positions and provide open and honest communication to them throughout the business transition period.

My own experience of my business transition was a bit of a roller coaster, so be prepared to have patience and the inevitability that there will be delays and every likelihood that the transition timeframes will slide.

Price Your Business Realistically

Valuing an STR business involves multiple factors, including property values, occupancy rates, profitability, and market demand.

Consulting with your accountant, a business valuation expert or a broker can provide insights into a realistic asking price based on similar STR businesses in your area.

But don’t overlook that a company is only ever worth what a buyer is willing to pay, and an evidence-backed reasonable selling price will attract serious buyers and help you close a sale faster.

Prepare for the Transition

Even if you feel that you are mentally ready to move on from your business, selling a business you’ve built is an emotional journey.

Having the support of an experienced STR consultant to help you navigate the preparation for the selling process will be a great support to you through the many stages of preparing your business for sale – it’s not for the faint-hearted, and an experienced second pair of eyes can take the pressure off you.

Selling your STR business is a big financial and emotional decision with many moving parts in play, but with careful preparation, you can position yourself for a smooth and profitable exit.

By preparing your business thoroughly, you’ll be ready when the right buyer comes along, ensuring both your legacy and years of hard work continue long after you’ve moved on to your next life chapter.