The trade show and events planning sector in Canada generates annual revenues of $2bn.
While revenue has dipped at the time of writing as disposable income growth slows, this might put a few under-priced businesses on the market as struggling owners seek a quick exit.
And there is every reason to believe that the sector’s long-term future is bright.
It’s a gamble to enter any sector without any experience – unless you’re a hands-off investor with funds to hire a management team – and the events sector is no different.
During the events themselves, it’s a fast-paced environment where you need to think on your feet.
In the planning phase, you need to be organised and meet the customer’s briefs within budget and on deadline.
Types of event business
What kind of events business did you have in mind?
There are personal events, such as weddings and birthday parties; sports events and concerts; charity and cultural events; and corporate events like conferences and trade shows – to name a few.
Venue management, catering and exhibition contracting also fall into this category.
Your work-life balance preferences could be as important as your interests. With corporate conferences, for instance, you can mostly avoid weekend work, while children’s entertainment means early finishes.
You should also consider the fortunes of a particular market, both now and projected by market research, and the competition in your chosen location.
Creating a shortlist
You will need to think about narrowing your search of events businesses for sale by financial numbers like asking price, cash flow and sales revenue – among other things.
If your budget is tight then be reassured that many events businesses are home-based. Not including premises and associated overheads these are therefore typically cheaper to buy and run day today.
Lawyers and business brokers
As soon as it’s time to approach vendors with a view to finding out more and, then, entering negotiations, it’s advisable to enlist the help of experts in business sales – ideally with experience in the events sector or related fields.
Lawyers and business brokers can help you with every aspect of the buying process, including mediating negotiations, requesting paperwork at appropriate junctures, conducting an independent business valuation, helping with due diligence and protecting your interests in drafting the final purchase agreement.
Valuing an events business
It’s worth getting your own independent valuation or at least understanding how the seller arrived at their asking price.
California-based valuation experts Peak Business Valuation say events planning typically attracts profit multiples of 32-55% of annual sales; 2-2.7 times discretionary earnings; or 1.5-2.5 times EBITDA.
Be careful if the business’ fortunes are closely tied up with the vendor’s charisma. This is a big danger with a relationship business like events, even more so for corporate events where there is more repeat business.
“Several corporations develop close relationships with their event planner,” says Peak Business Valuation. “If the event planner were to leave the company, the business is at risk of losing a client as well.”
You can insulate yourself from this outcome by convincing the vendor to stay on in a consultative capacity post-sale to smooth the transition to new ownership.
Negotiations, due diligence, closing the deal
Successful negotiations result in a letter of intent, a non-binding agreement setting out agreed terms, subject to the findings of the next stage: due diligence.
Due diligence is where you scrutinise everything relevant to the business’s value and future prospects, including historic accounts, its reputation, condition of the premises and anything about its market and local area that might help or hinder you in the coming months and years.
Online reputation and social media presence count for a lot in this sector. So check out business reviews on Yelp, Google and Facebook and their social media marketing in terms of followers and the quality of interactions.
But if you find them wanting in this area, yet profits are decent, then that suggests strong potential for growth if you can get your digital output right.
If due diligence uncovers anything unfavourable that the vendor didn’t declare, you’re within your rights to renegotiate the terms or walk away from the deal altogether.
Should you agree on final terms, they are set out in a legally binding purchase agreement – which, once signed, means the business is yours.