How to Sell a Nightclub

More Canadians are opting to drink at home to avoid drink prices and taxi fares at the end of the night.

If you own a nightclub and you’re considering of getting out of the game, make sure research and time the sale well to get the most money for your business.

Sector overview

There are around 4,975 bars and nightclubs operating around Canada, and more than 43,200 employees working within the sector. Despite the industry experiencing modest annual growth of 0.3%, there are a lot of challenges for nightclub owners.

Owners are faced with rising alcohol prices, changing attitudes towards drinking and competition from restaurants and bars. However, if you run a successful nightclub you can make a healthy profit, with industry revenue at $3 billion per annum.

Diversifying your business and offering your customers a new concept or unique event can be a great way to attract more clientele. The ability to control your stock and secure the best prices from your alcohol suppliers will also be beneficial.

Valuation

Hiring an impartial expert to value the business is an important aspect of the sale of your nightclub. You, the owner, may have an unrealistic idea of how much a company is worth due to your attachment to the business, so hiring a valuator is vital.

One of the most common methods used to determine a fair sale price is calculating a multiple of earnings before interest, taxes, depreciation and amortization (EBITDA), which measures the company’s ability to generate operating earnings and profit.

You will need to consider the business's tangible and intangible assets to determine the sale price, along with the location and the physical size of the business. You should also consider what comparable nightclubs have sold for in the local area.

Preparing for a sale

To get the maximum price for your business, you should make sure your nightclub is looking its best. Consider making any necessary repairs and renovations to the business to attract more buyers, and make sure the business is operating smoothly.

Some entrepreneurs may be keen to keep your current team of employees and managers so they can continue operating after the business transaction has taken place, so making sure you have efficient and reliable staff is important.

You should also ensure that all the correct licences are in place and that your financials are in order. Buyers will be keen to carry out due diligence checks and may review five years’ worth of business accounts to make sure your figures add up.

Marketing your nightclub for sale

Communication is a very important aspect of selling a business. You should consider hiring a broker who has experience in the hospitality industry; this extra cost may be very beneficial in ensuring you get the best possible price for your proposition.

Identifying a profile of potential buyers is a good first step in marketing your business. Ask yourself whether they are likely to be first-time buyers or seasoned entrepreneurs? What type of credentials will they need to operate the business successfully?

Once you answer these questions you will have a clearer idea of where to advertise your business; if the buyer is likely to be based locally, then newspaper advertising could work well. Industry magazines are also a good place to attract interested parties.

Finding the right buyer

Owning a nightclub suits a specific type of entrepreneur, someone who has a flexible lifestyle. Due to the nature of the business and the opening hours, owners will need to be available during weekends and late evenings to make the nightclub a success.

To buy a nightclub and make it successful you need to be social and build up strong relationships with suppliers and music agents. You also need to be passionate in promoting and organising events and be able to motivate and train your employees.