Having a clear exit strategy for your glamping business is an important consideration and should inform your day to day operation, writes Richard Arme
So you have your glamping site in mind, maybe you already have the land; you have the idea and a vision of what it’s going to look like, loads of enthusiasm and you can’t wait to get started! You might even have the all-important business plan and enlisted the services of a business advisor, planning consultant and some financial assistance from your friendly bank manager. All this is good stuff and a great starting point, but have you given any consideration to your exit strategy?
What is an exit strategy?~
Do we even know what an exit strategy is? The academic definition is “a way of ending your involvement in a situation such as a business arrangement” (Collins Dictionary). It is perhaps best thought of as your contingency plan for what happens when you withdraw from your business.
As a glamping site owner you have nurtured and nourished your business from infancy to maturity. What do you do at the point where your life or the business changes? It may be retirement, your lease running out, or you simply become incapable of continuing due to ill health or old age; there may be a natural disaster or the market could change. What happens if you decide that enough is enough and that the passion has just gone?
An exit strategy is important because about a third of new businesses fail within the first two years with the main cause being a lack of detailed planning, so it makes sense to think about the whole lifetime of your business. Difficult to imagine now but one day you will have to think about your next steps. According to Tim Rees from Quality Unearthed: “Taking a long term view is essential with any investment. Glamping structures are generally very cool and creative and sensation nourishing, but we need to be thinking 10 years ahead. Combining creativity and good business practice should mean a viable going concern for those ready to exit”.
Most business owners do not have an exit strategy in place simply because their efforts are totally focused on the day to day running of the business, concentrating on filling their diaries and keeping up with maintenance! Perhaps that end point just seems too far away.
However, most glamping owners do understand the logic of planning for an exit, but will typically put it off to some unknown point in the future. When writing or thinking about an exit strategy, there can be significant psychological barriers to overcome, for example some will simply state that they do not intend to exit. The thought of not being in business may be depressing, particularly after they have run their business for a number of decades. And of course there will be those that think that an exit strategy is something to consider when they actually decide to sell up.
When should you develop your exit strategy?
The best time to develop any exit strategy is when you’re starting your glamping venture, not when you want to sell up. The best advice is to always keep the closing day in mind even when you’re opening your doors for the first time. Timing is everything! People generally don’t enter a business thinking it will fail, but they should at least think about all eventualities.
Everyone has differing circumstances, but on the whole, and for the majority of small businesses, there are only a few common choices available when exiting: sell to an existing partner or employee(s) through a buy-out; sell to a family member (or transfer through some sort of succession planning); sell to a competitor or other business; sell to an individual through a public offering; or close down completely and liquidate your assets. A lot of considerations but let’s look in more detail at the selling side.
Business owners in any field sometimes have a perception that there is a buoyant market for businesses such as theirs, but in reality selling the business you’ve worked so hard to grow is rarely an easy exercise. Most surveys confirm that only about 50% of the businesses for sale under £5m in revenue actually sell! (ukbusinessesforsale.com). This is quite alarming and as yet there are no statistics relating specifically to glamping sites. To give you the best chance, here are five points to consider when selling your glamping business:
1. Understand the value of your business
Do you know what your business is actually worth? Rarely will a glamping site be floated on the stock market, and there are very few hitting the open market for comparison as glamping is still a fledgling sector of the travel and tourism industry. This makes it really hard to put a value on your business. One tip is to get a number of valuations from different types of estate agents. Sometimes it’s useful to ask them to document the split of commercial verses residential value for capital gains tax purposes or if you elect to segment your sale.
It’s clear that early planning of an exit strategy could at least make you more aware of value and more likely to focus on building it up to an optimum point to coincide with selling. So concentrate on building up that value, ensure that you have good financial records and that your profits are maximised prior to marketing.
2. Determine a marketing plan
How long will a glamping site take to sell? Best case weeks, worst case years! Therefore, you must plan for the long term and determine your timeline and overall marketing plan.
Do your research. Ask yourself if you should sell privately, through a low cost online estate agency or with the weight of a branded estate agent with national presence. Sometimes we know more about our own line of business than the professionals, but either way, advertising your glamping site in the public domain is going to be invasive for you and your guests and potentially costly, especially if you have glossy colour brochures printed. If you go it alone and find a buyer, consider agreeing a fee with a local estate agent to assist with negotiations, background checks and to finalise the sale process.
A fundamental question is ‘when is the best time to sell?’ Should you look to the winter season when you have low bookings and more time on your hands? The downside of a winter sale is that your buyer may not see your glamping site in its full glory with all units fully operational, and the chances of choreographing an easy, out of season move are slim. Even if it’s anticipated to be over your busiest weekend of the season, you need to be ready for the eventuality of moving out while still running the glamping business, so be prepared!
3. Provide a full financial disclosure
You may be lucky and find someone with sufficient capital to buy your glampsite outright or a potential buyer may need to approach a bank for a business loan. Either way you are probably going to have to provide financial accounts and a breakdown of all your assets. Remember any savvy buyer is going to want to know the financial condition of the business. This may also include financial projections of potential revenue based on reliable facts and market data.
Most accountants would look at the net book value and revenue returns, but there’s more to it; you have to be clear and honest about why it is you are selling, and ensure your records are complete and up to date. The bottom line is harsh: having an exit strategy in place is no guarantee that you’ll get back everything you put into your business and market forces may determine the future value of it.
4. Seek independent advice on legal and tax implications
Glampsite entrepreneurs can be fearlessly independent, but they should not be afraid to reach out to experts in the field for help. Your accountant is a good starting point, along with an independent financial tax advisor. Remember that a do-it-yourself exit strategy process may be a drain on valuable business time, but on the flip side, you may be lumped with a large consultancy bill for services provided by third parties.
From an Inland Revenue perspective, one area of concern may be the amount of capital gains tax charged at 18%, a legally enforced tax payment to HMRC. But don’t worry, there’s Entrepreneurs’ Relief at hand. This is set at 10% and is certainly another important consideration as it may allow you to pay significantly less capital gains when you sell or dispose of your business. Qualifying for Entrepreneurs’ Relief is a little complicated, and something you might need professional advice on.
5. Pre-empt handover logistics and customer expectations
One of the biggest challenges for any passionate entrepreneur is the art of letting go. You need to divorce yourself from the emotion of what you have created and think clearly with your ‘business head’ on. Consider what you need to document for an easy transition. Think about website access (domain name ownership and hosting), transferring your precious social media accounts, dealing with any booking systems or third party channel managers (such as booking.com or Airbnb), and the process to directing payments to the new owner’s bank accounts. All of this should be documented as part of the handover procedure.
Another consideration is whether you will offer your services to the new owner on a consultancy basis to ease the impact of the change in ownership. This may be good for both parties as you may want the reassurance that your baby is in good hands for the future and the new owner will benefit from your knowledge and expertise.
Dealing with customer expectations is a difficult point too; you may choose to make an announcement or take a low key approach but the main thing is that your guests must not see any change in quality or customer service. Some will of course find out that you have the business for sale and you may have to dispel any concerns about future bookings. Consider what you are going to say in advance to guests that sets out your personal reasons for the sale. Of course don’t forget that one of the interested guests could be a future owner of your business!
To sum up, setting up any new glamping business venture can be both exciting and momentous, as well as a little daunting and risky. To run a healthy business, future planning is essential and consideration should be made for a defined exit strategy. For some, an exit strategy could have negative connotations and could be thought of as the darker side of business planning as it’s a point you never think you need to reach. The best reason for an exit strategy is to plan for the unexpected, more specifically to plan how to optimise a good situation, rather than get out of a bad one. Like it or not, an exit strategy is an essential part of a business plan, and at least reading this article will give you food for thought… your future may depend on it!
Acorn Glade, York
My wife Julie and I opened Acorn Glade in 2013. Our dream was to set up a glamping site on a three and a half acre plot of land comprising woodland and a wildflower meadow in rural Yorkshire. We had a well thought through business plan and our exit strategy was to sell after five years, when the business was established and when glamping had grown in popularity. The site will be put onto the open market in the spring.
It’s going to be a real heartache to leave the idyllic setting we have created but you have to be pragmatic and realise that you are only custodians of the land. Someone else can now benefit and expand upon all the hard work and love that we have put into the business.
Acorn Glade is an award-winning glamping site with four accommodation units; two yurts, a log cabin and a 100 year old gypsy wagon. There is an amenity building (showers, toilets, kitchen and workshop) and scope for development of the business with further units. Accompanying the sale is a beautiful four bedroom house with large barn, paddock and private garden.
We see our forthcoming sale as an ideal opportunity for anyone wishing to have a total lifestyle change where everything is already set up and running successfully. We love what we do, but know the time is right to move onto our next challenge before we get too old.
Having a well-defined exit strategy from the conception of the business has allowed us to focus positively on its development and our ultimate end goal.