When you’re looking to agree on price for your accommodation sale, finding common ground with a buyer can be a challenge. In Part 1, we explored how structured handovers and non-compete agreements can help bridge the price gap between buyers and sellers. In this post, we’ll focus on more advanced options: vendor finance and earn-outs.
These tools offer flexible solutions to help you and the buyer agree on a price for your accommodation sale.
Use Vendor Finance to Agree on Price for Your Accommodation Sale
Vendor finance allows the seller to lend a portion of the sale price to the buyer. In this setup, you would finance a part of the transaction, while the buyer repays this amount over time, typically with interest.
Benefits of Vendor Finance:
- Expands buyer pool: Buyers who may not have full financing upfront can consider purchasing.
- Earn interest on the balance: Sellers often charge a higher interest rate than banks, providing additional income.
- Close the price gap: If the buyer offers a lower price, vendor finance allows them to meet your asking price with a deferred payment structure.
While vendor finance is beneficial, it’s important to structure the agreement carefully to protect both parties. Securing this financing against assets or using a solicitor to draft a watertight contract can help safeguard your interests.
Earn-Out Agreements: Sharing the Risk
An earn-out agreement allows you to receive a portion of the sale price based on the business’s future performance. Under an earn-out, you and the buyer agree on certain profit or revenue targets; when these are met, you receive the remaining balance.
Benefits of Earn-Outs:
- Mitigate buyer concerns: Buyers concerned about future performance feel reassured when the price is linked to actual outcomes.
- Maximise your sale price: Rather than accepting a lower upfront amount, an earn-out allows you to meet your asking price based on business success.
- Smooth transition: Sellers often remain involved during the earn-out period, helping ensure business continuity.
Earn-outs can be highly customised but need to be structured with a clear timeline and defined performance metrics. An earn-out may be ideal for businesses with seasonal fluctuations, allowing the buyer to adjust payments based on actual performance.
Choosing the Right Approach for Your Accommodation Sale
Vendor finance and earn-outs each provide ways to make your business sale more appealing to potential buyers while enabling you to achieve a fair price. Vendor finance works well if the buyer is committed but needs financial flexibility, while earn-outs can provide extra security by tying payments to business performance.
If you’re uncertain about the best approach, consult a business broker or solicitor to tailor an agreement that fits your goals and the buyer’s needs.
Final Thoughts: Flexible Pricing to Close the Deal
While selling your accommodation business, consider vendor finance or an earn-out as part of your negotiation toolkit. These options can be the key to reaching a price both you and the buyer can agree on.
For personalised advice, contact us today—we’re here to support you through every step of the sale.
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