Selling an Outdoor Recreation Business

What a buyer is paying for

A buyer is paying for the cash the business will produce in a normal year, and the word normal is where most of the conversation happens. Weather, wildfire smoke, a low river, a late thaw or a bad snow year can move one season a long way. A buyer will ask for several years of results and will want to know what was unusual in each one, so be ready to say plainly which year was the soft one and why.

The second thing a buyer pays for is repeat business. A campground where families book the same site every summer, a rental operation with a loyal local following and a guide service with returning clients are all worth more than a business that has to find every customer fresh each spring. Buyers will ask for reservation history, guest counts by month and how many bookings came from people who had been before.

The third is the place itself. Land, water access, a trailhead, a permit to operate on public ground or a lease on a lake shore cannot be copied by a competitor, and buyers know it. If your business sits on something scarce, that is probably the largest part of the price, and it deserves to be documented carefully.

What makes one operation worth more than another

Operations that sell well tend to run on a booking system with years of data in it. A buyer can pull the reports instead of taking anyone's word for it, and that alone saves weeks. Online reviews are steady and recent. Pricing has gone up over time without a drop in volume. The shoulder seasons are used, with group events, school trips, fall foliage weekends or winter storage, so the year is not all packed into a few months.

Staffing matters more than owners expect. Many outdoor businesses depend on seasonal workers, and a buyer will ask who comes back each year, who holds the certifications, and who knows how to run the place when the owner is away. A head guide with wilderness medical training, a mechanic who keeps the rental fleet running or a camp host who has been on site for a decade is worth a lot to a buyer, and he will want to meet them before closing.

Equipment is the other side of it. A fleet of kayaks, paddleboards, bikes, snowmobiles or UTVs ages quickly, and a buyer will walk the yard and look at the condition. Boats with chewed hulls, trailers with soft tires and a bike fleet that is two seasons past its best tell the buyer how much cash he needs to put in on day one, and he will take that out of the price. Owners who replace on a schedule and keep the maintenance logs get credit for it.

Things that lower value are predictable. Cash sales that never went through the books. A season that depends on one outfitter contract or one large group. A permit that expires soon with no clear renewal. Deferred repairs on roads, docks, bathhouses or septic systems. None of these stops a sale, though each one gives a buyer a reason to ask for a lower price or a longer holdback.

Paperwork to have in a folder

Plan on the buyer and the lender asking for business tax returns, monthly profit and loss statements for several years, a balance sheet and the reservation or point of sale reports that tie to them. Revenue in the booking system should match revenue on the returns, because when the two disagree a buyer stops trusting both and the accountant spends a week working out why. Our post on getting your financials ready for a buyer goes through what clean books look like.

They will also want the equipment list with age, condition and any liens, the insurance history including claims, and the waivers and incident reports the business has kept. Incident records get more attention in this industry than in most, because a buyer is taking on the liability of putting people in the woods, on the water or on a hill. Gaps in those files are a problem, and so is a file that is suspiciously empty.

Payroll records, a list of seasonal staff with tenure and certifications, the vendor and supplier accounts, and any contracts with schools, camps, corporate groups or tour companies round out the request. Pull it all together before you list. It is one of the more useful things you can do with a winter.

What has to transfer

Start with the ground. If you own the land, the real estate is part of the deal or is leased to the buyer, and we cover that choice in our post on real estate attached to the business. If you lease from a private landlord, the lease needs to be assigned and the landlord's consent is usually required. If you operate on public land, the permit matters more than anything else on this page, and in many cases it does not transfer automatically.

Operating permits for guides and outfitters, special use permits on public land, concession agreements, liquor licenses at a lodge or camp store, health permits for a food counter and water system approvals for a campground can each follow different rules. Some transfer with the business, some have to be reissued to the buyer, and some agencies take their time. Rules vary by state and by the agency involved, and your attorney confirms what applies to you. We would rather you find out in the first month of planning than after you have a buyer waiting.

Insurance is the other piece. A buyer will need his own coverage in place at closing, and the underwriter will want to see your loss history. Operations with a clean record and written safety procedures get quoted faster and cheaper, and a buyer who cannot get coverage cannot close.

Then there are the softer assets. The reservation platform account, the domain, the phone number, the social accounts, the review profiles and the email list all have to move to the new owner, and owners tend to remember them last. A campground that loses its booking history on the day of closing has lost a good part of what the buyer paid for.

Seasonality and timing

Timing a sale around the season takes some thought. Most buyers want to see a full busy season in the numbers, and most would rather close in the off season so they can hire, train and buy equipment before the first guests arrive. That usually means listing in late spring or summer, when the results are in front of them, and closing in fall or winter. A buyer who closes in the middle of peak season has to learn the business while it is running at full speed, and many will ask you to stay on longer to cover that. Our post on how long you stay after the sale covers what a transition usually looks like.

Deposits are a separate matter. Advance bookings and gift certificates are money you have taken for service the buyer will deliver, and the deal has to say who holds that cash. It is a common point of friction in the last few weeks, and it is easier to settle in the purchase agreement than at the table.

Seasonal working capital is the cousin of that problem. A business that spends heavily in spring and earns in summer has a different balance sheet in April than in September, so the working capital number built into the price has to account for that. Our post on earnouts, holdbacks and working capital explains how that number gets set.

Where these deals fall apart

Outdoor recreation deals that die usually had a warning sign early on. The owner was the face of the business and the guides or the repeat guests followed him out the door. The permit could not be moved. The books did not match the booking system. A bad weather year came up late in diligence and the buyer's lender lost its nerve. The equipment needed more money than the buyer had planned for, or an environmental question about fuel storage, septic or a shoreline came up in the last month.

Confidentiality deserves attention here. Guides and seasonal staff talk to each other, and so do regular guests, and a rumor that the business is for sale can send people to a competitor before the next season is booked. We market a business without naming it, and buyers sign a nondisclosure agreement before they see anything that identifies it. Our post on how we market a business confidentially explains the steps, and the post on when to tell employees covers the staff question.

How to get ready

Start a year out if you can, and use the quiet months. Make sure every booking and every sale goes through the system and that the returns match it. Write down how the place runs, from how you open the season to how you handle a cancelled trip or an injury, so a new owner is not working from your memory. Bring a second person up to the point where they can run a day without you. Put the permits, leases and insurance policies in one folder with their expiration dates on the front, and call the landlord or the agency about renewals before a buyer does.

Walk the property as a buyer would. Fix the dock, the road, the bathhouse and the sign at the entrance, and replace the equipment that is clearly finished. Those repairs usually cost less than the discount a buyer applies when he finds them.

Once you decide to go, we build a valuation from your own numbers, put together what a buyer and lender will want to see, and qualify buyers before anyone visits. Business Advisors of America stays with the owner from that first valuation to the closing. To get a sense of how buyers will read your operation, our page on selling an outdoor recreation business is where to begin.

This article shares our opinion and general information. It is not legal or tax advice. Always speak with a licensed attorney for legal advice, and a qualified tax professional for tax questions, before you act.