It’s perhaps a challenging time to sell a nightclub (at the time of writing) with the sector facing multiple headwinds.
Revenue has shrunk by 6% in the last five years, according to IBISWorld. And the 11% of adults frequenting nightclubs at least once a month in the year to September 2018 was down from 15% two years earlier, according to Mintel.
These alarming figures pose two questions for a nightclub owner who wants to sell up (and indeed may have prompted their decision to seek an escape route). First, how might this affect how they prepare and market their business for sale? And second, should they even try to sell in such a tough market?
A bad time to sell?
Let’s take the second question first. It’s true that the negative headlines can only shrink the pool of potential buyers, which could make finding one tougher even if your club is actually thriving. And buyers may use challenging trading conditions to justify driving the price down.
But if you think it’s worth holding tight until the market recovers, you should recognise this is a gamble – because there’s no guarantee that the market will rebound any time soon.
And anyway, the sector’s travails needn’t necessarily be a barrier to completing a sale. If your club is thriving – and many still are – then you’re still in a strong position to sell at a satisfactory price. And if consumer demand for nightclubs is falling, so too is supply – around a quarter of nightclubs have closed in the past decade, says IBISWorld. Therefore buyers might envisage your club emerging stronger still in a thinned-out field when the market does recover.
Understanding the buyers
Hire a business-transfer agent who specialises in the sector and they can advise you on the kind of buyers out there and what they’re seeking. Bear this in mind when formulating your prospectus for potential buyers.
Depending on your current offering, many might want to repurpose the business to exploit various trends.
Dave Connor, ex-owner of Venus in Manchester, which closed in early 2018, told The Guardian that “it’s all bar-nightclubs now.” If you have the right space and plenty of seating, you could market your club as a bar-nightclub, or simply a bar that happens to have a dancefloor. Or you could describe an entertainment venue that can accommodate a range of activities and revenue sources.
Some buyers will want to convert the club into other businesses (Venus is now a gym) or residential apartments. However, this isn’t the most lucrative option for sellers since these buyers want to pay for the site – not for the brand or balance sheet.
It pays to understand the sector’s challenges if you’re to pitch your nightclub as well placed to thrive in an evolving landscape.
Nightclub operators cite high business rates, tough licensing conditions imposed by cash-strapped police forces and legislation that extended the licensing hours of other drinking establishments. IBISWorld also says economic uncertainty is causing customers to ‘pre-load’ with supermarket alcohol, which erodes takings at the bar or eschew clubs altogether.
In what ways does – or could – your nightclub thrive amid these challenges? Perhaps you’ve a strong reputation for low-cost drinks and promotions, for instance. You could highlight a “large leisure space with many potential uses” or a “prime city centre location”.
Can you reassure buyers that your club isn’t near residential buildings and that nearby housing development is neither in the pipeline nor likely to be? With so many clubs struggling to renew licences as councils impose noise restrictions, buyers might spy the opportunity to take a bigger share of the market as rivals close around them.
In what ways is your club innovative in attracting Millennials and Generation Z, who are spoilt for choice when it comes to alternative night-time leisure activities? The House of Song, which has two London clubs, invites the crowd to dictate what songs its bands play, for instance. Fold in Canning Town, meanwhile, is open 24 hours on Saturdays, while the Cause in Tottenham spends bar revenue on raising money for mental health charities.
Then there’s the traditional advantage of simply having an exceptional sound system.
From timing the sale right to negotiating the deal, you can find out more about the process of selling a business with our in-depth guide to selling a business, featuring advice from leading business transfer agents.