Marina Valuation Tips
Contact UsIf you are considering selling your marina, here are seven concerns that a buyer will raise in evaluating your marina and determining its value. These concerns typically evolve over time or have always been physical limitations of the property, and you will not be able to do much about them. The point is, in order to get top dollar for your marina you need to be thinking about selling it from the time you buy it. That said, very few of us think that way, but it is never too late to begin preparing your property for an eventual sale when the time is right for you.
By Dennis Kissman, Principal of Marina Management Services Inc.
Let’s look at those seven concerns a marina buyer has and what you can do about each:
WHAT IS THE PHYSICAL CONDITION OF THE MARINA’S INFRASTRUCTURE?
If you have any deferred maintenance on the property, it is most likely there because of a decision you have made. An astute buyer will look for any deferred maintenance issues and the value that he puts on those for negotiating purposes will be in excess of the actual cost to restore the item to an acceptable condition.
Do not try to cosmetically conceal the deferred maintenance problem; once discovered it will raise more questions and prompt a closer scrutiny of your entire property. You are better off repairing those that can be repaired correctly with your resources, than haphazardly repairing everything that is an issue.
IS YOUR MARINA OBSOLETE IN THE MARKETPLACE ALONG WITH YOUR EQUIPMENT?
Marinas are reactionary in nature and must accommodate the boats that are in the marketplace. These boats have evolved over the years based on boat manufacturers’ responses to boaters’ demands, and although your marina’s infrastructure may be in good physical condition, it may not be right to accommodate today’s market demands, thus reducing its economic potential and overall value. There is little that you can do to reverse this situation in the short term and with limited resources.
Unless your marina has kept pace with the changing market over the years, this will most likely have a significant negative impact on the value of your marina. This will also limit the types of buyers that would be interested in your marina. If selling is not in the immediate future, any changes you make to decrease obsolesce in the marketplace will be worth the investment when the time does come to sell.
WHAT ARE THE STRENGTH AND CAPABILITIES OF YOUR STAFF THAT WILL REMAIN AFTER A SALE?
If you are a marina owner and operator and built your organization exclusively on your ideas without input from your staff, you are jeopardizing the future employment of those people under the new ownership, as well as decreasing the value of your business.
A prudent marina buyer will be concerned about your staff, even if the buyer’s intention is to revamp the organization. During buy/sell negotiations a good responsible staff can be used as an argument to increase the value of your marina. The least disruption a buyer can envision in a transition means more income and any past financial statements you provide will be more creditable for determining an ongoing income stream.
WHAT IS THE MARINA’S POSITION IN THE MARKETPLACE?
An astute buyer will research the market before he makes an offer. The more you can articulate about your customer base and why it is what it is, the stronger you will be able to refute a buyer’s claims and thus make this a non-negotiating item. Keep in mind a buyer may have a totally different vision as to what he wants but that does not make your vision wrong or less valuable.
WHAT RISK EXPOSURES DO YOU HAVE AND TO WHAT EXTENT ARE THEY ON THE PROPERTY?
The type of business a marina is and its location on the water lends itself to a number of liability risks, such as tripping hazards and exposed electrical connections, trash accumulation, petroleum contamination, etc. Many of these problems can be corrected for a very little cash outlay and is a reflection of your management. The more risks you can eliminate, the more positive an impression it will make on a buyer, particularly one that is looking for reasons to renegotiate a reduced selling price.
CAN YOUR FINANCIAL REPORTING BE VERIFIED?
Financial records at most marinas do not follow any standardized reporting format. Therefore most buyers when doing their due diligence will rely on any number of documents that have to be reported to local, state and federal agencies for making an offer to buy.
The problem here is that many marinas use whatever tax advantages there are for their business to reduce their tax liability. This often results in reportable financial information that reflects a value of the property and business that is less than it is really worth. An astute buyer will use this information to negotiate a lower sales price, and the seller will have little or no credibility to refute the buyer’s arguments. A few dollars saved in taxes today may cost you more when it comes time to sell.
WHAT IS THE FUTURE DEVELOPMENT POTENTIAL?
When a buyer is considering the acquisition of a marina he is buying and paying for a verifiable income stream. The obvious question in the buyer’s mind is:
What is my upside? What is the potential for future development either by expanding the current operation or developing new income streams?
Before any future development is factored into a selling price, a buyer will take into account what investment will be required and the return on that investment. Sellers often talk about all that could be but have not done it.
A buyer is not going to pay for your ideas but will pay for work that has already been done to achieve this additional income. For example, a seller tells a buyer that they could add 100 slips to the marina. This has no value to the buyer.
On the other hand, there is value if the seller can show a completed market and financial feasibility study, design plans, budgets, and most importantly – permits in place – for the 100 additional slips, the project is ready to start construction.
By taking action on these seven concerns before a buyer presents himself, you should receive a fair value for your marina when it comes time to sell. In closing I would just like to reiterate what I said at the beginning of this article and that is, in order to get top dollar for your marina, you need to think about selling it from the time you buy it. While very few of us think that way, it is never too late to begin.
Article written by our guest consultant, Mr. Dennis Kissman, Marina Management Services, for Marina Dock Age Magazine.
Contact us for a complimentary strategic consultation and preliminary valuation.
