1. Sell the Business to a Family Member
When it comes to fishing & hunting lodges, camps and resorts this method of exiting the business is quite common.
Because of the sensitivities that come with family matters, it can help to get a third party opinion from someone that is familiar with both the business as well as the potential successors. This third party can give an unbiased opinion on who is the best person for the role and what a fair price is.
If you are exiting your business for the purpose of retirement, then you will likely need to sell your business to the family member rather than just give it away. After all, you need to have a substantial amount of income or money in the bank that you can use to afford your lifestyle and living expenses after you retire.
We’ve written extensively on this exit method in this article here.
2. Sell the business to a Loyal Employee
A lot of outdoor tourism businesses have an employee that has been around for awhile and loves the business. There may be a way to structure an ownership transition to the right employee or employees that rewards him or her for their loyalty and gets you the funds you needs.
Similar to family succession, employee succession can become complicated with a lot of emotions involved. It’s important to involve impartial third parties to help determine an appropriate sale price and how to structure the transition.
Keep in mind that an employee may be a great guide or manager, but that doesn’t mean they’ll be great at running a business. It’s important to consider whether this employee can be successful for the sake of your guests.
If this is the route you’d like to go, develop a mentorship program to ensure a smooth transition. This mentorship period could be as long as a few years or a few months. The important thing is that the employee understands all of the aspects of the business that he or she may not currently be getting exposed to.
For a more in depth discussion on selling your fishing & hunting lodge, camp or resort to an employee consider reading this article.
3. Have a Co-owner(s) Buy You Out
Fishing & Hunting Lodge, Camp & Resort business buyouts involve many legal intricacies and it is best that you handle them with the guidance of professionals.
In the past we have helped two brother’s reach a buyout agreement by appraising their lodge for them. They already had an agreement in place, known as a buy-sell agreement, which dictates the terms of a buyout should you or your partner decide to leave the business. All they needed assistance with was an independent third party, familiar with their industry, to help them determine the market value of the lodge.
The general process of a co-owner buyout is as follows:
- Determine the fair market value of your business. For fishing & hunting lodge, camp & resort owners this can be difficult because they do not have access to the market data needed. You can view online listings of similar businesses/properties for sale but these are only asking prices. They also may skew your opinion because you do not know how the underlying business is performing. The best option for determining the value of highly specialized businesses like to fishing & hunting lodges, camps & resorts is to have an independent third party professional help you. There are many business valuation and appraisal professionals out there, but you need to hire a specialist.
- Hire a lawyer. Buyouts can start off friendly and turn quickly. Its also important to ensure a fair and legal breakup regardless of the relationship dynamics. Involve a lawyer in the process, we have a list of recommended service providers in a variety of provinces, states and territories.
- File all necessary paperwork. Its important that you have everything documented and on file so that no issues develop at a later point in time. Some important documents are the Mutual Release, which releases both partners from further claims, and the Release of Company Liabilities, which releases the departing partner from liability claims against the company.
- Transfer any accounts that are in your name to your partner or the business’ name, clearing your name from all legal accounts.
4. Selling via an employee stock ownership plan
This is a lesser known strategy that is gaining popularity: exiting via an employee stock ownership plan (ESOP).
As opposed to having a partner or select employee buy your lodge, camp or resort, ownership can be limited to key members on staff or it can be broad-based, and offered to anyone within the business. This method of exiting can also help owners who are seeking a gradual exit over time.
Fishing & Hunting Lodges, Camps & Resorts that have an employee-focused culture are more likely to be successful with an employee stock ownership exit.
By selling 49 per cent of the your business to employees, you’re also likely to see the business flourish as workers take on ownership.
Unlike an outright sale where ownership changes hands from one to another, an ESOP structure allows for more flexibility. Owners are able to sell shares of their business over time.
There are some drawbacks to this method of exiting your business, these are discussed in this article.
5. Selling the Business to a Third Party
This is the most common method of exiting a Fishing & Hunting Lodge, Camp or Resort business. We’ve written very extensively on all aspects of this process in the “How to Sell a Fishing & Hunting Lodge, Camp or Resort Handbook“. I encourage you to read through this handbook as it walks you through the 4 step process of selling your business.
6. Become a Passive Owner
Why give up the cow and the milk? This is a dream sold to inexperienced fishing & hunting lodge, camp & resort business investors. That one day their lodging operation will be a well oiled machine churning out cash with little required from them as the owner. Those who’ve been involved with one of these types of businesses would tell you reality is quite different.
I believe when a lot of fishing & hunting lodge, camp & resort owners entered the industry they took pride in doing it all, providing that family feel of having guests interacting directly with the owner. However as a business model this is obviously flawed if you ever want the business to become passive.
Passive ownership is risky. When you don’t have your finger on the pulse of day to day events, you will become blind to possible disasters. Obviously, under these circumstances, you must rely upon the competence and integrity of your management staff.
Which leads to the number one priority if you want a passive business – assemble a trustworthy team. Locking in non-owner managers with an incentive or bonus program will ensure the business’ continued smooth operation.
The next most important thing owners need to do is establish and document systems for both critical and non-critical operations. They must then ensure that these systems are followed to the letter.
On the surface, passive ownership seems ideal but it does have pitfalls. For example, owners do not receive any up-front cash as they would in a sale, and they still assume all of the risk. That being said, if done properly owners can reap the benefits of continued ownership and a steady cash flow to maintain their lifestyle.
Don’t expect to become a passive owner overnight – it is a 2 to 3 year process cleaning up the business and putting the house in order. Before you can step away the business must be fully systemized with a knowledgeable management team in place.
7. Gift the Business
Why would you want to give away your business? There may be personal (nontax) reasons why you would want to gift some or all of your business interests. There is also a good reason built into the tax code.
Gifting some or all of your business interest allows you to reduce or remove the value of your business from your estate, which could mean lower estate taxes that may be due at your death. Both the value of your gift and any gift taxes you paid when making the gift are removed from your estate. If you sold part or all of your business during your lifetime, you might be subject to capital gains tax. If your estate sells your business soon after your death, the sale price may determine the value of the business included in your estate for estate tax purposes.
8. Liquidating the Lodge, Camp or Resort's Assets
This option is appropriate when there is no alternative exit strategy available and immediate exit is desired. Liquidation results in the most significant tax penalties and provides minimal proceeds to the company owner. Though, this exit route offers the owner cash and a speedy end.
In plain English liquidating means turning your remaining business assets, such as boats, motors, lawn care equipment, tools, office equipment, furniture and hopefully buildings, into cash.
Make a list of the physical property your business owns, as well as any money owed to the business in the form of rent, security deposits, and unpaid bills (accounts receivable) you still expect to collect. write down a description of each item or category of property, the condition of the property, and who technically owns it—that is, what money was used to purchase the property—your personal funds, a partner’s personal funds, or business funds.
As you liquidate these assets, you’ll want to record on this list how you tried to sell each piece of property (save copies of ads or Web listings), who ended up buying it, and the amount you received. Keeping good records of your property and what happens to it will protect you in case a creditor later questions your liquidation of assets or in case you have to file for bankruptcy. You will also need this information for your tax returns. Don’t expect to get more than 80% of an assets value, at most.
9. Subdivide into Cottage Lots
Fishing & Hunting Lodges, Camps & Resorts often have large parcels of land with multiple buildings and cabins. Subdividing your business into smaller chunks that can be bought for personal recreational use rather than as an operating business may help you exit faster and in some cases more profitably.
10. Fractional Ownership
Fractional Ownership Real Estate is the fastest growing sector in the resort property industry.
Fractional ownership is a method in which several unrelated parties can share in, and mitigate the risk of, ownership of a high-value tangible asset. It can be done for strictly monetary reasons, but typically there is some amount of personal access involved. One of the main motivators for a fractional purchase is the ability to share the costs of maintaining an asset that will not be used full-time by one owner.
Most Fishing & Hunting Lodges, Camps and Resorts are sitting on a magnificent piece of land. Fractional ownership sales could be the ideal exit for your business.
If your business model or positioning in your market isn’t working maybe you just need to pivot. Lodges, Camps & Resorts can serve many different client bases. You could pivot from a fishing & hunting lodge to an ecotourism resort. Don’t be afraid to pivot your business to serve new clientele.
12. Take on a Partner
Taking on a partner could change the entire business for you and allow you to solely focus on those aspects of the business that you love.