Valuing a pub

BubbaWY

Free Member
Aug 5, 2020
45
1
A pubco has put my local pub up for sale but it seems to have a ridiculously high valuation. Ive been connected to the pub for 30+ years so know its trading history plus the state of the facilities i.e. it require major renovations (decoration, rewiring, plumbing/heating, windows, etc).

I dont want to see the village lose another pub so am interested in buying it - potentially on my own but more than likely look at forming some kind of community interest group using the advice of Pub is the Hub and the Plunkett Foundation.

Can anyone please offer any insight into how the pub would have been valued? On the sale information, it states trading history wasnt available so I assume this hasnt been taken into consideration.
 

The Byre

Legacy Full Member
Aug 13, 2013
11,838
5,131
Pubs aren't worth anything! Well, the building may be worth something, but a pub as a going concern is only worth more than a bucket of warm spit if it attaches other activities to that building. Top of my list would be a micro-brewery and a restaurant (putting the brewery first, as that is at least scalable!)

That means that if the pub building for sale would be worth £500,000 in perfect condition and it requires £100,000 in various renovations, then that building is worth £400,000. Goodwill and equipment - £0.

BUT - house prices in the UK are waaaay too high and will probably come down - and pub buildings that are unuseable as dwellings more than most!

I'll put it this way - the village pub near us was up for sale as a going concern with a large restaurant and eight-bed micro-hotel for £500k. Then a year later, it was £400k. Time passed and the building didn't get any better as it was standing empty. It sold for £150k.
 
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UKSBD

Moderator
  • Business Listing
    It may be priced high because they want to convert it to housing.

    They advertise it for a few months, go to council saying no body is interested, it's no longer viable as a pub, which increases chances of getting planning permission.
     
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    Clinton

    Free Member
    Jan 17, 2010
    5,274
    2,413
    ukbusinessbrokers.com
    A pubco has put my local pub up for sale but it seems to have a ridiculously high valuation.
    It's not a valuation, it's an asking price. There's a difference.

    I once approached a business broker about a business on their books advertised at what seemed to me a ridiculous price. Being a numbers man I asked for a copy of the valuation report.

    They hedged, and hedged.

    The guy who did the valuation was on leave and they needed to wait till he got back.

    Then three weeks later when I asked again I was told he had left the company.

    So I pressed them to do a new valuation and give me the valuation report.

    Then they finally admitted to me that the original valuation was ....

    <drum roll>

    Based on the vendor's "aspirational price". :rolleyes:

    So basically they asked him how much he'd "like" for his business and they tried to pass that off as an official valuation.

    Assh*les!

    But that's pretty common in the lower market (sub £5m businesses).
     
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    I am guessing the high price is in the hope that one of two things will happen:

    1. A builder will turn it into flats
    2. Someone for whom the romance of pub ownership outstrips their business acumen.

    It sounds as though you are neither.

    Pub ownership is far from romantic, it is, mostly real graft. And if, say, a pandemic happens (surely not) you get closed for a year.

    In my younger days, we all piled out the office on a Friday and had a couple of pints on the way home. Now we don't. And I suspect mostly people don't.

    We have a similar situation here. A pub has closed. And even though the building is not up for much money, there are no takers. All the village are sad that the pub has closed. But the truth is it used to typically have about 4 people in it most evenings. In the last 10 years 3 people have tried to get it going.

    It wasn't a bad pub, to be fair.

    If you want to do this, big them your own view of what it's worth. And as they have started the bidding high, you get some reality in. You never know....
     
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    It may be priced high because they want to convert it to housing.

    They advertise it for a few months, go to council saying no body is interested, it's no longer viable as a pub, which increases chances of getting planning permission.

    A pretty astute observation of how these things tend to work.
     
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    BubbaWY

    Free Member
    Aug 5, 2020
    45
    1
    Reasonable, yes. And I am sure they will be happy to give it.

    But of questionable value. It isn't going to persuade you to up your offer, I suspect. I hope. It isn't, is it?

    No. I appreciate the pubs potential but also appreciate the issues and investment required to modernise. My heart is attached to the pub, but my brain will be leading any decisions.
     
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    No. I appreciate the pubs potential but also appreciate the issues and investment required to modernise. My heart is attached to the pub, but my brain will be leading any decisions.


    Excellent.

    The pub's potential, as you realise by the sound of it, has little or no bearing on it's value. The potential will only be unlocked by your hard work, and therefore does not increase what your offer should be as such.

    Making a low offer for a business is OK. Being able to support that offer is important, of course. And negotiating is OK, too. But avoid the temptation to give the fruits of your future success to the current owner.
     
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    MBE2017

    Free Member
    Feb 16, 2017
    2,632
    1,049
    As Clinton has mentioned, this is an asking price.

    A local brewery rep over thirty years ago was gleefully celebrating having sold a village pub to a real sucker, they got double the amount they thought they would get, just as hundreds of pubs were closing. The buyer invested his pension pot into his dream village pub, then realised only three or four locals visited most days. He lasted a couple of years before losing everything.

    Forget what they are asking, offer what you feel it is truly worth. As for trading figures not being available, well I have heard some big lies but few as big as that one. Breweries know everything about that pub, it’s their business.
     
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    Bobbo

    Free Member
    Jul 7, 2020
    43
    6
    Depending on how interested you are, it might be worth appointing somebody yourself to carry out a valuation of the building. Pubco would of course have to grant you access but, if they want to sell, no reason they should decline.

    Valuer might also be able to shed some light on pubco's ulterior motive in listing for such a high price as others have suggested.
     
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    Talay

    Free Member
    Mar 12, 2012
    3,999
    888
    Aside from the conversion value into residential the valuation is a simple calculation based on the income generated, effectively the turnover.

    I've seen places that would be £2m plus as a house go for £600k as a pub because that was all the turnover would support.

    In the end, they will all go for residential and probably only right. We don't as others have said, head for the pub multiple times each week and we have no need to support such an endeavour.
     
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