How to Value a Wedding Venue
How is a wedding venue business valued?
Just as with other businesses, you can determine the value of a wedding business by using a multiple of its EBITDA, which is a standard accounting calculation of the business’s earnings before considering interest, tax or depreciation or amortisation.
The multiple varies depending on the industry and market confidence. Currently, the standard range for wedding venues is between 6 and 10 times the EBITDA, taking into account various factors. Many venues are operated by their owners and have grown naturally over the years, focusing on tax efficiency rather than improving the EBITDA. When valuing the business, adjustments will be made to normalise the accounts, for example if a business owner has paid themselves or their family members an unusually small or large salary for the contribution they have made.
It's not necessary to spend time and money manipulating the EBITDA before a sale, by significantly decreasing costs or artificially increasing sales, as the due diligence process will involve understanding the accounts over the years and the EBITDA multiple will simply be adjusted to account for any unusual trading patterns.
Instead it is better to focus on developing a sustainable long term business model, built on solid procedures with a committed team.
How is a wedding venue property valued?
In addition to valuing the business, it's a good idea to obtain a property valuation, either from a professional valuer (costing anywhere between £1500 and £10,000, depending on property size) or a friendly estate agent. Valuers tend to provide more realistic valuations, while estate agents might overestimate the price to tempt you into selling.
The property valuation won’t take into consideration the positive or negative impact of future wedding bookings, so before looking at the headline property valuation figure, look at the value of deposits that would need to be refunded and the costs of staffing a venue with just a handful of bookings to service while you close the business down.
Why the two valuations may both be relevant
Depending on the type of venue, the business value may be more or less than the property value. For instance, an impressive country house with a large estate is likely to have a higher property value than business value. On the other hand, a successful rustic barn venue with a full schedule of future bookings may have a higher business value than the barn and its surroundings.
In a wedding venue business, the property holds significant value as it forms a crucial part of the operations. Couples are attracted to the location, setting, and facilities of the venue, which contributes to the business's success. If you sell the property, the business loses its value. The business and property mutually support each other's standalone value. A financially successful wedding venue is one where the business value surpasses the property value since the owner will achieve the higher of the two values upon exit.
It's better to consider the property as an essential component of the business and anticipate a valuation based on EBITDA multiples. However, if the property is worth more than the business, the valuation should include the property value along with an additional amount, usually related to the value of existing bookings.
Tax implications on a business or property sale
Once you have established a realistic valuation, the final consideration is how HMRC will treat the various elements of the sale. The vendor and seller will want to avoid paying unnecessary Stamp Duty, Entrepreneurs Tax Relief, Capital Gains Tax and Income Tax, so it is sensible to obtain specialist tax advice from an accountant.
Next Steps
Without knowing how much your wedding venue is already worth, and how to add value between now and the point at which you are ready to retire or exit the business, it is hard to make long term decisions about your future.
I am happy to speak to wedding venue owners, regardless of the stage they are at in their venue-owning journey, to help them calculate a realistic and achievable valuation. These conversations are carried out confidentiality and without any cost or commitment, with the intention of developing a long term relationship, so that you are well-informed and understand how we operate when the time comes for you to sell.
Written by
James Matthews
James has a wealth of experience in the wedding and hospitality industry. Through studying the data on a number of success factors he has assisted Applerigg in developing a data-driven valuation matrix for wedding venues.
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