In order to determine a price, Nicklas examines the capitalization rate – the ratio of net operating income to property asset value. He settles on a number between whatever real estate comps he can find and the financials of operation. “Basically, it’s somewhere between the real estate and the valuation of what the business is worth.” Other factors may influence the final asking price. Because Parmley owned Carousel Skate Center under a corporation, he would suffer a heavy tax penalty upon selling it, so he increased the asking price to cover that. “Capital gains tax was 39%,” he explains. Fortunately for him, the recent tax reform reduced that to 21%. “That made a big difference and we were able to sell it then.” It was all a matter of timing, he believes. “The only tricky part was price. The taxes on the sale should be factored into the cost. What is it worth?” He says that if someone is willing to pay what you want, “go for it!” But if you’re relying on an appraisal, have a long-term strategy. “If you’re not selling it as a rink, you won’t get the money the business is worth,” Parmley cautions. His buyer just wanted the property, not the business.
screen quality buyers. • Pre-qualify buyers to determine if they have the ability to finance the purchase. Nicklas held a roll-out party at Red Bridge Roller Skating Rink to kick off the sale. The entire community was invited, with the first 400 getting in for free. “There was a waiting line,” he recalls. He shot video to illustrate the vitality of the business and how the community loves the rink. That video was used in marketing its sale.
All inclusive One ad for a rink in Columbia, Missouri not only lists potential uses for the property (such as retail office, medical office, funeral home, indoor storage, vehicle sales, church, school/college, fitness/gym, daycare, banquet hall, grocery store, warehouse, indoor miniature golf ), it also details the equipment inventory, including longtime staff eager to stay on. When Brown sold Rollhaven, he moved some of the equipment to his other two rinks, but he sold a lot of it. He even sold the floor. He reports that there was a lot of interest in the floor. “It’s cheaper than a new floor; even with the cost of removal and transportation, they can save 50%.” The floor went to an entertainment center that will add a small skating center. As he says, not only did that sale bring in some additional money, it also kept the building from opening as a rink and competing with his two nearby rinks.
Ultimately, Parmley believes, you have to be sensible about price. “Create a budget and figure out a number where it just won’t work.” He figured out his number when he bought his current rink 15 years ago from a bank foreclosure. “We made an offer that was rejected.” One year after walking away, he got a call about the A non-compete agreement can be important property. Not only was the bank willing to meet for sellers who retain other rinks in the area. his price, but it also gave him a line of credit to get Parmley, who has another rink “down the street” the rink open. from the one he sold, experienced some growth after closing the old rink and is working to more
of the old market. He included a 5-year noncompete clause, integrated most of his small staff into the other location’s roster of employees, picked out some equipment to move and sold the rest.
Exit, stage left Every deal is different. Parmley likens them to pieces of a puzzle; the buyer and seller have to come together to meet their needs. But, he advises rink owners everywhere to plan an exit strategy. “Have a five-year plan.”
A Message from the RSA It might seem out of the ordinary that we would cover a topic like this, but it’s a question that our members sometimes ask and we felt that it was important to discuss how other business owners have gone about selling their rinks - whether simply for property or to keep the skating center alive. While we hope that roller skating rink owners will sell to buyers who want to keep their skating centers open for years to come, we understand the financial aspects involved in small business ownership, as well. With more than 70+ future operators who currently belong to the Association who plan to open a new skating center, it is our hope that we will continue to grow the industry worldwide.
Marketing strategy Some sellers don’t want a sign on the property. Nicklas takes it in stride. “It can scare off business,” he accepts. Besides, most of the traffic at a rink consists of young skaters, not potential buyers. The mechanics of information gathering, valuation of the business and creating a potential buyers list are all generic strategies. However, Nicklas does have some suggestions specifically for selling a rink: • Take professional photos – including aerial drone shots and videos to see the whole property. • List the property on commercial real estate sites and your website. • Make use of social media to spread the word. He says Facebook is very successful. Rollhaven’s Flushing location announced the rink’s closure and availability for purchase via social media. • Use filters and establish parameters to 54 /
Rinksider - The Roller Skating Business Magazine |
Volume 27 / Issue 6 www.rollerskating.org