For years you have been keeping a relationship with clients, bargaining for enough tags, managing game populations, upkeeping equipment, setting up and tearing down camps, rising early in the cold, and working late into the night. The life of an outfitting and guide business owner is not easy and is generally considered to be a calling. Though it is difficult work, it has many rewards. Many outfitters struggle with the timing of when to leave the business.
As we begin the 2022 season, I hope last year’s seasons were successful, safe, and all your paperwork is done. The last few years have been unique to many service industries due to the Covid-19 virus. On one hand, many outfitters struggled with cancellations and hunters who had trouble traveling, but on the other hand, many outfitters have had some of their best seasons due to the increase in hunters caused by Covid-19.
Travel restrictions in Canada, New Zealand, South Africa, and other hunter-friendly countries have caused hunters to stay in the continental 48 states for hunting, with my home state of Idaho being a top pick among these hunters. Covid-19 concerns have also caused many to look for ways to get away from large masses of people, and remote hunting opportunities provide an ideal getaway.
Due to the reasons stated above, many outfitters have experienced some exceptional years and have guided a higher-than-average number of clients. This could mean your outfitting and guide business may be worth more money now than it has ever been. The best time to sell is when your business is at its highest value and there is a market for your business. Without a crystal ball to predict the future, right now may be a better time to sell than ever before.
A lot of the outfitters I have spoken with have had two years in a row with a record number of hunters coming into camp. These extra hunters have added to the profit margins, which increases the value of the business. As many outfits have seen their values climb, the economy has also created opportunities for potential buyers.
With low interest rates, increased home and land values (Idaho is leading the country in this area), and low unemployment rates, more people are in a financial position to invest in the dream of owning an outfitting and guide business. Over the past year, I have spoken with dozens of people exploring the idea of purchasing an outfitting and guide business, though due to intensive time and labor requirements, very few of these people will ever take that chance. Several of them, however, are seriously looking for the right opportunity to become an outfitter.
So, what does it take to sell an outfitting and guide business? I have identified several key factors, that when addressed, make it easier for an outfitting and guide business to sell.
Marketing – Unlike a standard home purchase where buyers can search on a variety of sites like Zillow, Realtor.com, Trulia, or Redfin for their next home, there is no well-known location for outfitting and guide businesses to be listed or for potential buyers to search. Outfitters looking to sell need to consider how they are going to market their business. Consideration must also be given to marketing in places where current or past clients may see the business is listed for sale.
Valuation – Unfortunately, buyers do not often take the outfitter’s word that the asking price is the value of the business. In the residential world, appraisers are as common as title companies. Outfitting and guide businesses have value in the business and may or may not have real property to transfer with the outfit. There are many different theories on how to value a business. I will discuss more on valuations later.
Disclosures – When a buyer purchases an outfitting business they want to know what they are buying and that they are paying a fair price and are not being taken to the cleaners. Everyone expects a business owner to write off everything they can to show less profit and thus pay fewer taxes (at least this is what I do). However, a potential buyer needs to be able to examine the cash flow of a business for which they may be paying hundreds of thousands of dollars. Accurate and complete equipment lists, number of guided hunts, details of non-season income (fishing, pack trips, or trail rides), and vehicle information are all things that also need to be disclosed.
Financing – Though there are buyers out there who are strong financially, financing options for a business are limited. The Small Business Association (SBA) will offer loans to some buyers, but they generally will only loan on a percentage of the tangible assets and not on the value of client lists or permits. It should be noted that permits have no inherent value, and are not always easily transferable. Outfitters who can be flexible with financing will find more potential buyers.
Hunting success/Opportunities – We all know we cannot control the client and their ability to be mobile or shoot accurately. However, we can control the information provided about the game in the area we hunt. The statement “I see elk every day” does not give someone who is serious about guiding hunts in the area the information they need. How often have we all glassed elk that were feeding over a mile away and wished there was a way to get to them? Seeing an elk and getting someone a clear shot at an elk are two very different things.
Fortunately, with some planning, all of these key factors can be addressed and a buyer for your outfitting and guide business can be found. Each outfitter can assess their situation and decide if they can take on these key factors or if they would be better off finding a professional who can help navigate these key factors.
In marketing, much like in life, first impressions are everything. This is why having a functional and professional website for your business is a must. Your website will be the first place people go to learn more about you and your business, as well as the driving force behind gaining new clients. There are many outfitters that fail to put enough effort into their online presence, and their businesses suffer because of it. Maintaining a functional and professional webpage is one of the most effective ways of marketing your business.
With the internet, there are a variety of options for marketing a business. Some of these options are free such as Facebook and Craigslist. There are also other “pay per ad” sites. Some of the real estate companies who focus sales efforts in the area of bare land have great success in getting outfitting and guide businesses out in front of potential buyers.
Not every land broker has learned about selling outfitting and guide businesses, but for some, it is a sensible jump from selling hunting land to selling businesses to operate on that land. I have spoken with buyers who are willing to look in multiple states, so finding a national marketing presence is extremely important.
A couple of theories on valuing a business are to either take the “net” proceeds from the business and multiply that by three to five, giving you the value of a business; or, take the “gross” proceeds from your best year out of the last three for the value of the business. This is easier said than done, as determining the net or gross proceeds can be a lot more complicated than it sounds. What is an expense and what is not, and do deposits for a hunt to be conducted next year count toward this year’s gross income or next year’s gross income?
I believe it is a wise investment to have a third party review the books and calculate the value of the business. Buyers like this because they do not have to simply believe the seller on the value, and sellers like this because they don’t have to turn all their financial records over to a buyer at the beginning of negotiations. They can disclose the third-party valuation. These valuations can cost between $500 and $2,000.
When these valuations can add ten, twenty, fifty, or a hundred thousand dollars to the purchase price of your outfit, your third-party valuation becomes money very well spent. Agents who are experienced in selling outfitting and guide businesses should be able to direct you to a third party who can conduct an evaluation for you.
Disclosures are an important part of marketing and selling an outfitting and guide business. Unfortunately, some of these disclosures just require the outfitter to take some time and energy to get them done. Above, we discussed how a valuation from a third party can reduce the work of financial disclosures. Most of the other disclosures can be prepared once and then shared with multiple interested buyers. Some of these disclosures include an actual-use report, hunting schedules, and equipment list (including livestock), maps of the hunting areas, and permit information.
I do believe a picture really is worth a thousand words, and pictures of the equipment, livestock, and vehicles will go a long way with potential buyers. Outfitters who are selling their business on their own will need to spend time putting all these items together, whereas those who choose to hire an agent should be able to rely on the agent to put these things together into an all-encompassing report.
Once an outfitter finds the buyer for their business, financing can become the most important factor. The bottom line is a buyer needs to have some cash to work with. This cash can come from the actual buyer or an investor who is willing to help and stand behind the buyer. If there is enough cash to pay for the outfitting and guide business, then a sale is likely on its way.
If not, then financing is necessary. The two main sources of financing are the SBA and the seller. The SBA should be willing to loan (on approved credit) money to the buyer, but their loan basis is generally only on the physical or tangible assets of the business. For example, if an outfit had $100,000 in equipment, livestock, and vehicles the SBA may loan up to $70,000 to the buyer.
The other common financing option is for the outfitter to carry the note. This means the outfitter will take on the role of the bank. Generally, the buyer will put a percentage of the purchase price down and set up loan payments to the outfitter for a specified period. This may help the outfitter with the tax consequences of selling a business because not all the money for the business is coming in at one time. There is generally an interest associated with the loaned money, so the outfitter benefits from the accrued interest.
Nobody wants to buy an outfitting and guide business where there is no game to hunt. It is common for outfitting businesses that are for sale to post pictures of their successful hunters; however, remember we cannot control how well our hunters can hike or shoot. I recommend getting pictures of live-game during the hunting season. When your guides are out scouting, make sure they have a camera with them. If you use trail cameras, save pictures of the game. Also, it is one thing to see a picture of a big bull elk, but it is another to have that picture with the caption “taken opening morning from 100 yards away.” If your hunter passes on a bull, take a picture anyway.
Also, get some real numbers. For example, know the number of guided hunts and know how many of those hunters harvested an animal, how many animals were shot at (some hunters will shoot at more than one animal), how many opportunities there were (again one hunter may have more than one opportunity so don’t just say “ten hunters had an opportunity”). It is also good to know how many days it took each successful hunter to fill their tag. Real concrete numbers and examples are better than anecdotes like, “We see elk all the time.”
Addressing these key factors will help an outfitter sell their business for the best price. There could also be value in paying for some professional help. I know outfitters who pay a 15 percent booking fee for help in booking hunts. If it is worth 15 percent for help in booking hunts, why wouldn’t it be worth 6 to 8 percent to have a broker help identify, screen, and vet potential buyers for your business?
If you have questions about how to prepare an outfitting business for sale or sell an outfit, feel free to contact me or another broker with experience in outfitting and guide businesses.