You can’t run a business on dreams alone
Country House hotels are particularly popular in the early months of the year for quick battery-recharging breaks in between Christmas and Easter. A few carefree days in bracing country air, with good food and wine, blazing fires – wonderful. Great business for the favoured establishments too, but faded luxury and exclusivity doesn’t guarantee healthy profits unless the owner’s dream is reinforced by serious business planning. Boring, but true!
Such establishments are often the result of a rather rose tinted view of the hotel business and such was the case for an idea nurtured for years by two people who had allowed their hearts’ desire to overcome their commercial experience. A wonderful location, twelve beautiful rooms, luxurious conference facilities for 30 people and truly exceptional food.
Unfortunately, after the initial success driven by launch publicity, reality set in. The rooms were rarely full, not many hill walkers require such luxury (and certainly don’t want the expense), there weren’t enough rooms for the occasional small conference and the location was too remote for casual restaurant trade.
Our Appraisal was swiftly completed and noted that the bank was becoming increasingly restless and pushing to replace the outstanding overdraft with a five-year loan that was completely unaffordable. Interestingly, it appeared that surplus lounge space in the main house could be given over to two new bedrooms and that unused stables could be converted into a dozen additional rooms. This development of the business would form the basis for a new PR campaign to be fronted by a revised and more dynamic web presence.
The partners were concerned about the cost of such proposals – especially when viewed alongside the current £750,000 overdraft that the bank wanted returned. However, with the likelihood of a shortfall in the event of a forced sale, the bank was prepared to listen to a positive and credible proposition.
Strategic planning demonstrated feasibility and after some negotiation the bank accepted £600,000 odd in full settlement, funded by a mix of angel investment and a new 20 year mortgage.
The partners are now directors of a new company managing a business that has been transformed within a year by serious marketing activity. They hold 60% of the equity in a properly funded business, going from strength to strength and still have their dream in place.
This is a great example of a how a wider, external perspective combined with experience in re-financing and sourcing suitable investors can significantly add to a business owners’ specific expertise in a practical manner that moves the business forward.