ZIP TOUR FOR SALE!
ZIP TOUR FOR SALE!
GET YOUR NEW ZIP TOUR!
Whether you’re looking to move in or move on, there are several factors to evaluate in any prospective aerial adventure sale to ensure the ownership transition is a win for buyers and sellers alike.
BEFORE YOU BUY
I have had the pleasure of watching the growth of the commercial zip line and adventure park industry in the United States over the last 30 years. It has been quite a ride. Many businesses have come and gone, but new operations are still being built and established ones are doing well.
Add it up. This history, along with quick math, might suggest to many would-be owners that the commercial aerial adventure industry is a gold mine. Consider this hypothetical mountainside zip tour: It does 12 tours of 10 people every day, 365 days a year, with guests paying an average of $100 per person. That should be several million dollars a year in your pocket, right?
Unfortunately, it doesn’t always work out that way. No business runs at 100 percent operational efficiency, and expenses are always more than you expect. So, before buying an aerial adventure operation, consider the cost of:
It all adds up. Depending on these costs, operating a commercial site may not always be profitable. It’s important to go into an acquisition with reasonable expectations about the prospects of the business.
Why are you selling? Profitability (or lack thereof) is one reason an owner might want to sell their commercial adventure park or zip line tour. Other reasons I’ve heard over the years include:
It’s harder to operate than originally thought.
Too much local competition.
Life circumstances changed.
It is not as fun to operate as it was to start up.
A miscalculation of the time investment needed to operate the tour effectively.
It’s a challenge in this (post-pandemic) time finding good guides—or any guides.
The owner’s reason to sell may or may not be of concern to you as a prospective buyer. That’s why it’s important to do your due diligence, which may reveal some red flags, such as:
Accident trends increasing.
Constant increased expenses with decreased revenue.
Noting that recommendations in past inspection reports have not been addressed.
Lack of operational reviews by an outside third-party organization (which are required every five years by ACCT standards).
Lack of upkeep to general ongoing maintenance, i.e., cable replacement, maintaining lumber/trails/paint/trees, platforms that need major adjustments or have reached the end of their life due to tree growth.
How the owner is receiving their income (as an employee collecting a salary, as a draw as a business owner, or both).
CONSIDERATIONS FOR SELLING
What if you’re on the other side of the equation and thinking about selling?
If you are just tired of running the operations, consider bringing in a contractor to operate things for you. You may make less income, but you’ll also have less responsibility and hassle.
If you are set on formulating an exit strategy, there a few options to consider.
You can just walk away and leave the business to rot. Not a responsible choice, but maybe that’s your style.
You can take it apart piece by piece and intelligently reuse or recycle the materials. A more responsible approach to be sure.
You can sell it to someone who will maintain or possibly even grow the business.
I like option three the best. In my opinion, it’s the most responsible choice as an employer, community member, and steward of the environment. So, that’s what we’ll focus on.
Option three typically necessitates a sale, so you must determine the sale price. Before you put your business on the market, here are a few questions to ponder:
What do you need/want out of the sale?
What is your timeline?
Do you need to move it quickly, or is finding the right buyer more important?
Will it be a clean break, or can you take a month or two after the sale to help the new owner transition?
What is included in the sale?
Website domain name and/or intellectual property?
Property? Will ownership/lease need to change?
Finally, if you can’t find a buyer what is your plan B?
Lower the sale price?
Keep operating the tour?
Find an entity to operate it for you?
Finding a buyer. Next, you’re ready to talk with potential buyers. This can be a bit challenging because there is no “Zillow” for commercial zip line tours. So, your options include posting on social media in groups like Zip Line Pros, Challenge Course Pros, or Adventure Park Pros; advertising in industry publications (like API); and spreading the word among your professional network. I have also seen ownership transferred to employees via creative contracts and agreeable long-term payment plans.
WORK TOWARD A WIN-WIN
In most races, there is one winner. But selling a business isn’t a race, and in this scenario, I believe you should strive for a win-win for seller and buyer. This industry is still young and setting new people up for success is important. At the end of the deal, the seller should feel good about the transaction and the buyer good about their new business.
Assessing value. A win-win starts with a realistic look at the value of the business. Many potential sellers I’ve talked with want to sell their tour for what they’ve invested in it. That is, add up all the money they poured into the construction, maintenance, web development, gear, etc., tack on a percentage for “pain and suffering,” and then list that as the price. This math doesn’t necessarily work, though.
Since there are so many variables, there isn’t one best way to designate the value of an operation in this industry, but here are a few simple methods you can try yourself.
The value of your assets (gear, computers, vehicles, retail inventory, etc.), plus:
Gross sales averaged out over last three years = Price
Net profit over 12 months X 36 = Price
The average of 1 and 2 = Price (I like this method)
These are, admittedly, simplistic, but they seem to work well. If you want to take a deep dive into this topic, find a good business consultant—they can take you for quite an educational ride.
Factors that increase/decrease value. It’s also important to thoroughly review anything that can increase or decrease the value of your business. These include:
The original cost to build, which offers a basis for the value.
Needed maintenance: The value will be negatively impacted if your site needs new platforms, new cables, tree work, etc. A properly maintained site will be more valuable.
Timeline for gear replacement: An inventory of newer, well-maintained gear is more valuable than a collection of gear that will soon need to be retired and replaced.
Current pool of staff: Good staff who are willing to stay through the transfer of ownership is valuable, and can make or break a sale. Conversely, needing to turnover and train an entirely new team upon a change in ownership is expensive, and can reduce the value of the operation.
Costs for ongoing training.
Documentation: Good documentation is a must—and great documentation adds value to the site.
– Is there a set of manuals (owner’s, maintenance and documentation, operations)?
– Is there a documented tracking system for your guide and guest gear?
– Are forms and documents being filled out and tracked appropriately for the new owner to reference?
Does the land and/or course go with the sale? Options may be:
– Selling the operation concession only.
– Selling the course and the operation concession.
– Selling the course, the operation concession, and the property if it’s owned.
If the property is not owned outright, what is the current relationship with the landowner? Are they willing to transfer the property lease to a new owner? At what cost?
What is the current marketing program?
In addition, any past major incidents or accidents, past lawsuits, and any potential forthcoming lawsuits may affect the insurability and long-term reputation of the tour/park.
Make an investment. Before putting your business up for sale, consider investing time and money into improving or fixing any shortcomings you’ve identified that will hurt the valuation. These improvements can include operational and training documentation, deferred maintenance, needed updates, new or updated gear, and the aesthetics of the operation.
The right investment can increase the market value of your tour. (Think of selling an older house—you might update the kitchen, paint the walls or exterior, or add a new roof to increase its value.)
Consult with a pro. After performing your review and making any needed improvements, I would encourage you to seek help from a business consultant who specializes in business transfers in order to properly assess the value of your business. This person most likely won’t be an expert in our industry, nor do they need to be. Find someone good with business transactions and help them understand the industry (that’s easier than going the other way).
Once you have found a good buyer (or business to buy), the transfer of knowledge is imperative to the ongoing success of the operation. You may be selling to a seasoned operator, but most sales I have seen are to someone who is fresh, energized, smart, and ready to tackle this fun new endeavor—with little to no understanding of this industry. Take the time to create an ownership transfer plan, remembering how long it took you to learn all the ins and outs of the operation.
If you have a great manager who will be staying on, the transfer is easy. If you are the owner, manager, and onsite operator, I would recommend a month or two of working together to transfer knowledge over to the new ownership.
This is also a great time to bring in the professionals you work with. Introduce the buyer to your builder, your inspector, and your trainers. Help the new owner understand the standards you choose (or are required) to follow.
In addition, go through all of your documentation step-by-step and ensure it is current, relevant, aligns with the standards and is easy to follow. If you are worried about the operational documents that you are passing along, you may want to engage with a third-party professional and ask for an operational review, which can be conducted in advance of a sale or with you and the buyer together.
Final thoughts. A good handoff is imperative to the new owners’ success and the longevity of a business you likely built from the ground up. It takes time and energy to transfer ownership with care. A few parting notes for the seller:
Sell it before you are so tired you want to just give up.
Ensure that what you are selling is worth the value of the asking price (not just the amount you want).
Make sure you set the new buyer up for success. You put a lot of time and energy into building this business, it would be a shame to see it fall apart.
Create a win-win relationship.
Treat the new owner with respect.
And, get some professional help where needed.
For both buyers and sellers: Feel free to reach out if you have any questions, I am always happy to help.