Selling a Business in Pattaya: What Is It Really Worth?

By KC Cuijpers, CEO, Town & Country Property Co., Ltd.

You've built a successful business. You've worked hard, invested money, survived difficult times and perhaps spent twenty years making it what it is today. Wonderful. But here's my question: what exactly are you selling?

Every now and then, somebody approaches me with a business they would like to sell. It could be a restaurant, a hotel, a transport company, a small real estate agency or practically any other commercial venture. And quite often, the owner already has a fairly precise idea of what the business is worth.

Usually, that figure comes from years of investment, financial statements, annual profits and a considerable amount of personal attachment. I understand that. After all, building a business takes courage, commitment and a fair amount of sleepless nights.

But the buyer isn't purchasing your memories, your sacrifices or the twenty years you spent building the company. He's buying whatever is left for him to operate, develop and hopefully make money from.

And those can be two very different things.

What Happens When the Heart and Soul Walks Out?

Imagine a successful gourmet restaurant operated by a talented husband and wife. The husband is an extraordinary chef, his wife runs the front of house, and together they have built a wonderful reputation with loyal guests who return again and again.

Now they decide to retire and sell the business.

What exactly is the new owner buying? The kitchen equipment? The furniture? The name above the door? The guest database? The goodwill?

Perhaps. But what happens when the chef walks out of the kitchen for the very last time?

Will those loyal guests return when somebody else is preparing their favourite dishes? Will the new operator achieve the same reputation and profitability?

The restaurant might have been extremely successful. That doesn't necessarily mean the business is worth anything close to what its owners imagine.

Compare that with a transport company operating twenty vehicles with established contracts, experienced drivers, a professional management team and systems that function without the owner getting involved every morning. Assuming those arrangements can continue under new ownership, that might be a much more transferable business.

Even an established franchise needs to be examined carefully. A recognised brand, operating procedures and existing customer demand can be very valuable, but the franchise agreement, transfer approvals, fees and remaining contractual rights are part of what the buyer must examine.

The important question is not simply how profitable the business has been.

How profitable will it remain when the present owner is no longer there?

Yesterday's Success Doesn't Guarantee Tomorrow's Value

Let's take a small, family-operated real estate agency in Pattaya. The husband and wife have worked here for twenty years. Everybody knows them. They have excellent contacts, loyal customers and an impressive understanding of the local property market.

Sounds valuable, doesn't it?

But suppose the couple retires and leaves Thailand. Their knowledge goes with them. Their personal relationships go with them. Their ability to pick up the telephone and speak directly to the right people might disappear overnight.

What remains?

Perhaps a website, a database, an office lease, some furniture and a company name. Those assets might have value, but the real question is how much of the business can continue without the people who created it.

And today there is another factor we cannot ignore: technology.

A talented graphic designer or website developer might have built a successful business over many years. Yet artificial intelligence is already changing how these services are delivered and what customers are willing to pay.

That doesn't make every design company worthless. Far from it. But it means yesterday's earnings cannot automatically be projected into tomorrow's market.

A buyer is interested in the future, not simply an impressive financial history.

And Who Owns the Building?

Here's another interesting situation.

You operate a successful restaurant in an excellent location in Pattaya. Business is booming, guests love the place and you have decided to sell.

Wonderful. But you don't own the building.

Perhaps your rental agreement has only twelve months remaining.

Will the landlord agree to a new tenant? Will he offer another long-term lease? Will the rental remain the same? Or is he going to take advantage of the situation and demand a substantial increase, perhaps accompanied by some unexpected key money?

A business that looks very attractive on paper can become considerably less attractive once these questions are answered.

Now consider the opposite situation. You own the freehold property in an excellent location, together with the business operating inside it.

Where does the real value lie?

Perhaps you believe the goodwill of your restaurant is worth several million baht on top of the land and building. But your prospective buyer might have a completely different idea.

He may have absolutely no interest in your restaurant.

He wants the location.

In fact, he might calculate the property's market value, deduct the cost of removing your equipment, clearing the premises and renovating the building, and arrive at a figure substantially below your expectations.

Your successful business could actually be an inconvenience to him.

And who is to say he's wrong?

Two Sets of Books. One Very Uncomfortable Question.

Anyone who has been involved in buying or selling businesses in Thailand will probably be familiar with the expression "two sets of books."

One set of accounts for official purposes. Another set supposedly showing what the business really earns.

Now, I'm not suggesting every business operates this way. Certainly not. But it happens, and it creates an obvious problem for anybody attempting to establish a credible valuation.

Which numbers are we supposed to believe?

An owner might proudly announce that his restaurant earns a million baht a month. Excellent. Can he demonstrate that through bank statements, invoices, tax returns, payment records and other verifiable information?

Or are we being asked to accept figures written down in a notebook?

And what about outstanding tax liabilities, unpaid suppliers, employee obligations or financial commitments that don't immediately appear in the presentation?

Reliable financial records are essential. But even genuine historical profits are only part of the picture.

Sometimes a Licence Is Worth More Than the Furniture

Consider a licensed hotel, resort or other business operating in an area where obtaining new approvals has become difficult or where planning rules have changed.

An existing licence could represent a genuine commercial advantage.

But only if it is valid, appropriate for the operation and capable of continuing under the proposed transaction, subject to the necessary approvals.

A buyer should never assume that purchasing a business automatically means inheriting every permit and licence required to operate it.

The same applies to building permissions, zoning restrictions, fire-safety compliance and the many other legal obligations attached to commercial properties.

Sometimes the paperwork is merely a routine part of the transaction.

Sometimes it can make or break the entire deal.

And Why Does the Owner Want to Sell?

Why does the owner want to sell?

Perhaps he's retiring, relocating, changing direction or simply ready for a new chapter in life. Those are perfectly understandable reasons.

But perhaps the business is struggling, facing new competition, losing important employees or approaching the end of an attractive rental agreement.

The answer might not change the valuation immediately, but it certainly helps me understand what we're dealing with.

The Value of a Fresh Pair of Eyes

Some months ago, I was involved in assessing a resort-style property in the Nong Pla Lai area. It was an interesting, purpose-built development with substantial investment behind it, but it had never developed into the fully operating, licensed business originally envisioned.

For me, that distinction was important.

We weren't simply valuing the owner's investment or the business he had once hoped to establish. We had to look at the property as it stood, its potential alternative uses, the costs and restrictions a new owner might face and the type of buyer who could realistically make something of it.

That is sometimes where an independent assessment becomes valuable.

Not because an outside professional necessarily knows more about your business than you do. Nobody knows your business better than you.

But knowing your business and knowing what somebody else is prepared to pay for it are not quite the same thing.

And yes, there is an important role for accountants, lawyers and other specialists.

A good accountant can help establish whether the financial information is credible. A capable lawyer can explain the contractual, ownership, licensing and liability risks.

Their advice can be invaluable.

But there is a difference between good legal advice and commercial judgement.

I've never believed that an expensive legal opinion automatically makes a transaction commercially sensible. Nor does a lengthy invoice, calculated by the hour, necessarily mean that the most important questions have been answered.

Sometimes you need somebody who can look at the entire proposition, understand what is actually being offered and tell you, without unnecessary complications, whether the deal makes sense.

And occasionally the most valuable advice is to tell an owner that his expectations are unrealistic.

That might not be what he wants to hear. But it could save him months of frustration.

So, What Is Your Business Really Worth?

There are recognised methods of valuing businesses, and naturally financial performance, assets, liabilities, cash flow and future earning potential all deserve careful attention.

But no formula can replace understanding the actual transaction.

Are you selling a profitable operation that can continue without you? A valuable property with a business attached? A prestigious brand? An attractive lease? A rare operating licence? Or simply the opportunity for somebody else to start something new?

Before deciding what your business is worth, perhaps the most useful exercise is to forget what you spent on it, forget how hard you worked and forget what you would ideally like to receive.

Instead, put yourself in the buyer's shoes.

Because ultimately, you're not selling what your business meant to you. You're selling what it can mean to somebody else.

KC Cuijpers
CEO, Town & Country Property Co., Ltd.