Many bowling alley owners are receiving excellent valuations and selling for fair market value or higher, despite a recent drop in industry performance. This review discusses the valuation and sales process for bowling center owners who are planning their exit strategy.
About Bowling Alleys in The United States
Bowling alleys and centers primarily profit by renting bowling lanes. However, many bowling centers also offer food and beverage (F&B) services, pool tables, and offer alcoholic beverages. Of course, the business model varies within the Bowling industry. The most recent bowling industry numbers and projections are:
- There are approximately 3,350 bowling centers in the U.S.
- There was a -6.1% annual growth for bowling centers from 2018 to 2023
- Bowling centers generate $2.9 billion in annual revenue
- The annual profit for bowling centers is $156.4 million
- Experts predict a sizable increase in annual growth (0.9%) from 2023 to 2028
Overall, this is a well-established industry that can be fun for certain owner types. However, owners must be willing and in a position to work longer hours than most industries. Also, the league-based vs. recreational-based bowling alley models are much different.
How to Value a Bowling Alley
Your valuation is of the utmost importance when you decide to sell your bowling alley. This determines how much prospective buyers are likely to offer. Notably, when using a market approach, your broker will calculate your earnings before interest, taxes, depreciation, and amortization (EBITDA), and the seller’s discretionary earnings (SDE). This is then applied to the following rule of thumb data:
- Bowling centers sold for approximately 3.26 times the Seller’s Discretionary Earnings (SDE)
- Bowling centers sold for approximately 5.50 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Bowling centers sold for approximately 0.45 times the annual net sales
Your broker will also use other information that is not included in your SDE, such as your growth potential, location, and reason for selling (among more than a dozen additional factors). It is important to choose a broker who has the experience and you can trust to provide an honest and thoroughly developed valuation.
You should also check: How to Sell a Bar
How to Sell a Bowling Alley in 5 Stages
You should not approach the sell o your bowling center without establishing a sales plan beforehand. Your sales approach should contain the following five stages (or a similar variation based on the specifics of your company):
- Determine your bowling center’s fair market value (FMV)
- Prepare for the sale
- Market your company, negotiate, and finalize a deal
- Complete the due diligence process with the buyer
- Schedule a convenient time for closing and completing the sale
Your broker should personalize your sales plan. However, to provide a general sense of what you can expect, below is information about each stage of the sales process.
Determine Your Bowling Alley’s Fair Market Value (FMV)
Your fair market value (FMV) is the amount that is considered reasonable and fair for your bowling center when you sell. This is largely based on past sales data and the current state of the market. Of course, your financial information plays a large role in your FMV as well, which is determined by the market approach you receive when you first connect with your business broker. As discussed, your valuation is based on your EBITDA, SDE, rule of thumb data (for bowling centers), and your non-financial information that prospective buyers may take into consideration.
Prepare for The Sale
You must utilize a confidential marketing approach when you sell your bowling center. This means you utilize private sales techniques and channels, along with potentially using blind listings, NDAs, and other methods to maintain confidentiality. During this stage, you will plan all details for your marketing strategy and approach with your business broker.
Moreover, you will collect all documents that may be needed throughout the sales process, such as your tax returns, profit and loss (P&L) statements, cash flow statements, balance sheets, insurance information, list of employees, rental lease, and/or your commercial appraisal (if you own the building).
Market Your Company, Negotiate, and Finalize a Deal
Your broker screens offer as they arrive once you officially list your bowling center for sale (privately). Their goal is to ensure prospective buyers are qualified and in a position to follow through with their proposed purchase terms. Of course, your broker should keep you informed throughout the process, and you can be as involved with the negotiation process as you desire. Ultimately, with the assistance of your broker, attorney, and CPA (if applicable), you will select the buyer that allows you to maximize the sale price and reach your other (often-non financial) exit strategy goals.
Complete The Due Diligence Process With The Buyer
Once you select a buyer and they sign a letter of intent (LOI), you will begin the due diligence stage. This is a time for the buyer to review all of your business details and ensure all information you provided is accurate. Although this is a stage primarily designed for the buyer’s benefit, it should not be entirely open-ended to the point where the process lasts for months at a time. Instead, your broker should help guide the process and ensure a speedy due diligence process. Notably, during due diligence, the following may occur:
- You provide the buyer with financial and legal documents (which they review)
- You answer a series of questions (either via written format, virtual meeting, or in-person meeting)
- You allow the buyer to walk through your facility to learn more about daily business operations and potentially meet with key employees and business partners
Schedule a Convenient Time for Closing and Complete The Sale
You (the seller), the buyer, and both of your respective attorneys will attend the closing of the sale. In some cases, the broker attends as well. During closing, the purchase agreement is reviewed once more by attorneys, the final signatures are attained, and the purchase for the bowling center is completed.
As the seller, you will also need to transfer ownership, which may involve notifying employees, updating all legal information (along with insurance and lease information), and providing the buyer with full access to your bowling center (keys, online access codes, employee records, etc.).
Sigma Mergers and Acquisitions Has More Than a Decade of Brokerage Experience
Sigma Mergers and Acquisitions has years of experience helping business owners sell at or above their determined fair market value (FMV). Of course, the first step of the sales process is a valuation. If you would like to learn more about the sales process for bowling centers and/or desire a free, no-obligation business valuation, then schedule a consultation with us today.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
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