Background
You’re in the market for a campsite business as a going concern.
There’s one that’s taken your eye:
Coastal 120 Pitch Campsite And Letting Cottages For Sale
St. Mary’s, Isles of Scilly, UK
Asking Price:
£1,025,000
Turnover:
£265,000
Net Profit:
£125,000
-
- Campsite (with 10 electric hook ups)
- Set within c. 6.87 acres of mature grounds
- Permission for 120 camping
- Letting cottages and 5 bed owners
- Remainder of long lease
- Rare opportunity with ebitda of c. £125k
You’ve got the budget for buying at their asking price, but you want to make sure that the price is fair.
Problem
“I’d like to buy this campsite, but what is a fair asking price?”
Research
You estimate it to take 8 years for the campsite to pay you back for funding the investment.
You capitalisation rate is therefore 8%.
A standard valuation method would either have you:
[A] divide the expected net operating income of the campsite by this capitalisation rate to arrive at a reasonable market value,
OR
[B] multiply the gross annual revenue by 2.8 to get the sale value.
Solution
£265,000 x 2.8
= £742,000
or
£125,000 / 0.08
= £1,562,500
BONUS QUESTION:
“But…what size campsite would generate £265,000 gross revenue (in terms of number of pitches)?”
SOLUTION:
This advert claims the the campsite has 10 electrical hookups (the remainder being standard pitches presumably).
The site also has permission to operate 120 pitches. so, room for expansion.
First, of all just the 10 electric serviced pitches are likely to produce:
Taken away from the gross annual revenue of £265,000 leaves…
…£239,264.71 to be earned elsewhere within the business model.
The mention of 4 holiday rental cottages made you assume a price of £80.00 per night, each. Again, with the same occupancy rate as the camping pitches.
Now, this makes the annual revenue figure:
Taking this figure away from the annual gross revenue of £265,000 leaves…
£195,030.97
Now, assuming the remaining income is from unserviced grass pitch customers…this is how big a site you’d need to satisfy the revenue figure:
The answer: 93 standard grass pitches.
And here’s the proof…
Use the Campsite Financial Analyser to calculate the solution to the problem above.
Go To Part 17: https://campsitebusinessplan.co.uk/knowledge-base/4-campsite-business-case-study