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Due diligence while buying (or selling) a haunt.

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  • Due diligence while buying (or selling) a haunt.

    While in business school, I learned a lot about buying an established business. However, a lot of these rules are hard to figure out in the haunt industry. Can anyone offer advice on evaluating the purchase of an established haunt?,
    Chris Tillman, President
    Rocky Mountain Terror, LLC
    Trick or Terror Haunted House

  • #2
    Specifically, id like to know more about evaluating depreciation of props, etc. Requesting audited financial statements, obtaining a certificate of good standing, obtaining company credit reports and tax returns. All required for a proper due diligence.
    Chris Tillman, President
    Rocky Mountain Terror, LLC
    Trick or Terror Haunted House


    • #3
      Yes, But..

      In the final count it all comes down to your own ambition and creativity.
      Buying a tool doesn't make one a craftsman.
      When buying something consider what price you could ever sell it for if and when that day came, then pay alot less for it.
      Around here some suckers have paid way too much for propertys when they should have looked up past selling prices of their place and the ones similar to it, guess what? Prices here don't go up much if at all, but people coming here from the rest of the world think prices go up automatically all the time.
      It really hurts to buy a place for $250,000 that you can't sell for $50,000 and this was happening here long before the more recent financial calamitys and bail-outs, ex cetra.
      A legal document is only as good as the people signing it.


      • #4
        I agree Jim. The current housing market is a GREAT example of why one should do their homework (due diligence) before investing in anything, whether itís buying a home, or buying a haunt.

        I am working on a part of my business plan titled "Entry Strategies." One thing that many people have advised me to do is to figure out numerous entry and exit strategies, in order to plan for every case scenario. In the case of entry strategies, I am developing a "Scenario A," "Scenario B," and "Scenario C." As I am not one to put something that sounds good on paper, and then decide to figure it out later, I want to thoroughly go through and understand each case scenario. I feel that if I do this, I will be able to fully be able to weigh the pros and con's of each decision, and determine the best Scenario for the market I am entering.

        In regards to the "buy" scenario, I feel that it would give me a platform in which I could establish myself quickly in this market, as opposed to time it would take to establish myself if I start "from scratch." As a result, I could potentially build capital faster and start engineering the haunt design I envision company having.

        As I mentioned above, I know that this scenario has its pro's and con's, and is therefore only one of many scenarios I am exploring. This has proven to be a successful strategy for many haunters though. Look at Kelly Allen and Raycliff Manor.

        By the way Kelly, I'd love to hear your advice on this one!!!!

        And for that matter, I'd love to hear from EVERYONE who has purchased a haunt.

        I have not seen this addressed as much as I believe it should on this forum, and I believe it could only stand to benefit both buyers and sellers of haunts!!!
        Chris Tillman, President
        Rocky Mountain Terror, LLC
        Trick or Terror Haunted House


        • #5
          Is due-diligence a new term you just learned or something? J/k lol


          • #6
            Its a basic business term. You could also call it "doing your homework" or "research."

            I'm just looking for insight from people who have bought or sold a haunt before. And i'm sure a lot of other haunters would benifit from this kind of information also.
            Chris Tillman, President
            Rocky Mountain Terror, LLC
            Trick or Terror Haunted House


            • #7
              I know you posted some great questions I'm just joing with you. Good luck!



              • #8
                I Dunno?

                When two parties end up across from one another in court over a sale gone sour, does the Judge find in favor of the seller because the buyer was stupid and didn't use "Due Dilligence"?
                This might be how I heard that term used?


                • #9
                  Good point Jim. Lol.

                  More or less, I just want to know how to determine the actual value of a haunt as opposed to the asking price. In real estate appraisal, we use comparables and depreciation factors(i use to appraise.)So now i'm trying to find a similar method for haunts.
                  Chris Tillman, President
                  Rocky Mountain Terror, LLC
                  Trick or Terror Haunted House


                  • #10
                    We're also looking at purchasing another haunt company/event here in town and what we've done is:

                    -Asked and looked at past attendance counts with bank deposits as proof. Haunters like to over-exaggerate what they do as far as attendance goes. So, ask for statements to back up what they're telling you!

                    -Look at assets other than props, costumes and masks. Does the haunt have an established reputation? Good or bad? Location? Anything you can use to your advantage business wise such as copyrights and trademarks! Sometimes this could be worth the total value of the purchase alone!

                    If your buying a company that's already established, ask around and get a general idea of what kind of reputation you'll be working with. You may have to dump some serious money into marketing to get people to come back... or dump serious marketing money for people whose never heard of it!

                    -Look at past pictures, themes, floorplans... etc. etc. See what you like best and what works. Try not to re-do everything but use what worked for the public and make it better.

                    -Look at where you think the business could use improvement and work towards that. Some events have awesome haunts but not so awesome websites... and some vice-versa... see what kind of capitol you'll need to make the event as a whole great.

                    Overall... look at it as potential profits. It'll take MONEY to buy a seasoned event, but you'll also want to update it and make it better. So, do your work in the accounting portion of it all and see what will work best for you!

                    Chris Riehl


                    • #11
                      Are you looking to purchase name along with the haunt? Are you going to operate out of the same building the haunt is in now? Or are you literally just buying the walls, props, and equipment?
                      Jared Layman


                      • #12
                        Caveat Emptor!

                        I was about to ask the same question. Are you looking at buying an existing business or a used haunt? There is a difference.

                        Buying a used haunt is like buying a used car. Unless you have the opportunity to test drive it, i.e. see it in operation and inspect all of the components, don't do it! You could end up with trailers full of rotting plywood and deteriorating foam latex props. Do not trust photos or video. See it in person.
                        Last edited by MindWerxKMG; 01-21-2010, 10:10 AM.
                        MindWerxKMG, LLC


                        • #13
                          Mindwerking! Quit Holding Out!

                          WHERE Can I get that truckload of half-rotted plywood and rotted latex masks?
                          Sounds like a "turn-Key" operation to me!
                          If the semi has rotating axle bearings I could drag it and set up at Transworld!
                          It's the "Nostalgia Tour!"


                          • #14
                            Thank you all for your responses.

                            Jim, you crack me up! lol. I didn't think about it that way. I want to have a gothic haunt that looks run down, but definitely don't want the "nostalgic" half-rotted plywood and rotted latex mask look. lol.

                            IF I were to purchase, I would only be purchasing the haunt, as I all ready have a name for the haunt (which is not Rocky Mountain Terror, that will be the company name), a storyline, and a theme.

                            In all actuality, I really don't want to purchase a used haunt. I would like to start from scratch and build my own vision. The reason I am even entering this into my business plan is to show potential investors and lenders that I have explored all avenues of entering the Haunt Industry. As well, if I can't find the money I need do do it my way, I might have to look into the purchasing of a used haunt just to get entered into the market, and build and transform it into my vision from there.

                            I am loving all of the cautionary statements that you all are giving me. I was asked by one person who will potentially (HOPEFULLY, fingers crossed!!!) be investing in my haunt venture, if I had explored this option. To him, it seemed to be the most rational way to go. This person however, knows very little about our industry. To be able to go back to him and tell him, via the advice of many experienced haunters that there are many pitfalls to this idea (I'm using the "Nostalgia Tour!" comment when I talk to him Jim, lol.) , should show him that starting from the ground up is the way to go.

                            There is a new haunt in my area that came up with a solid business plan, risked everything they had, and built the haunt or their dreams last season. I have to say, It is BY FAR the best haunt Denver has EVER seen!!! Not only were they successful, they were profitable in their first season! Now, I don't intend to risk as much as they did, nor do I believe that this result will happen for everyone. However, this case study, along with the advice everyone here is giving me, should be enough to convince my potential investor that buying a used haunt is not the best way to go.

                            But, just because this is not my ideal option, I still want to be ready and knowledgeable on the subject if a great opportunity ever presents itself, or if I don't end up getting the money I need to start from the beginning. Thanks Tyler for all of your advice. If you don't mind, I would like to use some of what you said in this option of my entry strategy section of my business plan.
                            Chris Tillman, President
                            Rocky Mountain Terror, LLC
                            Trick or Terror Haunted House


                            • #15
                              When Estimating:

                              Your building time figure closely but then add alot of unforseen hours because they WILL be there!
                              Unless you have a talented, ambitious crew of construction-experienced tool weilders(Might want to check, 10 fingers? Anybody have a severe limp? Do they know what those smallest lines on the ruler are? Some people don't!)
                              If you have your own shop and room to take your time, if you are doing this work mostly yourself time and money will become an issue if you are renting workspace or making stiff mortgage payments as the time zipps passed..."It's OCtober-All ready!"..and no possibility of taking in any $$...not done yet.
                              Friends or relatives have their own time-sucking agendas in life and extra worktime becomes precious for most of us and that is the way it usually is....
                              One of my biggest things I found I had to learn and accept and work around was this very trait I have just is Your Passion..but probably not so much theirs.
                              I assumed for years that I could find a good number of people to work the haunt with me because if for no other's fun! (And I pay them)
                              This is also the most common, basic reason a haunt will fail if the owner has to hire a manager to run the place while the owner is away at another business or a second haunt.
                              This Passion to do this will carry you beyond the normal mental and physical limits's Yours! The Money driven aspects will come in second place.