Fair maintainable trade explained: the number your whole deal turns on
Fair maintainable trade is the single concept a hospitality valuation is built on. This guide explains what it means, why it is not the current owner's accounts, and how it drives the value and the loan.
Fair maintainable trade is the level of trade a reasonably efficient operator could sustainably achieve at a property, assuming competent management and normal conditions, rather than the current owner's actual takings. It is the foundation of a trade-related valuation: the valuer establishes the fair maintainable trade, deducts maintainable costs to reach the fair maintainable operating profit, and capitalises that profit at a market yield to reach the going-concern value. It matters because a lender funds against this figure, not the sale particulars, so a tired operation with upside can be worth more to a good buyer, and a flattered set of accounts can be worth less than it looks. The Valuation Office also uses it to set business rates. We arrange the finance; we do not lend.
At a glance
- What it isSustainable trade a competent operator could achieve
- NotThe current owner's actual takings
- Leads toFair maintainable operating profit, FMOP
- ThenCapitalised to the going-concern value
- SetsThe value and therefore the loan
- Also used forBusiness rates on licensed premises
What fair maintainable trade means
Fair maintainable trade, often shortened to FMT, is the level of trade a reasonably efficient operator could sustainably achieve at a property, given competent management and normal trading conditions. The key words are reasonably efficient operator and sustainable. It is not the current owner's actual figures, which may be inflated by an exceptional operator or depressed by a tired one, and it is not a best-ever year. It is a fair, maintainable level that a competent operator could hold.
This is the concept a hospitality valuation is built on, and therefore the concept your finance turns on. It underpins the going-concern valuation at /guides/going-concern-valuation/ and the hotel profits method at /guides/hotel-valuation-guide/. Hospitality Property Finance is not authorised by the FCA, and the commercial lending we arrange is unregulated.
From fair maintainable trade to value
Fair maintainable trade is the top of a chain that ends in a value. From the maintainable revenue, the valuer deducts the maintainable operating costs a competent operator would incur to reach the fair maintainable operating profit, or FMOP. That profit is then capitalised at a market yield to reach the going-concern value. Because the value is capitalised profit, small differences in the assessed trade and margin move the value significantly, which is why the fair maintainable trade assessment is where the real negotiation and evidence sit.
- Assess fair maintainable trade: the sustainable revenue a competent operator could achieve.
- Deduct the maintainable operating costs that operator would incur.
- Reach the fair maintainable operating profit, FMOP.
- Capitalise the FMOP at a market yield to reach the going-concern value.
Why it is not the current accounts
The most important and most misunderstood point is that fair maintainable trade is not the current owner's accounts. A valuer looks through the actual figures to what a competent operator could maintain. That cuts both ways. A tired pub or a hotel run at half its potential has a fair maintainable trade above its actual takings, which is where a good buyer finds value. Equally, a business flattered by an exceptional owner, a one-off event or unsustainable cost-cutting has a fair maintainable trade below its recent accounts, so paying on the historic figures would mean overpaying.
Because the loan is sized on the fair maintainable trade, not the asking price, the fair maintainable trade assessment is the number to focus on. Evidence supporting a sustainable trade, verifiable accounts, booking data, local demand, strengthens it; reliance on the current owner's unrepeatable performance weakens it. A buyer who understands this can offer sensibly and fund cleanly; one who does not can agree a price the valuation will not support.
Fair maintainable trade and business rates
Fair maintainable trade is not only a valuation tool for buying and lending. The Valuation Office Agency uses a fair maintainable trade approach to set the rateable value of licensed and other trade-related premises, such as pubs, so the business rates a pub pays are themselves derived from an assessment of its fair maintainable trade. That means rates are a real running cost that moves with the assessed trade, and it is worth understanding when you buy, because it affects the maintainable operating profit and therefore the value.
A pub pays business rates, not council tax, on its trading premises, though a residential flat above may attract council tax separately. Reliefs sometimes apply to licensed and hospitality premises, so check the current position as part of due diligence.
How we use fair maintainable trade in a deal
We build every hospitality case around the fair maintainable trade, presenting the evidence that supports a sustainable trade a valuer will accept, and sizing the finance against the going-concern value it produces. Where a buyer is paying above what the fair maintainable trade supports, we say so early, because it changes the deposit and the loan. We are an arranger, not a lender. Start at /services/commercial-mortgages/, or the buying guides at /guides/how-to-buy-a-pub/ and /guides/how-to-buy-a-hotel/.
Fair maintainable trade explained: the number your whole deal turns on: common questions
What is fair maintainable trade?
It is the level of trade a reasonably efficient operator could sustainably achieve at a property, given competent management and normal conditions, rather than the current owner's actual takings. It is the foundation of a trade-related valuation, leading to the fair maintainable operating profit and, capitalised at a market yield, the going-concern value that a lender funds against.
What is FMT in pubs?
FMT stands for fair maintainable trade: the sustainable level of business a competent operator could run at the pub, used to value it and to set its business rates. It looks through the current licensee's actual figures to what a reasonably efficient operator could maintain, which is why a tired pub with upside can be worth more than its current takings suggest.
What is the difference between fair maintainable trade and actual trade?
Actual trade is what the current owner really takes; fair maintainable trade is what a competent operator could sustainably achieve. They can differ in both directions: a poorly run business has a fair maintainable trade above its actual takings, while a business flattered by an exceptional owner or a one-off has one below. Lenders and valuers use fair maintainable trade, not actual trade.
How is fair maintainable operating profit calculated?
You start from the fair maintainable trade, the sustainable revenue, and deduct the maintainable operating costs a competent operator would incur, to reach the fair maintainable operating profit, or FMOP. That profit is then capitalised at a market yield to reach the going-concern value. It is a sustainable, normalised profit, not a single year's actual figure.
What are the 5 methods of property valuation?
The comparison, investment or income, profits, residual and cost methods. Trade-related property such as pubs and hotels is valued principally by the profits method, which is built on fair maintainable trade, with the comparison and investment methods used as cross-checks and the cost method as a floor for the bricks and mortar.
Does fair maintainable trade affect business rates?
Yes. The Valuation Office Agency sets the rateable value of pubs and other trade-related premises using a fair maintainable trade approach, so the business rates payable are derived from an assessment of the property's fair maintainable trade. That makes rates a running cost that moves with the assessed trade, and it feeds into the maintainable operating profit and the value.
Why does fair maintainable trade matter when buying a hospitality business?
Because the loan is sized on the fair maintainable trade and the going-concern value it produces, not on the asking price or the current accounts. Understanding it lets you offer sensibly, avoid overpaying on a flattered trade, and spot value in an underperforming asset. It is the single number your whole deal turns on, which is why we build every case around it.
Ready to take a deal to market?
Send us the scheme and the numbers and we will come back with a view on fundability and likely terms within one working day.