costing a cafe for sale

GrindOnDemand

Hi all ...

This is directed at those of you who've had experience in selling their cafe/s.  I'm a first-time seller, and after speaking with a few business brokers, am getting conflicting views on how you should cost a cafe (ie valuate it) when selling.

One says turnover minus all costs to come to your 'operating profit', then multiply that by 2.5 times, and that figure is what your cafe is worth to sell at.  Another broker reckons you only multiply your operating profit by 1.25 times to get a realistic value of the business.  Two significantly different scenarios!

Then do I add the depreciated value of all infrastructure - ie machine, grinder, generator (I'm mobile), + van with full stainless fitout?

Also, although I don't have any franchisees on board, I've invested considerable resources in consultants to help develop a franchising 'system', with Operations Manual, legal documents, templates & database of numerous franchise enquiries etc.  Plus there's my branding, logos, website, graphics.  All this constitutes my Intellectual Property which I want to value and include as part of the 'package' for sale, for a buyer to take my operation to the next growth stage of enlisting franchisees.  How does one value one's IP?

Any wise thoughts out there/experiences would greatly be appreciated ...

Cheers,
Tony

fattylateplease

Cost out equipment Set up costs And Goodwill which you can work out on your profit margin expcted. Check out what other cafes are selling for. One piece of advice, don't sell too cheaply. There is always someone willing to have ago.

askthecoffeeguy

One thing worth considering is 'recasting your financials' to factor in and make allowance for overheads or area of potential profit which are not currently accounted for. For instance, I have a manager who runs the day to day operation of my business, which means that I don't need to be there all the time If I was to sell, however, an owner operator would most likely want to work the store themselves, which would, on paper at least, greatly improve the profits, but cutting down on one full-time wage. Also, it's a bit difficult to pin down resell value for a mobile business, given that the retail value of the business is often calculated based upon proximity to the cbd, or some other desirable location And that's not necessarily the only consideration either, I think you have to value the business based on the package as a whole. Someone approached me about buying my business a year ago, and asked me how much I wanted for it, and I told them a considerable sum, which I thought was way off the page, as I wasn't that interested in selling, and they declined the offer Now that I have renovated, however, that same person has returned and wants to talk turkey (but I'm not interested in selling) - so they obviously think that the original asking price is now a ball park figure All I say is don't sell yourself short, get some advice from a pro if you can, and at the very least do some sums with your accountant All the best with the sale, Patrick

chefrob

Firstly, always engage a good Accountant and take their advice seriously. Talk to your Bank Manager, and take their advice seriously. Get to know them, they always have your best interests as a first priority, as they want your business, and they are human with a small business to run. The same as you.

GrindOnDemand

Thanks for all of the above collective wisdom. I'm starting to get the vibe from talking more to brokers (a notch up from used car dealers) that they push to list your business as low as possible for a quick sale on their books.  I'll stick to my preferred price, though on the flip side I don't want it languishing on the market for too long 'cause I'm asking too high a price tag.

askthecoffeeguy

stick to your guns mate and don't sell yourself short Unless its a matter of urgency that you sell up - I revisited the selling question a number of times over the years and my joint has pretty much doubled in value in the last 12 months! P