What exactly do you pay for?

[ashurjames]

I am looking to purchase a coffee shop in an excellent location with a loyal base and a site for tourism. It is also located in a book store. The revenue is around 215k and the net is around 60k. This is a very small place with enough room for a sink, a large refrigerator and a small tabletop oven in the back. The owner is on lease. I know there are a many more factors in determining a price but any estimates would be great. I had a former business teacher look at it and she said she would not pay over 10k for it. Does this seem right; I was surprised at her low estimation. I was reading somewhere here that is 40-60 percent of the revenue???

Ultimately what goes into the price of a successful existing coffee shop?

 

[John P]

1) Never pay what they are asking.

2) If you are not capable of making an assessment, or making a completely dispassionate business decision, hire a business broker.

3) See #2.

Why is the owner selling?

Can you renegotiate the lease/
What are lease terms?
Can you be independent of the Book Store?

Have you seen tax returns or is this just what the owner tells you?
How many years at X revenue?
What does the owner pay him/herself ? Again, tax returns.

Used Equipment is worth .10 to .30 on the dollar

 

[nv305]

Just to scratch the surface:
Business valuation based solely on revenue is a poor metric to guide in the purchase of a business.

More importantly look at what they are netting and the liabilities.

There are many formulas to business valuation, but valuation based solely on revenue is a near guarantee of overpaying.

I agree with john P. The last 3 years of tax returns will help get a better idea of the business. Granted with everything there are exceptions, but you need to get an idea of its operations.

 

[Giovanni]

Are coffee shop evaluations similar to restaurant evaluations? Or is it different?

 

[caphesachbstar]

caphesachbstar

 

[PinkRose]

caphesachbstar

Ryan,

If you're getting ready to SPAM the Forum, you may as well say "Goodbye" now.

Rose

 

[slurp]

I have to side with John P, Never pay what they are asking.


Part of your evaluation should be his much is the equipment worth and do you get to keep it of is it the book stores.

Make sure you see tax returns for every year the pervious owner had the business.

Get the daily ledger and make sure you KNOW the real operating cost.

Find out what debt you will be acquiring including lease details. You do not want them to sell and find out you have taken a personally guaranty on a 10 year lease.

After you buy it and need a good coffee supplier message me!!!! LOL

Can you tell us the monthly gross revenue? Might help answer some questions for you.

Jamie

 

[chast]

Slurp will sell you great coffee at a great price! But remember his words...never pay what someone is asking!!! hahaha!
He has great espresso beans also.

 

[JerryB]

that's a good one

Slurp will sell you great coffee at a great price! But remember his words...never pay what someone is asking!!! hahaha! He has great espresso beans also.

Chast, That's pretty good right there now... LOL