Hi all,

I'm wondering if any business owners could help me a little, an opportunity has come up to purchase a cafeteria that Mrs Zhastaph has been working in for a few years.

The business is leashold with about 18years left on the lease. Gross annual turnover last year I'm led to believe was £150k {though I'm yet to confirm this} with an annual lease of £7k.

Could anyone give me an idea of how I could guage the value of the business?

 

You would need to know the annual profits over the last 5 years and are the accounts certified? are they increasing or decreasing.

Ingoing cost such as fixtures and fittings? After you have these I am sure some one on here will be able to tell you an approximate forumla to work out its worth.

 

So take is £680 per day assuming open 220 days per year. Quite a few sarnis

Perish the thought but as it's a cash business try and find out discretely if all the takings went through the books. Mrs Z might have a feel for this.

 

turnover is vanity - profit is sanity. Whats the profit margin? Why are they selling? Is anything changing or about to change that will affect the business?

Usually 10x annual profit is a rough guide, although any capital items need replacing soon etc?

 

NO NO NO....

No leasehold business is worth that much. The banks if you are looking for a loan, and any decent business valuer, will tell you 2xNet Profit.

If the owner is cooking the books and they all do in cafes and sandwich bars, then that's their tough ****, if they can't prove the profit then you don't pay. Fixture and Fittings aren't a huge problem, chances are they aren't owned anyway, and you take over the rentals for them.

The length of the lease isn't a particular concern, but check the details for renewal or rent increases.

Get a professional to comb through the books for you, I would guarantee the profit they show will be minimal, but you really should be looking at 25-35% net profit for a well run business. If its less than 20% start asking the obvious questions, like are you useless or how much is being creamed off.

If your wife is in the business, get them to open the real books if they want to prove a high turnover. She'll able to count the money in the till at the end of the day. I'll guarantee that all expenses are booked, so you can usually rely on the accounts to show the true expenditure.

If you can establish a higher turnover for the business than that shown in the books, they you have a decision, but always remember a bank will only lend on the certified accounts, so any shortfall will have to come from yourselves. On leaseholds the bank will loan upto 60% of the value tops for unsecured loans. If you secure the loan against a seperate property which has suitable equity, then you can borrow upto 100%, but I and any bank would warn you against this very strongly. I have seen the after effects of this, with family homes being taken by banks to cover unpaid loans.

All the above is just the basics, please consult a professional, your bank's small business adviser would a good place to start, for more detailed help.

 

Have they got 2 tills or 1?