Do I Need To Pay GST When I Sell My Cafe?

Do I Need To Pay GST When I Sell My Cafe?

 

 

 

Do I need to pay GST when I sell my Cafe?

 

The question about whether or not GST is payable on the sale of a cafe is something that seems to confuse many people and, it is certainly something that you should look into before you sell.

 

The short answer to this question is no (providing that you meet certain criteria outlined by the ATO).

 

The term used commonly in this ruling is “supply of a going concern” simply put this means that the business is still trading.

 

The ATO make it quite clear that if the business is being sold as a going concern then there will be no GST payable on the transaction.

 

What determines if a business is being sold as a going concern?

 

In order for the business sale to be deemed as a going concern then you must make sure that:

 

  • The business continues to operate up until and including the date of supply (settlement)
  • All of the equipment required to continue the operation is supplied as part of the sale.

 

Most cafe sales will fall into this category. An example of an exception might be a sale of fixtures and fittings in a shop which is no longer trading.

 

If you are selling your cafe as an operational business then the sale will most likely be considered “a going concern”.

 

What else needs to be considered to ensure you don’t have to pay GST on your sale?

 

In addition to making sure you are selling as a going concern you will need to make sure that both you and the person buying the business have agreed that the the business is being sold as a going concern.

 

This is generally taken care of in the contract of sale, this is quite a standard clause in most contacts and looks something like this:

 

By you both signing this contract you will have effectively agreed that the sale is as “a going concern”

 

The buyer must also be registered for GST

 

Whoever is buying your business must also be registered for GST in order for the transaction to be GST exempt.

 

If you can meet all of the criteria above then your sale will likely not include GST.

 

Where can I get more info?

 

You can read more about the ATO guidelines here

https://www.ato.gov.au/General/ATO-advice-and-guidance/In-detail/Private-rulings/Supporting-documents/GST/Sale-of-a-business-as-a-going-concern/

 

Details about the tax ruling can be found here

 

http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR20025/NAT/ATO/00001

 

Speak to your accountant and double check your personal situation and if you are still not sure then the ATO are very helpful in explaining this.

Contact the ATO directly on 13 28 61

 

I hope this helps make the understanding of GST on cafe sales a bit clearer, if you need any help or advice feel free to get in touch at any time.

How to increase Cafe Profits - Menu Costings

How to increase Cafe Profits – Menu Costings

One of the biggest factors when working out the potential sale price of your café will be the profitability.

 

Whatever stage you are at whether you are on the market now or just wanting to make plans to sell further down the track then this is a good exercise to go through.

 

Periodically costing out your individual menu items and dishes puts your mind at rest that each item that you are selling is priced right and making the correct margin.

 

The process of going through your supplier invoices will also force you to check what you are paying for key ingredients and may help you pick up on price rises that you had not been aware of.

 

Costing out each item is also a good way to check current portion sizes and make sure that staff are all aware of correct amount of each ingredient that they should be using for each dish.

 

Being aware of you highest margin lines will also help you when it comes to knowing what you can offer as a promotion or special and which dishes you and your staff should be pushing the hardest.

 

This video shows how a simple spreadsheet like this can make the process quick and painless, it will also give you a reference to check back against when you make any changes to ingredients, suppliers or prices.

 

Don’t feel you need to cost out all of your dishes at once, just pace yourself and start with the highest selling lines.

 

If you have never done this or not done it for some time then I guarantee its going to be an eye opener!

 

I hope this helps, feel free to comment below or get in touch if you need any help.

 

Coffee Roasters on The Northern Beaches

Coffee Roasters on The Northern Beaches

 

 

This page is designed to showcase local Coffee Roasters on The Northern Beaches and North Shore to help buyers and cafe owners become more aware of the options available to them.

 

I have added this page as I am often asked for suggestions and recommendations from people buying cafes as well as existing operators who may be shopping around for a new bean or better deal.

 

The roasters listed on this page are all companies that either I have worked with directly or my clients  work with currently.

 

As with anything it pays to shop around when looking for a coffee supplier and, your decision to work with a particular roaster should be based on many different criteria.

 

It is quite likely that whoever you chose are going to become one of your biggest suppliers so you need to make sure that you feel that you can work long term with the roaster and that they will support you on an ongoing basis.

 

Whilst I am a great advocate for driving margins and reducing food costs wherever possible the price per kilo should be lower down your list of questions when speaking to roasters. In my opinion it is far more important to see how you will be able to work together to grow your business, after all the better you do the better they will do.

 

Many roasters will help you out with equipment, training and branding in return for agreeing to buy from them for a certain period of time, currently this seems to range from 1-3 years.

 

One of the best things I can suggest for you to do is to go and visit all of the roasters that you are considering. Meet with the owners, sales reps and roasters and get to know the company, decide whether they are the type of company that you can see yourself working with long term.

 

Once you have visited a few roasters and of course tasted more espresso than you thought possible then you can start thinking about price.

 

In most cases the price per kilo will not vary greatly between like for like roasters, you should really be motivated by taste of the coffee and your feel for the company when making your final decision.

 

As coffee is likely to be one of the mainstays of your business and your customers will vote with their feet if it is not good enough then opting for an inferior bean to save a couple of dollars per kilo will hurt the top line more than it will help the bottom line.

 

I hope this page helps you become more aware of some of the great Coffee Roasters on The Northern Beaches that you have to choose from, if you have any questions, comments or feedback please feel free to get in touch anytime.

 

Quattro Coffee Roasters

 

Coffee Roasters on The Northern Beaches

 

 

 

 

 

 

 

2/3 Apollo St Warriewood NSW 2102

P: (02) 8919 2125

[email protected]
quattrocoffees.com

Quattro Coffee Roasters is all about the highest quality coffee sourced from around the World and Roasted in Australia. Time is spent on cupping to ensure just the right roast profile is applied so the coffee is just right for the best cup of coffee possible.

We are called Quattro because not only do we believe in the heritage of coffee we believe that there are 4 really important aspect to creating the perfect cup

– it starts with People critical at all stages

– then the Bean is selected direct from farms in the coffee belt

– the green bean is then Roasted with care and attention

– finally it’s down to the Brew, whether it’s a stove top, a Siphon or an Espresso machine get the grind right and brew away…

 

 

 

 

 9 Bar Coffee

Northern Beaches Coffee Roasters

 

 

 

 

 

 

 

 

Factory Unit 6/4 Hayes Street Balgowlah NSW 2093

P: (02) 9949 3275

M: 0414 527 663

[email protected]

www.9BarCoffee.com

 

9Bar Coffee are a service company located in Sydney’s Northern Suburbs offering service for most makes of espresso coffee machines and  coffee grinders. 9Bar also trade new and used coffee equipment Australia Wide.

Jason Marks, owner operator of 9Bar Coffee has over 20 years experience within the coffee industry.

Jason’s passion for espresso coffee has led to the creation of a premium coffee brand 9Bar Coffee and more recently the revolutionary espresso machine espressoDECK .

Jason believes that proper training, fresh coffee and well-maintained espresso equipment improves your coffee standard, he sees it as a proven way to a better cup and increased coffee sales.

Feel free call or email Jason any time to see if  he can help you with your espresso coffee needs.

 

 

 

 

 

Little Italy Coffee Roasters

 

Northern Beaches Coffee Roasters

 

 

 

 

 

 

18/8 Tilley Lane, Frenchs Forest NSW 2086

P: (02) 9453 2009

[email protected]

www.licr.com.au

 

Little Italy Coffee Roasters was established since 2007 and since then they have built up a loyal following of wholesale customers.

Brothers Adam and Guy Bortz who run the business pride themselves on offering a bespoke roasting service tailored to their clients specific needs. Little Italy have move than 15 different blends available and, they also work with their customers to develop individual roasting profiles if required.

Many of the house blends that you see in Sydney cafes packaged with the cafe’s logo come from Little Italy’s purpose built facility on The Northern Beaches. In addition to personalising the coffee packaging Adam and Guy also offer bespoke printed cups which can either be co branded or printed with just the cafe’s logo.

A wide range of coffee machines and grinders are available as part of the supply agreement and different options can be put together to suit any budget.

Complimentary barista training of all levels is also available to customers either in store or at Little Italy’s premises in Frenchs Forest.

 

 

Background Coffee

 

Background Coffee are on of our featured Northern Beaches Coffee Roasters.

 

 

 

 

 

 

 

Shop 1/ 61 Middleton Rd
Cromer, NSW 2099
Telephone: 1300 44 26 33 (24 hours)
Email: [email protected]

https://backgroundcoffee.com.au/ 

 

The Background Coffee  journey began back in 2009 when Lecio (owner) set up his first café serving speciality coffee in Manly.

 

After successfully operating the business for 12 months Lecio decided to install a 2Kg top bench roaster inside the shop. The locals loved the flavours of the high quality speciality coffee and the café became a huge success.

 

From there the demand for Lecio to supply other cafes began to grow and in 2012 Background Coffee was established. Since then the wholesale business has grown significantly and is recognised as one of the leading roasters on the Northern Beaches.

 

Background take a wholistic approach with their clients and in addition to providing barista training and equipment maintenance Lecio and his wife Patricia also use their experience of buying and selling cafes to help owners improve profitability and systems in their cafes.

How to Increase the Value of a Café

How to Increase the Value of a Café

How to Increase the Value of a Café

 

In some ways selling a café is very different to selling other businesses but there are several ways in which you can add value to a café that are pretty much the same with most businesses.

 

So how can you increase the value of your café?

 

 

Reduce the Risk

One of the factors that will reduce the value of your café and also increase the time on the market is when buyers sense that there is some risk associated with the purchase.

 

Examples of this might be a short lease, a lease with a demolition clause, declining net profit and even a poorly maintained shop.

 

It’s a really good idea to start planning the sale of your business as early as possible, ideally your business should always be ready for sale but I appreciate that this is not always practical.

 

Negotiating a new lease or arranging an assignment can be a lengthy process so, before you commit to the sale process it is a good idea to meet with your solicitor to discuss any potential issues with either option.

 

With an incoming tenant most landlords and managing agents are going to want some proof that the person looking to purchase your business is going to make a good tenant. Make sure you understand exactly what your landlord will require to assess the purchaser and then make sure that the buyer is aware of this early on.

 

Another thing that worries some people is when they think that the business is too reliant on certain employees (barista, chef etc.) or even yourself. Anything you can do to reassure purchasers that you have a café which does not rely on one or more individuals is going to reduce risk and increase the  price.

 

This could be achieved by having a documented system in place for things like recruitment, training and operations. What you really want to aim for is to show that anyone could buy the business and follow your systems to keep it running the way it is currently.

 

 

 

Improve the Bottom Line

 

It seems basic to mention this but I often see businesses that have the opportunity to increase profit without making too many changes.

It’s tough when you get into the mindset of selling to stay focused on profit but a few small changes can often have an impact on the bottom line that can help to increase the value and saleability of the café.

 

Start with your biggest impact areas:

 

  • Wage costs – How is you wage cost percentage? Are there ways that you can tighten the rosters and save a few dollars here and there?

Can you cut back on a few casual hours?

 

  • Food costs – How is you Gross Profit percentage?

 

Along with wage costs supplier expenses are another major weekly outgoing for cafes and often an area to make quick improvements.

 

How does your gross margin compare to the industry average?

 

Are you confident that you have the best deal possible from your suppliers or can you negotiate some more discount?

 

Are you monitoring the food waste and stock control?

 

Are you confident that the margins are right for all of your dishes? When was the last time you checked?

 

 

Why Bother?

 

If your café is taking $10,000 per week and the food costs are 38% a reduction of just 2% could result in an extra $10,400 in annual profit which will in turn increase the value business, lower the risk and make you a few extra $$ whilst the business is on the market.

 

 

Drive the Top Line

 

One of the key metrics that buyers look at are the weekly sales of the café, it therefore makes sense to make sure you are doing all you can to maximise these, right? You would be surprised how many businesses I see that have stopped driving sales because they are on the market or the owner is thinking of selling.

 

Many buyers will see the lack of marketing such as social media posts, new menus and promotions as a sign that the owner has given up or is too busy with other commitments.

 

When I was buying cafes I was always pleased to see a neglected Facebook page or Instagram account as this signalled that I was more likely to get a deal.

 

Try and keep running the business like you just started it, keep the social media up to date and keep working on ways to bring in more business.

 

Focus on the only three ways to grow the business:

 

  1. Get more customers (advertising, social media etc)
  2. Sell more to your customers (would you like fries with that?)
  3. Sell more often to your customers (loyalty programs etc)

 

 

If you combine the impact of improving the margins mentioned above (wages and food cost) with an improved top line the impact can be very beneficial.

The value of the café is ultimately going to be determined by the net profit so the more you can do to improve the bottom line the higher the potential value will be.

 

I hope that this has helped you learn a little more about How to Increase the Value of a Café, you might also find this 20 point checklist useful.

 

If you have any questions about how to maximise the value of your café feel free to email me [email protected]

 

 

 

 

 

 

 

Cafes For Sale in Sydney

Cafes For Sale in Sydney

GSE Business Consultants specialise in helping people to sell cafes across Sydney and throughout Australia.

 

If you are looking to buy a cafe and would like further information about any of the businesses listed please register as a buyer and complete the Confidentiality Agreement. 

 

Once logged in you will be able to view financial information that is only visible to registered users. Once you have read through this information feel free to get in touch to request a full business profile which will show the full details and address of the business.

 

Please note that we do not send these details out without having a conversation with you first, its really important that we understand exactly what it is that you are looking for.

 

Many Cafes for Sale in Sydney that we work with are not listed on the website and, by gaining a clear understanding of your needs this will enable us to offer you opportunities that you may not otherwise have found.

 

If you are considering the sale of your cafe I would love the opportunity to meet with you and discuss your options. As you are probably aware there are hundreds of cafes for sale in Sydney at anyone time.

 

To secure the right deal you need to make sure you work with a specialist and with somebody who has been where you are and knows the business inside out.

 

If you have a cafe for sale in Sydney and would like to have a chat to talk about the best way forward and,  ensure that you sell for the right price and the right time give us a call on 1300 52 21 79.

 

We also have a Private Facebook Group for anyone thinking of selling their Cafe the group is called “Exit Planning For Cafe Owners”  this group is a community of cafe owners and industry professionals who are coming together to share the best tips, tricks and insights to selling cafes and restaurants without the struggle, and without paying thousands in commission!

Find the Exit Planning Group here: https://www.facebook.com/groups/2124440880959192/?source_id=1648444935438475

 

Check Out the Top Cafes in Sydney 2018

Check out Sydney’s Top 20 Cafes of 2017

When did you last Google your Cafe?

When did you last Google your Cafe?

 
When selling your business it’s understandable and quite normal for your mindset to shift. When this happens your attention to detail can also change, managing your online and social presence can be one of the things that gets pushed to one side.
 

Even though you are considering selling or maybe already be on the market it’s really important that you stay on top of this and here is why.
 

Whenever we get a call from somebody about how they should go about selling their cafe one of the first things that we do is check out their online presence.
 
What we have noticed is that most buyers also seem to do exactly the same thing when they know a cafe is for sale. I find it quite easy to tell how somebody feels about their business just by looking at the type and frequency of posts on social media, the business information available online and recent reviews.
 

Think about it logically, if you come across a Facebook or Instagram account that has little or no recent posts, how to you think the owner is feeling about their business?
 

If you look through recent reviews and notice negative comments about service and products (especially unanswered comments) what kind if signal is this sending out about how engaged the owner is?
 

Many people trust the information delivered by Google about your business and unless you check it and update it it could be sending out the wrong message to buyers.
 

There are typically two main types of buyers that will be looking at buying your cafe and here is how they will see these problems differently.
 
 

The Buyer With No Previous Industry Experience.

 
When a buyer without any hospitality experience comes across a business with negative unanswered reviews or a lack of social media activity they tend to be concerned that the business is not a good option.

In the mind of this buyer they may be concerned about dealing with reviews about the product and service when they may not have as much experience as some of the staff that are currently employed.

This type of buyer is looking for a strong ready made business that they are going to get a good return from and will allow them to move into the hospitality industry in the smoothest way possible.

There is a strong upside to these buyers paying top dollar for a good business, demonstrating that they are taking over a well established and low risk business will lead to you getting a much better offer and quicker sale.
By maintaining a strong online presence during the sale process you are going to make your business look like a more attractive and lower risk opportunity to these buyers.
 
 

The Experienced Operator.

 
This buyer is somebody that recognises that turning an underperforming business around is going to be harder than starting from scratch.

Fighting against a negative reputation can be a lot of work so continuing to manage your online reviews and keeping your online presence in check will help to reduce the risk in the eyes of these buyers.

The experienced operator will be able to see the potential (for them) of your business in a clearer way than the person who is coming into the industry from elsewhere. With that in mind they will potentially pay a good price for your business if everything stacks up.

If these buyers find one or two things that seem like a red flag then they typically negotiate much harder than other buyers.

Because experienced operators know the work involved in running a cafe they are usually less emotionally engaged as the first timer who has always dreamt of owning a cafe. With this in mind it is crucial that you don’t give them any wriggle room to try and drop the price or walk away.

The Upside to staying on top of your online presence during the sale.

  • You increase the appeal of the cafe to both types of buyer.
  • The perceived risk to buyers is reduced.
  • You will most likely bring in extra sales by posting regularly on your social media platforms.
  • You are putting out the image that you are fully engaged and not in a hurry to sell, even if that’s not the case!
  • You are adding to the goodwill of the business and giving yourself more positives to discuss with potential buyers.
  • The process of posting more frequently on social media may even help potential buyers to become aware of your cafe for the first time.
  • If the Increased activity on social media increases business this will help the cafe present better when you have buyers looking at it.

Action Steps

  • Google your business and check the first 10 results, is everything that you find up to date?
  • Check your Google Business listing, is this information correct?
  • Try and post on your social media platforms at least once a week. (we want people to almost find it hard to believe that you are for sale).
  • Check your online reviews and respond professionally to all of them. Don’t get emotionally drawn into any negative reviews, take a deep breath or sleep on it and post a response explaining your side and apologise if you got it wrong.

 
As hard as it is, when selling your business you need to keep running it as if you’re not selling.

If you can ramp up your marketing and online activity you are going to make the business look more appealing from the outside and as mentioned above make a bit of extra cash on the way out.

I hope this encourages you to review your current online presence and to take some action that may be needed. As always if you have any questions about preparing your cafe for sale or the sale process feel free to get in touch.

How to Sell a Cafe - Changes to Lending Criteria

How to Sell a Cafe – Changes to Lending Criteria

I wanted to make you aware of some changes that we’ve noticed recently with the lending criteria and the way that banks are looking at small business finance in particular with business loans for cafes and food businesses.

These changes could affect the sale of your cafe in the later stages which is naturally something that we want to try and avoid.

With this in mind, we’re going to change the way that we’re working and the way that we are preparing our clients’ businesses for sale and I wanted to give you the heads up quickly so that you’ve got the opportunity to do the same.

We have become aware of this change through a client of ours who’s got a really good buyer lined up. This person has industry experience, they have got cash in the bank, they’ve got good equity in their property and they have made a solid offer.

On paper these guys are ticking all of the boxes, they are the kind of buyer that you wish there was more of.

The deal has gone really smoothly. up until the point that the bank have looked in more detail about the lease.

The lease is a five by five, there are four years gone, so there’s one plus five left which in terms of return on investment and for the level of the deal itself is quite reasonable.

The buyers had previously spoken with their finance broker about the lease term and he saw no problem with it at all.
When the broker submitted the paperwork to the bank however there now seems to be a shift in the way that they are now looking at the remaining term before the option.

Because there is only a relatively short period of time left on the lease before the time that option is due to be exercised the bank has now refused to lend on that business.

 

It now appears that the time frame that you need to focus on is not the just the overall term but also the period of time remaining before the option kicks in.
If you’ve got a business that you’re looking to sell and, that someone is going to need finance for, you should be aware of this and prepare accordingly.

 

By preparing thoroughly you can overcome the problem before it arises which is really what good exit planning is all about.
Hopefully that’s given you a little bit of an insight into an extra something that’s worth taking into account as you start preparing your cafe for sale and maybe that will be one thing that helps you to get your deal across the line a little quicker.

I wish you all the best with the sale of you business and please feel free to let us know if you have any questions at all.

If you have not already found our Exit Planning For Café Owners Facebook Group why not join us here

https://bit.ly/2CtobUa

 

If you would like to learn more about preparing your cafe for sale then why not book in a call with us. On this 45 min call we will cover the following with you:

• What the current market value of your cafe might be.
• The steps you need to take to prepare for the sale.
• What the market is like at the moment.
• How to make sure that your cafe stands the best possible chance of selling.

 

There is no charge for this call and there is no obligation. At the end of the call if we think that we can help you we will let you know about how we work and, if we don’t think we can help we will give you some advice about alternative options.

 

Either way you will come off of the call with a much clearer idea about the potential value of your business and of what you need to do next to achieve a sale.

 

Click on the link below to book in a time that suits you best, once you have selected a time you will be taken to a form which has around 10 questions about your business that will help us to get a better understanding and save time on the call.

 

Book your call here
https://www.gsebusinessconsultants.com.au/apply

How to Prepare a Cafe for Sale

How to Prepare a Cafe for Sale

How to Prepare a Café for Sale.

 

Running a cafe cannot really be compared to running many other businesses. From the outside it can look like a dream lifestyle business but for many people that’s not the reality. The first cafe that I setup and run for 11 years certainly didn’t improve my lifestyle in the early stages!

 

There are many things to think about when selling a cafe and this article takes a quick look at how to prepare your cafe for sale.

 

With all the blood sweat and tears that you’ve put into running your cafe during the time that you’ve owned it it’s really important that you sell for the right price and get a fair reward for all of your hard work.

 

During the time I have spent building up and selling cafes I learnt a lot of valuable lessons. I soon realised that whilst you can make a good living running a cafe the real money is made by increasing their value and selling them on.

 

It’s no secret that a business which is well prepared for sale generally sells quicker and for more money. Organisations such as the Exit Planning Institute suggest that a business with a well planned exit can be worth as much as 50-100% more than an unprepared business.

 

In my experience I have found that this exit planning process works just as well with cafes and I have developed a system that is designed specifically for food businesses.

However you decide to proceed with the sale of your business, if you do nothing else then look into how you can best prepare your cafe for sale. Even if you went through the process and increased the value by 20% imagine the difference that money could make to you.

 

 

Planning

When thinking about selling your cafe the first phase is a planning phase. During this part of the process, you will consider many different things to really make sure that now is the best time for you to sell.

 

Some of the key things for you to consider during the planning phase are:

 

Tax implications – If you have a good accountant then it’s a good idea to sit down with them and let them know of your intention to sell. Make sure that you cover your personal and business tax situation. Make sure that you’re fully aware of any capital gains tax or personal tax liabilities that may arise from selling the business.

If you don’t have a good accountant this is a great time to find one! Getting the right advice at this point can save you a lot of money further down the track.

 

Timing – Is now the best time to be selling the business?

If you are anything like me you could well have two answers in your head right now. The emotional side of you which feels the pain of the long hours, staff issues customer dramas and so on may well be saying SELL but the business side of you maybe well saying hold on.

Only you are going to know the answer to this question but, try to make the decision more with the business side of you than the emotional side. If you feel that there is an opportunity to improve the situation that you’re currently in (and therefore the performance of the business) then you should seriously consider taking action to achieve this.

If you don’t have to think about this too much then you know the time is right and you also know that you’re not going to look back in a couple years’ time and regret the decision you’ve made now.

 

Legal matters – The early stages of this process a good time to sit down with your lawyer and make them aware of your plans to sell. It’s good idea to check the current lease to make sure there is a good term remaining or at least an option to renew. As these matters generally take quite a while it’s good to get this underway early on.

 

Valuation – Do you know what the business is worth in the current market?

It’s good idea to take advice at this stage from professional broker, agent or valuer about what the business may be worth. There are many factors that go into valuing a cafe and although there may be similar business is listed for sale at a certain price range this doesn’t mean that’s what they are actually selling for. Brokers and valuers will have access to industry information including recent like for like sales, this will give you a much more accurate idea of what the business may actually sell for.

 

If you go through this part of the process and find the business is not work maybe as much as you expected then don’t despair you have plenty of options to improve this. Increasing the value of cafes is a big part of what we do so feel free to contact us or use some of the free resources on our website.

 

Once you are confident that the timing is right for you to sell then you can move on to the preparation phase.

 

 

Preparation

 

The preparation phase is definitely the part of the process which requires the most work, on the plus side it’s also the part that can add the most value to the business and really help you to sell quicker.

 

 

During our six weeks to sale program we work with our clients through a step-by-step process to get everything that a buyer will need prepared. Having all of this documentation prepared makes the whole process much smoother and less stressful for you the person selling and it also helps to reduce risk in the buyer’s mind. In my experience, reducing risk has had the biggest effect on achieving higher multiples when selling food businesses.

 

 

How to sell your cafe

 

Imagine a buyer looking at your cafe at the same time as another cafe that makes about the same profit, the same turnover and is in a similar location. If you’re able to present all the information that the buyer needs (as well as things they may not ask for) you are sending a clear message that the business is well organised, structured and systemised. This will help to build the buyer’s confidence that the business will continue to perform well even after you’ve gone and therefore reduce risk in their mind.

 

If you’re having two scrabble around and put information together after somebody has shown interest it’s going to tell them that the business is a bit unorganised.

 

Once a buyer senses risk of any sort one of two things usually happens, firstly they may begin to question things more which can cause the whole process to slow down or even fall through. Secondly the buyer will start to see an opportunity to negotiate on the price, it’s our job to make sure that neither of these things happen.

 

As mentioned previously the preparation phase involves a lot of different pieces of information being drawn together, I won’t go through them all in this article but some of the important ones are as follows.

 

Documentation – As mentioned previously, having all your documentation at hand is going to reassure any buyer that the business is well organised. Ideally you want to keep all your documents relating to the sale in one place where it’s easy to share, this could be something like Google docs Microsoft OneDrive or Dropbox.

Some of the key documents that we provide our clients with templates for include, inventory, stock take, operations manuals and policies manuals etc. Other documents that can be stored on the same drive are things like a copy of the lease, supplier agreements and sample invoices etc.

 

Staff information – Again, this information can be stored on the shared Drive and the templates that we set up include things like staff contracts, job descriptions and rosters. I’ve always also included a short bio about each staff member as well which helps the buyer get a better idea of the team and may help to reduce risk. A lot of buyers will worry about staff leaving and anything you can do to help prevent that worry will be a benefit.

 

Financials – If you talked to your accountant during the planning stage then hopefully they will have given you the heads up about what needs to be done to get the books in order for the sale.

If there is one area where the sale is going to slow down, stall or fall through then it is if the buyer’s accountant or advisor find something in the figures that they don’t like. The more work you can do in the front end to make sure the books are all straight and that the figures add up in relation to the valuation the better.

It’s good idea to have up-to-date profit and loss statements, balance sheet and tax returns (you may be asked for up to 3 years) and I would suggest putting all of this information on the shared drive in a folder called “financials “.

 

Business as usual – This part covers a lot of different areas but is basically making sure that from the outside there is no sign of weakness and the business looks to be running as it always has.

When I’ve looked at buying businesses if I noticed things like negative reviews, lack of activity on social media, outdated website etc I generally saw that as a sign that I could negotiate a lower price. To a buyer these signals suggest that you might be a bit over it or have lost interest and may therefore be willing to accept a lower price.

 

As hard as it is at times, try and keep the momentum up during the sale process and the preparation phase and run the business as if it’s not for sale.

This is by no means all that you need to do during the preparation phase but should give you a good starting point.

Once you feel that you are fully prepared it’s time to move on to the Decide Phase.

 

 

The Deciding Phase

The deciding phase – In the final phase you have a couple of big decisions to make.

 

The first of these decisions is whether or not you still wish to go ahead with the sale of the business.

This might seem like an odd thing to say at this stage but I have found that a lot of people I work with decide to keep their business after they’ve been through this process.

 

By spending time organising systems, processes, documentation and so on the business becomes easier to run, some of the stresses are gone and there is clearer direction. I’ve found myself in this situation, it’s almost like you press the reset button and start it all over again.

If you find that you now want to keep the business a bit longer then make sure you keep updating all the information you put into the shared drive. By doing this your business will be ready to sell at any point and will be worth more than competing businesses and be much easier to sell.

 

 

How to sell your cafe

 

 

If you’re still committed to the sale process then the next decision is whether you will sell the business yourself or sell through a broker.

 

If you going to sell through a broker it’s a good idea to bring in at least three different ones to get a feel for how you might work together. It’s also good way to cross check the valuation of the business and to get feedback on the current market, there could be external factors that your unaware of that may influence the price.

 

Naturally the commission charged on the sale is an important factor, I have been amazed over the years how much this fluctuates from one broker to another.

 

Advertising costs are also something else which seems to vary quite a lot, on the last business I sold I had advertising quotes from brokers ranging from $900 to $3,000. The interesting thing I found with this was that all the brokers also told me what a strong database they had!

 

I would expect to pay cost for advertising and no more, check with the brokers where they will be advertising and ask for a breakdown of costs for each area.

 

 

If you decide to sell the business yourself then you need to consider writing your advertising copy and information memorandum and think about how best to filter enquiries.

 

One of most time-consuming areas of selling a business can be dealing with enquiries from people who are not serious buyers. One of the things that we do on the six weeks to sale program is prepare non-disclosure and confidentiality agreements that can be sent out in the early stages to help filter out any time wasters. These documents also cover you legally should any confidential information be disclosed.

 

At the same time the confidentiality agreement is sent out we generally ask buyers to complete a ten question survey that gives us much better idea about their current situation. For example, are they currently operating another business? Do they require finance? What time scale are they hoping to work too? and so on.

 

This is a very useful process firstly to qualified buyers and secondly if you have more than one enquiry it gives you some information on each buyer but you can use to decide who might be the better option for the business. You can easily create these email questionnaires for free in applications like Typeform.

 

Once you have a buyer interested in the business with the document system you have organised it will be easy for you to share the required information to allow the buyer to carry out their due diligence.

 

When you do receive an offer on the business you will need to draft a heads of agreement document that instructs the legal representatives for each side about the transaction.

As the deal progresses you will then need to co-ordinate with your lawyer and potentially the managing agent for the landlord as well.

 

When dealing with a business sale yourself as well as running the business this part can be challenging at times. With your lawyer, the buyer’s lawyer and the lawyer for the landlord involved in the transaction without some gentle encouragement the process can take a very long time. This is where brokers earn a fair bit of their commission and it can help the transaction to move quicker.

 

As with the previous section this really is an overview of the process and there is more involved which cannot all be covered in this document.

 

Our website contains a lot of useful information for people selling cafes and I am always happy to answer any questions that I can by email.

 

Learn more about how to sell your cafe without paying commission here https://www.gsebusinessconsultants.com.au/sell-my-cafe

Is Your Cafe Worth What You Want For It?

Is Your Cafe Worth What You Want For It?

 

After an appraisal call with a client earlier today I wanted to quickly post this to give you some help around the thought process of valuing your business.

As I have mentioned in previous posts many people that we work with are concerned about keeping the sale of their business confidential.

One of the biggest factors in selling without too many people finding out is make sure that your business is not on the market for any longer than it needs to be, price plays a big part in this.

Sounds obvious right?

Pricing the business correctly is something that we find people often struggle with.

When you get this wrong there are several ways that this can hurt you and, all of them cost you financially.

Basing the valuation of your business on what you paid for it is a flawed method and here are a couple of examples of why that is:

The cafe owner that I spoke to earlier today had owned her business for three years.

During the time that she had owned the business the sales, profits and expenses had all increased more or less in line with each other.

With that in mind it’s understandable that she thought the business might be worth a similar amount as to what she paid for it but here is what was overlooked.

The current market is very different to when she bought the business, three years ago there are differences in buyer confidence, competition, number of businesses on the market and so on.

The lease had not been renewed meaning that it was less than half the length of the original term and only had two years left.

The suburb had seen about four new cafes open and, whilst this business is holding its own the lack of redecoration during the time of ownership meant that the shop is looking a bit tired in comparison to some of its newer rivals.

When we discussed the figure that they had been trying to sell for I was interested to know how that number had been worked out.

The asking price had been based on what they needed to achieve for the business as well as what they had originally paid.

Both of these reasons are completely valid and can be achieved

BUT….

You need to work backwards and make sure that the numbers stack up, if they don’t then you need to do some work on them before you list the business.

By starting with the end in mind (like any good plan) you can work towards getting the figure that you want or need for the business.

The process of thorough preparation will also make sure that you have a clear idea of the current valuation and, if there are issues holding the value back this process will highlight them.

IT IS POSSIBLE to get what you what for the business if you plan and prepare properly.

Many people think that in order to get a quick sale you need to get the business advertised as quickly as possible and start generating inquiries, this could not be further from the truth.

Think about the sale in a similar way to setting up your cafe, how good would your lunch service be if you just rocked up and opened the doors at 11.45am with no prep done?

I am sure we have all had days where we have been smashed and underprepared, I have one particular Mothers Day that has scarred me for life! Not a good feeling right?

Try and look at the sale of your cafe in the same way, the better prepared you are the smoother the sale will go and the chances of you getting the return that you want increase significantly.

We have created a brand new Facebook community for cafe owners and industry professionals to share the best tips, tricks and insights to selling cafes.

Get exclusive access to live Q&As, actionable advice, and an amazing community of like-minded hospitality professionals.

I would love you to join our growing community and if this sounds like something that might interest you please click here

The group is all about helping cafe owners to sell in less time and for more money, watch this space for more tips, advice and battle stories about selling cafes.

We would welcome your comments, feedback and suggestions about what you would like help with so feel free to post in the comments section below.

If you would like to learn more about preparing your cafe for sale then why not book in a call with us. On this 45 min call we will cover the following with you:

  • What the current market value of your cafe might be.
  • The steps you need to take to prepare for the sale.
  • What the market is like at the moment.
  • How to make sure that your cafe stands the best possible chance of selling.

There is no charge for this call and there is no obligation. At the end of the call if we think that we can help you we will let you know about how we work and, if we don’t think we can help we will give you some advice about alternative options.

Either way you will come off of the call with a much clearer idea about the potential value of your business and of what you need to do next to achieve a sale.

Click on the link below to book in a time that suits you best, once you have selected a time you will be taken to a form which has around 10 questions about your business that will help us to get a better understanding and save time on the call.

Book your call here

Cafes For Sale on the Northern Beaches Sydney

Cafes For Sale on the Northern Beaches Sydney

Cafes For Sale on The Northern Beaches Sydney

 

View more cafes for sale in Sydney Here

 

 

 

GSE specialise in helping cafe owners to sell their business at the right time and at the right price.

This page shows some of the Cafes For Sale on The Northern Beaches Sydney that we currently have listed. We also work with many cafe owners that prefer not to list their business on the internet so, if you are looking to buy a cafe in Sydney make sure that you register as a buyer with us.

Once registered you will be able to login to our website and view financial information about the businesses that we have listed, you will also receive advance notification about new businesses before they are officially listed.

 

 

 

Read news about Northern Beaches Cafes Here