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
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
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