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]

 

 

 

 

 

 

 

Business Broker Wagga

Business Broker Wagga

 

My name is Robert Illsley and I am a licensed business broker in Wagga Wagga NSW. I am originally from Somerset in the South West of England and in 2000 I married a Wagga girl and moved to Australia in 2007. In 2014 I opened my own café which I poured my heart and soul into and was able to establish it as one of the towns most prestigious and popular locations for coffee and food. When we decided to sell nearly 4 years later I realised how difficult it was to sell a business, although I felt that I was capable of handling the sale myself, I needed help. I wasn’t sure exactly how to evaluate my business, how to properly and discreetly market it and I found the process quite daunting.

 

After a number of bad experiences with agents I discovered GSE Business Consultants and it was at this point that I realised how valuable a good business broker can be. The right advice and preparation allowed me to properly prepare my business for market. After using the services of GSE I quickly found a potential buyer and found that I was in a competitive situation with another café. The buyer was in advanced negotiations with another café. Because of the way I was able to present my business the buyer felt more comfortable buying my business even though my competition had a bigger business with higher turnover.

 

I think that at this point a lightbulb went on in my head and I made the decision that I wanted to become a business broker myself. I approached the owner of GSE and thankfully he was looking to expand his business and when I sold Jardine’s I qualified as a business broker and setup my own business operating as a franchisee of GSE Business consultants.

 

Put simply a good business broker can be the difference between selling your business and having it languish on the market. Many brokers are happy to list a business without doing the proper preparation and do not always increase your chance of selling in a timely manner. In my role as a business broker I intend to bring the same level of service, quality advice and ethical standard as when I owned my café.

 

The difference between working with us at GSE compared with other brokers is clear. We only work with small food businesses, all the brokers at GSE have owned, operated and sold food businesses of our own and we understand the unique challenges that this industry faces. My regional knowledge as well as my background in hospitality means that I can help you to add significant value to your business during the sale process.

 

Our 6 steps to sale product allows us to work with small businesses to prepare and sell in a timely manner at a price that other brokers simply can’t match. I will always give you honest advice and work in your best interests to achieve the sale of your business. If you are considering an exit strategy then please get in touch with me as soon as possible on 0415 243750.

How to check the DA of a cafe

How to check the DA of a cafe

I quite often get asked how to check the DA of a cafe so this quick post gives an idea of how you can do this.

 

When selling your cafe it is quite likely that the buyer will ask to see a copy of the DA for the business.

 

If you do not have this to hand it’s a good idea to request a copy as soon as you can as the process can take up to four weeks.

 

Most council websites will however give you the ability to check the current DA details online.

 

In the example below that is on the Sutherland Shire Council website the DA tracker allows you to search back as far as 2006 to obtain immediate results.

 

How to check the DA of a cafe

 

 

In this case if the DA of the business was granted prior to 2006 you would need to fill out what is called a GIPA (government information public access) application form. Many councils suggest that this can take up to 28 days so the earlier you can get the application in the better.

 

You might find when checking the DA that the hours that you currently operate are considerably less than those allowed and this can be a good selling point showing buyers that they may be able to open earlier in the morning or later into the evening.

 

 

 

 

 

How to check the DA of a cafe 6/11/2017

Cafe Business Plan

Cafe Business Plan

 

Having a Cafe Business Plan is important for several different reasons.

 

Plan your goals and track them.

A well written Cafe business Plan will allow you to set your goals and check that the business is moving in the right direction at regular intervals. Writing the business plan is quite easy and, when done before the business is purchased or started it can help you to understand things like what level of business you will need to generate to meet your income goals and what kind of actions will need to be taken.

 

Help Raise Finance

Your Cafe Business Plan may also be used to  help you to raise finance for either the initial purchase or a renovation or equipment purchase. Further down the track you may also use your plan to help you raise finance to expand your business and open a second site. If you build up a good track record with your lender and demonstrate that you are hitting your goals and that you have a clear plan of where you are heading then raising finance becomes much easier.

 

Get the purchase over the line quicker.

When buying an existing business the purchase will always be subject to the landlord granting approval for the lease to be assigned from the seller to yourself. This is an area of the sale transaction that can significantly slow the process down and in some cases it is where the process ends.

Having a well thought out Cafe Business Plan that you can submit as part of your application to the landlord will increase your chances of getting approval granted quickly. Many private landlords may not ask for this but if you are considering the purchase of a business managed by an agent or a business in a shopping centre then you will have to submit a business plan along with the retail lease application.

 

Key Takeaways

Preparing a business plan for your cafe is going to not only help you in the early stages with finance and lease assignment. Having a well written plan will act as a guide as to how your business is performing and can be a great accountability tool.

One of the most important things about having a business plan is keeping it alive, don’t just use it to get you across the line, use it to make sure it helps you reach the dreams that you have as you start this new chapter of your life.

 

Next Steps

One of the easiest ways we have found to create a complete Cafe Business Plan quickly and easily is by using Live Plan Software.

LivePlan is the best choice for writing start-up, investment, growth and cafe marketing plans, because it provides guidance options and research resources for the most accurate industry, market, and financial data

The goals you’ve established for your new or growing cafe will determine what type of business plan you need.  If you’re not sure what type of plan is best, this program assists you in determining whether you need a funding or an investment plan and then provides templates for each scenario.

Visit Live Plan Website

 

 

 

Cafe Business Plan

How I Sold My Last Shop in Six Weeks and Saved $17,484.50

How I Sold My Last Shop in Six Weeks and Saved $17,484.50

 

 

How long will it take to sell my business?

 

This this is a question that I get asked a lot and I almost feel as if I am dodging the answer when I tell people it depends them, but it is true.

 

Whilst there are certain things that need to be done to get the business ready for sale a big deciding factor as to whether your business will sell or not, and how long it will take will be determined by how you price and market the business.

 

In this email I wanted to quickly walk you through how I sold my last shop in six weeks, that is from the day it went on the internet to the day the sale completed.

 

The shop in question was bought with the full intention of getting in quick, turning it around and selling it on. This is something that I had spent most of my working life doing and so I went in with confidence that in 12-18 months I could more than triple the value. I had my eldest son and my wife beside me, what could possibly go wrong?

 

Whilst my previous experience has taught me a lot about picking the right business, market value, potential profit and future sale prices etc. one thing I forgot to account for was how much you can get drawn into a food business.

 

Let’s just say my plans of just overseeing operations and not really getting hands on didn’t quite work out!

 

It soon became apparent that the changes we were making were going down well and the shop became very busy very quickly, a little too busy on a couple of occasions.

 

I think if we had gone into the business with a longer-term mindset this would have been the point that we would have taken on a manager and probably a couple of other staff to ease the burden.

 

Given that we were purely in for the short term I was keen to keep the costs to a minimum and as I am sure you know, that means doing a lot of the work yourself.

 

After a few months of juggling this business as well as the shop I began to feel the strain, I felt that my clients were not really getting the service they deserved in this business and I could not commit fully to the shop.

 

My wife and I had always felt that we had one more shop in us but we were now beginning to doubt that!

This was my son’s first venture into the hospitality business and I think he soon worked out that he preferred being on the customer side of the counter.

 

Needless to say, we made the decision to cut the plan short and put the shop up for sale.

 

Although I knew that we would not reap the rewards that I had projected on the 24-36 month plan I knew that we could still clear a good profit.

 

As I had gone into this shop with the plan to sell quickly a lot of the groundwork for getting the business ready for sale had already been done. All the preparation that I cover in my Six Weeks to Sale course was checked off so it was just about pricing, marketing, listing and selling.

 

Pricing – Be Realistic

 

Setting the price for a business is not an exact science, there are many ways to set the price of a café but the general rule of thumb is 1 to 3 times net profit or return to owner.

 

For example if the business was making $100K net profit it might be priced between $100K and $300K.

 

Naturally there is a lot of difference between $100K and $300K so considering what gets you closer towards the $300K is worthwhile. I have covered this in other posts so won’t go into detail now, but it is basically about reducing risk for the buyer.

 

With my shop I knew that I was at the higher end of the multiple as I had reduced a lot of the risk so I felt confident to price it accordingly.

 

When I went through the process of calculating the sale price I thought about the difference between the asking price and what I paid to calculate the profit on the sale but I did not price the business according to the level of profit I was after.

 

I have had many conversations with café owners who base there expected sale price on what they need or on what they paid for the business originally as opposed to what the market value might be.

Unfortunately, it just does not work this way and if you market the business with this method you a setting yourself up for disappointment.

 

When I priced the business I looked at the offer from the buyer’s side. As I have bought and sold quite a few shops and looked buying a lot more I feel I have a good grasp of what buyers are looking for.

 

In most cases it all comes back to the numbers, I was very careful to make sure that the sale priced matched up with numbers that I could easily back up.

 

Although I had invested time and effort into improving the appearance of the shop, replaced equipment, changed the menu etc I knew I would only get a sale if the price related to the income the buyer could expect.

 

Another thing that always seems to come up when you look at buying a business is the word “POTENTIAL”

 

Seriously, if I had a dollar for every time I had heard that! Don’t try and sell potential, very few people, if any will pay for potential in the hospitality trade.

 

Once I had worked out what return a buyer would get from buying my shop and calculated where the business sat on the multiple scale I was confident that I had priced the business correctly.

 

It was now time to market the business…

 

 

Marketing the Business

 

 

As I was time poor I fully intended to sell this shop through a broker, I already knew how the process worked and I just wanted some help.

 

I called four brokers, two that were referred to as “experts” only to find that the level of service I had expected was overstated.

 

One broker said he didn’t want to visit the shop and would list the business once I sent him a cheque for $900.

 

Two brokers never returned my calls and the fourth one who I had a good conversation with emailed me instead of somebody else (by mistake) with confidential information attached.

 

The minimum commission was quite consistent between the two brokers I spoke to, $15K – $18K and whilst I don’t have a problem paying commission I do have a certain level of expectation if I am paying out that sort of sum.

 

I had sold seven of my own shops previously so I did know what to expect and how the process worked. Although I did not really want the extra work I felt I would rather take it on than pay commission to somebody I felt that did not deserve it.

 

That weekend I went about considering where to advertise the shop. I researched all the top-ranking business for sale websites and decided on two:

 

https://www.seekbusiness.com.au/  and https://www.businessforsale.com.au/

 

From memory Businesses for Sale was a lot cheaper than SEEK and although it looks a lot more dated it was easier to list on.

 

Interestingly the results from enquiries were also better through Business for Sale with the advert getting 5 enquiries on the first weekend from that one site.

 

I had a system in place to filter out anybody that might not be 100% serious and I quickly took the five enquiries down to two.

 

Of the two I managed to set up a meeting with one couple on the Wednesday of that week and I took them through the numbers of the business. After visiting the shop at the weekend they seemed quite keen and I knew that if I could show them that the numbers all added up w would be able to agree a deal.

After chatting for about an hour the couple submitted an offer which was $20k below the asking price which I rejected, this was then countered by another offer which was the exact figure I wanted to achieve. We shook hands and agreed to push the transaction through as quickly as possible.

 

Next Steps

 

With an interested buyer I knew that it was in my best interest to get the ball rolling as quickly as possible.

I had already had a conversation with my solicitor about my intentions to sell the shop and so I called him on the way back from the meeting.

 

With the instruction received and the relevant information about the buyer and the deal I knew we could get a contract out quickly and sure enough we had it signed within a week.

 

The key points in this stage are to make sure you have discussed you plans with your solicitor (and accountant) before you put the business on the market. This way you will identify any potential roadblocks before you spend time generating buyer inquiries.

I have found that buyers can lose interest quite quickly if there is a time delay or situations that arise which could have been prevented.

The more that you can do in the front end to prevent this the better.

 

The Conclusion

 

This deal went well, six weeks from placing the advert the contacts were exchanged and the sale completed.

I am not naïve enough to appreciate that this was an exceptionally good result but I am also a big believer that you create your own luck.

 

By going into the sale well prepared, pricing the business correctly, and marketing the business well the odds were stacked in my favour.

 

Whether you are going to sell the business yourself or through a broker there are things in your control that will help you to sell quicker and for the right price.

 

Selling through a broker will help you save time on the listing and enquiry process but the preparation side of things will need to be completed by you. In my experience, it is far better to get this done in advance so that you can answer any queries quickly and convincingly to avoid losing a buyer.

 

I hope that this has been of some use to you and wish you all the best with the sale of your café.

 

If you need any help feel free to Book in a Time for A Confidential Chat About Your Options.

Coffee shops for sale Sydney

Coffee shops for sale Sydney

GSE Business Consultants specialise in selling cafes and we have many Coffee shops for sale in Sydney.

 

You will find a selection of some of these businesses on this page but we always have others that are not listed on the internet. If you you like details of all of the current coffee shop listings that we have then register as a buyer with us (click the buyers link above)

 

and complete the online confidentiality agreement and we will send you out some detailed information about opportunities available.

 

As well as Coffee shops for sale in Sydney we also work with cafes, restaurants and takeaways, browse all of our cafes for sale.

 

If you have a Coffee shop for sale  or if you are considering selling we would love to help you, find out more about our services.

 

 

Coffee shops for sale Sydney