Business Valuation Blog | Understanding Buying / Selling a Company

What's different when you're valuing a restaurant?

Posted by Business Valuation Specialists LLC on May 31, 2018 1:25:03 PM

A business valuation can be a complicated process, but even when you understand the entire process, there is a wide range of differences depending on the particular industry your business falls into. This is especially true when valuing a restaurant, which can have many differences in even very similar enterprises. Here's a quick look at how restaurant valuation is different than other types of businesses.

 

What's different when you're valuing a restaurant?

Restaurants have a wide range of different factors that can impact its value. Is it a diner, a fine-dining establishment or a themed eatery? Where is it located and what kind of clientele does it draw? Have you developed a strong following because of a specific type of cuisine, fresh approach or community outreach? All these factors can impact your restaurant's value.

Most restaurants have an assortment of fairly standard pieces: tables, chairs, dishes, trays, ovens, stovetops, refrigerators, chopping blocks, sinks and decor. Though the quality and number of these items will vary based on the size of the business and the type of cuisine being served there, the value of this equipment is pretty close to even across the board. Where restaurants really tend to have different values is when community goodwill and average income are brought into account.

A small mom and pop diner may serve a couple dozen groups over the course of the day, not turning over a great profit but not having much in terms of expenses either. A specialty restaurant featuring locally-produced foods and specialty fare in a vacation area may have constant wait times during the tourist season, but just a few customers a day during the rest of the year. A high-end fine cuisine restaurant may draw plenty of attention with their specialty chef, but may lose income and business when that chef leaves the business for other opportunities.

Does your restaurant always support whatever youth sports, academic group or arts organization needs help at the time? That sponsorship often leads to additional income from family members of students or arts patrons which would otherwise be unavailable. Is it popular because Sal has been slinging top-notch burgers for the past 20 years and customers have come to expect that familiarity from the cook? If so, changing owners may cause a drop in business as customers realize that their familiar friend is no longer running the show.

These types of added business can be hard to value, but are an essential part of the business' bottom line. This is one of the many reasons a restaurant owner should always use a certified business valuation specialist when trying to determine the value of their business. A certified appraiser has the knowledge and experience to properly value a restaurant business, with all of its unique facets and factors that can impact its value. They know how to determine the value of goodwill and community support, as well as value of every specific facet of your restaurant's assets and income.

By understanding the process of valuing a restaurant, you can gain a better grasp of how different decisions you make can impact your business' bottom line. Take time to carefully go over your valuation report, and make sure to ask about any calculations you're not certain about so that you can get every possible dollar of profit and productivity out of your equity.

Tags: valuing a restaurant

Ready to sell? How valuing a restaurant gets you the right price

Posted by Business Valuation Specialists LLC on Jun 7, 2017 3:02:00 PM

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When you're in the restaurant business, it can seem as though your hard work doesn't always amount to much. But how much should you get for your hard work when it's time to sell your business? One option that will provide you with both a solid price and insights into how to improve that figure can be found when valuing a restaurant. Here's how it helps you get ahead.

Ready to sell? How valuing a restaurant gets you the right price

When you're trying to determine a fair selling price for your restaurant, it can be really tough. Should you base your price on a restaurant that just sold in a neighboring town? Should you try to talk to a real estate agent to figure out a price? Should you just add up the assets you have and ask for that as your asking price? Unfortunately, these options usually won't provide you with an accurate selling price for your company. Why not? Let's take a look.

Basing your selling price on a restaurant in a neighboring town assumes several thing. First, it assumes that your business is of comparable value to that business, while you may have very different assets. Secondly, restaurant value can often be affected by location, so that location may be worse or better than yours. Thirdly, if you have a better or worse reputation in the community, that will affect the overall value of your business. Lastly, you have no idea how that restaurant came up with or negotiated their selling price.

Using the selling price recommended by a real estate agent has issues as well. A real estate agent is typically paid based on a commission, which means they get a percentage of the final sale. That means they'll want to sell your business for as much money as they can manage, no matter how long it takes to make it happen. What if you want to just get out of the business and move on to your next venture or retirement? You don't want to wait on the real estate agent's pocketbook to make that happen.

Adding up the assets of your business won't give you an accurate figure either. Why? It doesn't include the value of your business' location, goodwill in the community, market share or similar aspects that often makes your business worth much more than simply the sum of its parts. A good business appraiser can look at your business from the smallest aspect of operations to the grand picture in the community at large to develop a price that fits not only your assets, reputation and hard work, but also the current market conditions and how quickly you'd like to sell.

When you get a quality business appraisal, you can get a lot more than simply valuing a restaurant, you can learn how to build on your investment to get the best possible outcome. But don't forget to use a certified business valuation specialist for the process.

Tags: valuing a restaurant, restaurant valuations

Valuing a Restaurant to Determine Your Direction

Posted by Business Valuation Specialists LLC on Mar 1, 2017 10:58:00 AM

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Whether your restaurant isn't doing as well as it used to or if you just want to take it in a new direction and don't know what will work, one way to gain those insights is by having a business appraisal performed. But what kind of information can you discover in the valuation of a company? What's the best way to have a company valuation performed on your restaurant? In this post, we'll discuss the ins and outs of business valuations as they pertain to the eatery industry and how you can use the information you gain to your business' benefit.

Valuing a Restaurant to Determine Your Direction

It could be that your business just isn't doing as well and you don't know why. Maybe you're considering changing to a different cuisine or theme and aren't certain exactly which concept would do best in your area. Perhaps you're getting ready to sell and aren't sure how to market your business' goodwill and reputation in the community. Whatever your situation is, getting a business appraisal is a great way to get a professional opinion about what you can expect in your restaurant.

A business appraisal specialist is trained to look at a variety of aspects in your business. If you've been losing business, is it because of competition or because your business has lost it's newness? A restaurant appraiser knows how to look at your financials to figure out which issue is causing the drain on your business financials. Would a change in theme or cuisine help boost sales or chase away your regular clientele? Instead of simply trying something and finding out later how badly it can impact your business, a business valuation specialist can help you think about specifics ahead of time. 

When it's time to sell your business, what is it really worth to a buyer? If the locals are coming in because it's just the convenient place to go, a buyer may be very interested in purchasing your establishment. But if it's because you've spent years developing the perfect cuisine for the area and a strong reputation in the community, potential buyers may need the reassurance that you'll help with the transition to new ownership. Otherwise they may have concerns about whether the business will remain solvent.

By getting a business appraisal on your restaurant, you'll have access to the best possible insights into what will and won't work to get your business back in shape. If you're not currently working with a certified appraisal specialist for your business appraisals, you could be missing out on the quality insights such an appraisal can bring to your business

Tags: valuing a restaurant, small business valuation