Worthy Eats: The Value of a Restaurant
As a restaurateur, you might realize at some point that you cannot continue to run your business. Perhaps you are retiring, or you feel that there are other business opportunities to pursue. You might be considering selling your current business to fund your future endeavors. However, before you get to finding buyers for your business, you should ask yourself, “What is my restaurant worth? ”
Restaurant valuation is a lot harder than it seems. There is no guaranteed, sure-fire way to precisely appraise a restaurant, even if you try to base it on its financial success. There are a lot of things to consider, and you will need to keep them all in mind to come up with a realistic valuation of your business.
The fastest way to get a fair appraisal is to hire a professional like Restaurants for Sale Edmonton to do it. However, owners should know how their restaurants are graded. By learning how to approximate the value of your own establishment, you can easily track the health of your business, or find out how restaurant brokers come up with a reasonable price for it, among other things. Here are a few things that determine a rough estimate of your restaurant’s sales value:
Prepare an Income Statement
Naturally, buyers will only want to purchase restaurants that are both popular and profitable. Normally buyers can track how lucrative a restaurant is by examining its revenue. As a seller, you should be willing to prepare an income statement for prospective buyers to refer to before closing the deal.
Approximate the Value of Your Assets
By considering each asset your restaurant possesses–the property itself, plus equipment, inventory, and other supplies–you can more or less come up with a ballpark estimate of your business’ worth. Documenting your daily operations will come in handy in coming up with the figures for this approximation.
Determine the Business’ Profitability
Restaurant brokers use two methods to produce an estimation of your business’ profitability: either apply a multiple to your business’ discretionary cash flow or apply a percentage to the annual gross revenue of your restaurant.
Discretionary cash refers to the owner’s total benefit from owning the business; this also includes personal expenses the owner runs through the business that are not a part of the restaurant. Of the two, this is the more accurate measure of determining a restaurant’s value because it gauges how much a buyer stands to earn once he or she purchases the business.
The other method of determining a restaurant’s value via annual gross revenue is a little less accurate. This computation assumes that the business is consistently earning the average bottom line profit, and such assumptions are not always accurate.
Hire a Professional
In order to answer your question, “What is the value of my restaurant? ” you need to enlist the expertise of a real estate professional. Restaurants for Sale Edmonton can appraise any restaurant in the locale and determine its value so that you can make an informed decision on your sale or purchase of a restaurant.