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natural food cafe/juicebar/market valuation?

revenue: 300K, FFE:50K, inventory: 12K been in business for 2.5 years, pretax earnings: 35-40K
what should this business cost?

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Answers (6)
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Corporate Financiers
President

Kyu Sun Kim: I am an experienced fortune 100 banker, merrill lynch, with an accounting/business background from U. of Michigan and Northwestern U. I can assist with the information you are seeking. I have first hand knowledge of actually lending to these types of businesses. Importantly, I now arrange financing for small and mid-size businesses using my prior banking contacts at several banks. I am an advisor first and intermediary second, so I can include valuation insight, capital structure, etc into my service. My service is free of charge to the borrower - my fee is paid by the lender in terms of a referral fee only if the loan closes. Todd 312-488-3505.

Aug 3, 2010
Buy-a- Company

What is the salary of the person you would replace? Add that back into the net profit. Then, add together the hours you would work to replace that person, plus the hours you would work to fulfill the duties of the owner. Let's say the net becomes $55000 (the person you replace was being paid $15k per year). Let's say the hours for you to work become 60/week. That means you've just bought yourself a job where you make $17/hr and have to work like a dog and take a lot of risk. If your skills are worth more than about $15/hour in the open market, the business is worth NOTHING on a cash flow basis, and little on an asset basis.

If your skills in the open market are only worth $10/hr, then the business has a value of about $10k. (A business owner is worth a lot more than $10/hr!)

Yes, there are A LOT more things to consider. But this is the most important test of all. If these numbers don't work, walk away.

We have businesses for sale where the buyer would make in the $300-400 per hour range. $17/hr is just buying a job, and that does not interest me at all. Unless maybe you don't need the money, and just like chatting with customers all day.

Aug 3, 2010
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thanks for the reply, all your websites are helpful!
the owner doesn't work much and it's all employee operated. I want to go in and work full time and cut out payroll a bit. so i would be working 50+ hours a week. i'm so new to this, didn't know the hours worked by the owner had an impact on valuation. the store is leased. what else do you need to know to get a vage idea of the value.

Aug 3, 2010
Julie A. Barnes, CPA
Small Business Exchange, Inc.
Travis County, TX

Hello Kyu Sun,

I agree with the previous answer - you have not provided enough information to make a market valuation. Please visit my blog: http://www.AustinBusinessesForSaleBlog.com for advice about how to evaluate a business.

Good Luck!
Thanks,
Julie A. Barnes, CPA
President, SBX, Inc.

Aug 3, 2010
Buy-a- Company

Not enough information to do a valuation. How many hours per week must the owner work to earn this $35-40k?

Aug 3, 2010
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Biz2Credit LLC
New York County, NY

Kyu,

Does the business own the place or lease it. How long is the lease for and what are escalation charges in rent every year. Biz2Credit (www.biz2credit) does a large no. of financing deals every year and also help in getting businesses valuated. Register for free and get started

Aug 3, 2010

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