• Is the business currently producing an income for the owner?
• Is the business seller retiring and fully funded his or her retirement plans?          • Does the sale of the business only represent a small part of the retirement portfolio?
• Is the business debt free?
• Do the financials show that the depreciation schedules are completely exhausted?

Affirmative answers to these questions tell the business buyer that the business is making enough money for their needs and you are indeed in a financial position to sell your business and sell it within the constraints of the marketplace.

Another thing that a buyer is going to want to know about is your plan for the future.  Nobody wants to get to the closing table only to have the owner decide that he or she wants to keep the business.  Equally, nobody wants to buy a business only to find out that you’re going to open a competing business.  This is why buyers like sellers that are clearly of retirement age and means.  If your business is complex or highly personal in nature, a buyer may require that you stay involved in the business for a period of time to provide a seamless transition.  If you have dreams of selling your business and moving to the Caribbean, this might be achievable. You may only have to adjust your time line a bit.

Now that you know some of the keys to attracting a buyer for your business, the next step is to find the right buyer for your business.  To do that you’re going to want someone to help you who understands business buyers.

Kendric Foultz is a certified business broker with decades of experience in deal making and working with business buyers and sellers.  Feel free to give him a call regarding your business related issues at 310-968-2369.

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What Is a Typical Restaurant Business Worth?

The worth of a restaurant is predicated on what someone will pay to buy that restaurant. As restaurants come in as many shapes and sizes as do their owners, determining worth is complex. In the most general terms, value can be established through either a multiple of annual sales or by its assets.

Restaurant Categories

Restaurants fall into two major categories: full-service and limited-service (or quick service). Then there are many subcategories such as, fine dining, casual dining, dinner house, bar & grill, deli’s, fast food, pizza take-out and the list goes on. Within those categories are independently owned, franchises, corporate owned, single location to international multi-location. Thus, “typical restaurant” cannot be rationally defined.

Profit vs. Assets

Let’s look at individually owned and operated restaurants. In the most simplistic terms… there are two ways in which a restaurant can be valued, whether they are full-service or limited-service. The first is by a multiplier of annual profits for successful operations. For a restaurant that is not making a profit, its worth is determined by its fixed assets, known as Furniture, Fixtures and Equipment (FF&E) or an asset sale. Whether or not a restaurant is making a profit, the fact is that the market is going to be the ultimate determination of what any restaurant is worth.

Multiplier for Restaurants Earning a Profit

Prior to the current recession, profitable restaurants were valued at two to three times their annual profits (or Discretionary Earnings) plus inventory. However, currently in the Los Angeles area, it appears that profitable restaurants are generally worth a 1.5 to 2 multiple of Discretionary Earnings plus inventory. The more successful the restaurant is at making a profit for the current owner, the more valuable it is for a buyer. This is typical for any business.

No Profit, No Problem

If a restaurant is not turning a profit, there still is value to a buyer. The biggest barrier to entry in the restaurant industry is the initial build-out costs. If a restaurant has a permitted and functioning hood, flood drains, three-part sink and a permitted refrigerator unit, and it’s in a good location, then the restaurant will generally sell. If it has a liquor license, the restaurant will sell for more! This is true also for a profitable restaurant also.

At Cost Equipment Value

The value or worth of a restaurant that is not making much of a profit is in its working-permitted equipment and other assets. The owner must determine the at cost value of each piece of functioning equipment and other asset. Then put it all together in a list to ascertain the current worth of the restaurant.

Enlist a Professional

Whether trying to determine the worth of your own restaurant for financing purposes or to put it on the market to sell, your opinion of value will most likely be tainted by emotions and the price you want vs. the actual market worth.  For financing intentions, talk to a commercial lender before you start the loan process.  When contemplating selling your restaurant, enlist an experienced business broker. They can help you determine market value and discreetly bring you qualified buyers, so you can your spend your time and money running your restaurant and living your life.

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Shelli comes to BizEx with direct and unique experience working with small business owners. In addition to her experience as a business broker, she has over 15 years in local government providing business assistance and consultation in the areas of permitting, financing, expansion and transitioning of ownership.  Her inside knowledge of permit processing for restaurants and liquor licenses is particularly helpful in the sale of restaurants and other businesses.

According to BizEx president, Michael Davidson, “Shelli’s diverse experience working with entrepreneurs and start-ups has enabled her to better analyze businesses for sale and guide them through the acquisition process. Her natural consultative approach makes her a great fit to our team of business sales experts.

BizEx is a Los Angeles business brokerage providing M&A quality services for small business owners.  BizEx leverages technology and expertise to simplify and expedite the buying and selling of businesses.  In the buy sell business transaction, matching the right buyer with the right business is how BizEx defines success.

Shelli Margolin’s BizEx profile can be read at http://www.bizex.net/business-broker/shelli-margolin. She can be reached by email at smargolin@bizex.net or by phone at (310) 882-2200 ext. 128.

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There are many nightmares that the wrong buyer can cause:

• Fear and concern among your employees: Buyers often stop by your business and the wrong buyer will talk to your employees, and accidentally alert them that you are selling the business. This invariably causes fear and concern from your people. Often employees start looking for a job when they know the business is for sale even though they would likely have a job with the new owner.
• The release of confidential information: The wrong buyer might talk to your competitors and perhaps even share your confidential or financial information with them.
• A very expensive waste of time: The worst of all is having your business essentially off of the market for several months while you are working with them on due diligence and find you have lost all that time and opportunity because they can’t or won’t complete the transaction.

Your plans to move to Montana or to buy that other business are shattered.

The good buyer:

• Will be asking lots of questions which are perfectly normal and necessary. You need to engage the buyer in conversation. If the buyer is not willing to answer your questions it is likely that they are not genuinely interested and/or qualified
• Will agree to sign a “Non Disclosure Agreement.”  Before you move beyond the general information about your business to the more confidential and financial information, Again, authentic buyers will be willing to do this.  Your broker will have the appropriate form
• Will respect your confidentiality
• Will be as honest with you as he expects you to be with him

At the risk of repeating myself;

• genuine interest in your business
• the skills to operate it effectively
• and the financial resources to make the purchase

These are the key characteristics of a good buyer for your business. If they do not have these traits, they may cause many problems; they are probably not your buyer and are likely to be a waste of your time.

When you do find a qualified buyer who has taken serous interest, you should be forthcoming and as helpful as you can be to help move the process forward. In most cases you will have some financial interest in his success.

A good Business Broker is experienced in handling buyers and eliminating some of these nightmares. The broker can help make a fair deal for both of you, guide you through the complicated process and help create successful transition for the buyer too run his or her new business. The best deal is one that works for everyone.

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Another very important factor of using a Business Broker is the confidentiality involved with the sale. By not using a Broker, an owner risks loosing key clients, vendors and employees. So how else can a Business Broker help?

A Business Broker’s  duties includes:

• Coming up with the appropriate value of the business, and explaining to the owner how the value was established.

• Writing a comprehensive Business Review on the company to increase the marketability of the business and to  outline the business for potential buyers.

• The Advertising and marketing of the business to attract buyers.

• To answer all questions about the business from potential buyers

• To pre-screen buyers to make sure that they are financially qualified to buy the business

• Schedule and monitor all buyer/seller meetings.

• To obtain SBA financing for qualifying businesses.

• Handle all negotiations with offers and counteroffers on the business.

• To assist with the Due Diligence process.

• To assist the buyer and seller through the close of escrow.

These are just a few of the many benefits of using a Business Broker. There are hundreds of variables in selling a business and it is the Broker’s job to pay close attention to the details to make the business transaction a smooth one.

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So we delay and explore other ways to promote our business and wait for someone else to figure out the magic recipe on how to blog time and cost effectively.

Then one day the phone rings and I spend 30 to 45 minutes talking to another first time Buyer who is interested in buying a business. Most of which is spent going over some really basic things they need to know before moving forward. BizEx, our company who specializes in brokering the sale of small and medium sized businesses, gets calls like this almost every day. So I decided to condense these conversations into writing and posted “How to Buy a Business” on my website, and for Business Sellers, How to Sell a Business just to save myself from another daily 45 minute conversation.

Then it dawned on me that this is really what blogging should be about. We should blog to save us and our client’s time and money, by sharing the information they need to fulfill their part of the business sales process. Things that they really need to know and would derive significant benefit from. It’s all about efficiency.

BizEx’s core mission is the support of Entrepreneurialism, and we have a lot to give. We use a consultative approach which requires us to learn what is most critical about every business we represent from the owners who are experts at what they do. Our Brokers specialize in a variety of industries including Retail businesses, Restaurants, Manufacturing companies, Dry Cleaners, Service related businesses like Film and Entertainment companies, Internet ecommerce businesses, and a host of other businesses that would take too much space to list. We have a wealth of information we can share for the benefit of entrepreneurs that we take for granted: Information that would promote the sales cycle and reduce the risk and anxiety associated with the purchase of a business.

Are there SEO benefits we can derive from our blogging efforts? Sure. For Google, content is king. The better the quality of information we provide, the more Google, Yahoo, MSN, Bing and other search engines are going to like us. This will equate to higher search engine rankings for our best work.

So now we’re bloggers. We plan on writing a lot more posts in the near future. We hope our fellow entrepreneurs will find them interesting enough to read and comment on.

Welcome to the Biz Blog!

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