How to Sell a Restaurant Fast

As with most businesses, price is a prime factor in selling a restaurant fast. However, restaurants can sell for their asset value alone, such as furniture, fixtures and equipment (FF&E) along with their permits and licenses.  Knowing how to value those assets is the key to selling a restaurant quickly. Price is not the only [...]

As with most businesses, price is a prime factor in selling a restaurant fast. However, restaurants can sell for their asset value alone, such as furniture, fixtures and equipment (FF&E) along with their permits and licenses.  Knowing how to value those assets is the key to selling a restaurant quickly.

Price is not the only determining factor in procuring a quick sale.  You need to get into the “buyer mindset” and make sure a buyer sees the same value in your restaurant as you do.  Here are some no nonsense step to getting your restaurant sold fast:

1.       Price – Price – Price!!!

Just like anything else…   the better the deal, the faster someone will snatch it up.  Some factors that go into determining the price are location, FF&E replacement values, permits and licenses.

2.       Make it easy to understand -

If you want to sell your restaurant above and beyond the asset value, make sure your books and records are in order.  If someone can’t understand your books and records, they generally aren’t going to pay much for your restaurant.

  • Put together a list of inventory and other assets such as furniture, fixtures and equipment (FF&E) and list their replacement costs.
  • Make sure you have straight forward profit and loss statements for the last three years
  • Find a way to prove cash sales (start keeping a handwritten record on the side, if necessary)
  • List out your cost of goods sold (COGS)and monthly food waste costs, if possible
  • Have any employment contracts organized and ready for review
  • List out any debt that will need to be dealt with in the sale

3.       Write up your story-

How and why you opened this restaurant, what are the opportunities and the obstacles and why you are selling.  Also, list how you advertise to customers.  Quote some reviews, etc.

4.       Clean it up- 

Make sure chairs, tables and décor are in good shape. The kitchen and bathrooms should be spotless and free of clutter and all equipment should be operational.  Your staff should be friendly & knowledgeable and the general environment should be pleasant to customers.   Also note that messy inventories tend to scare away buyers.

5.       Review your lease- (unless you are selling property with the business)

Make note of your expiration date, what extension option you have and any transfer clauses.  A buyer will either assume your current lease or negotiate a new one depending on the factors within your lease agreement.

6.       Get a restaurant broker-

A good restaurant broker will help you get organized and help you determine the best price to expedite the sale.  They will also advertise on the plethora of websites (I, for instance, advertise on at least 100 local, national and international sites dedicated to selling restaurants and businesses).  A good restaurant broker will also discreetly market to people within the restaurant industry, help you negotiate the best deal and, most importantly, make sure the deal closes.

There is a lot that goes into selling a restaurant, much more than many other types of business.  A restaurant needs be positioned for sale to get it in front of the right buyers. We currently have over 3,000 buyers in our database alone. For a free consultation, please don’t hesitate to call Restaurant Broker, Shelli Margolin-Mayer at (310) 882-2200 ext. 128.  http://www.bizex.net/business-broker/shelli-margolin

How to Sell a Business Fast

Price is not the only determining factor in procuring a quick sale.  You need to get into the “buyer mindset” and make sure a buyer sees the same value in your business as you do.  Here are some no nonsense universal step to getting your business sold fast: 1.       Price – Price – Price!!! Just [...]

Price is not the only determining factor in procuring a quick sale.  You need to get into the “buyer mindset” and make sure a buyer sees the same value in your business as you do.  Here are some no nonsense universal step to getting your business sold fast:

1.       Price – Price – Price!!!

Just like anything else…   the better the deal, the faster someone will snatch it up.

2.       Make it easy to understand -

If someone can’t understand how you do business and how you derive your net profit, they generally aren’t going to buy your business at any price.

  • Make sure you have straight forward profit and loss statements for the last three years
  • Put together a list of inventory and other assets such as furniture, fixtures and equipment (FF&E) and list their replacement costs.
  • Have any employment contracts organized and ready for review
  • Organize your customer/client lists
  • List out any debt that will need to be dealt with in the sale

3.       Write up your story-

How and why you got started in this business, what are the opportunities and the obstacles and why you are selling.  Also, tell the story of how your get and service customers/clients, etc.

4.       Clean it up- 

Make sure the physical business environment will present well.  (Unless, of course, you are selling an internet business or a service that won’t prompt someone to visit you.) Serious buyers will generally want to meet with you at your place of business.  Also note that messy inventories tend to scare away buyers.

5.       Review your lease- (unless you are selling property with the business)

Make note of your expiration date, what extension option you have and any transfer clauses.  A buyer will either assume your current lease or negotiate a new one depending on the factors within your lease agreement.

6.       Get a business broker-

A good business broker will help you get organized and help you determine the best price to expedite the sale.  They will also advertise on the plethora of websites (I, for instance, advertise on at least 100 local, national and international sites dedicated to selling businesses). A good business broker will also discreetly market to people within your industry, help you negotiate the best deal and, most importantly, make sure the deal closes.

There are many factors that determine the length of time it takes for a business to sell, price being the most important.  Plus, there is a lot that goes into positioning a business for sale and getting it in front of the right buyers.  We currently have over 3,000 buyers in our database alone. For a free consultation, please don’t hesitate to call me, Shelli Margolin-Mayer, at (310) 882-2200 ext. 128.  http://www.bizex.net/business-broker/shelli-margolin

Selling a Small Business as a Short Sale

Drowning in business debt!?! Even when a company’s sales start increasing, debt can eat away at the profits… More and more small business owners are finding that profits are going to servicing their debt and keeping their business operational.  In such cases, an option is to sell the business through a short sale.  Especially if [...]

Drowning in business debt!?! Even when a company’s sales start increasing, debt can eat away at the profits…

More and more small business owners are finding that profits are going to servicing their debt and keeping their business operational.  In such cases, an option is to sell the business through a short sale.  Especially if a business owner is burnt-out, looking at shuttering the business and declaring bankruptcy.

Declaring bankruptcy is different as a small business owner.  It’s not just an anonymous bank or bureaucratic phone company that is owed money; it’s often suppliers and vendors with whom there are long-term personal relationships.  And often, friends and family have invested in the business or lent large sums of money to help keep the business afloat.

A short sale can provide creditors at least a portion of the funds owed to them, while alleviating the small business owner of having a bankruptcy tied to their name and credit.  It can also save the jobs of the employees.

Special note for franchise owners – If the business is under a franchise agreement and the franchise payments are grossly in arrears, there is a chance the franchisor can take back the business, leaving the owner without a business and still holding all the debt.  It is in the interest of the franchisor for the business to sell and bring in a new owner who will start paying royalties.

How it works –

An experienced and competent business broker will package the business based upon its net profit and assets.  The debt and other non-operational expenses will be added back to the net profit and an industry appropriate multiple will be determined.  If the business sells for less than what is owed, it is a Short Sale.  If it sells for more than what is owed, the owner will receive whatever is left over after all the debt is paid.

In a normal sale, an escrow is used primarily to protect the buyer from successor liability – any debt attached to the business.  In a short sale, the escrow process also aids the seller in settling the business’s debt.

Once all the debt is established, the escrow officer will prepare a seller’s estimated statement reflecting all secured and unsecured debt.  Secured debt includes tax liabilities, private liens, judgments, etc.  Unsecured debt includes private loans.  If the sale price covers all the secured debt, the remaining funds are distributed pro rata to the unsecured creditors.  If the sale price doesn’t cover all the secured debt, remaining funds are distributed pro rata to the secured creditors.

All creditors will need to agree on the payout in order to close the deal.  Since the alternative is usually bankruptcy for a small business owner, creditors would prefer to receive something rather than nothing.  Thus, they generally will agree to the pro rata payout.

Although short sales are messier than regular business transfers, they are a win-win for the buyer, the seller and the creditors.  The buyer gets a good deal on the business; the seller avoids bankruptcy and is alleviated of their debt while their creditors get something rather than nothing.

Enlist an experienced business broker.   They can help you overcome most obstacles and discreetly bring you qualified buyers.  We currently have over 3,000 buyers in our database alone.  For a free consultation, please don’t hesitate to call me.  Shelli Margolin-Mayer, Business Broker: (310) 882-2200 ext. 128.  I’m happy to help.

By Shelli Margolin | BizEx Business Broker Profile | 310-882-2200 Ext 128

Selling a Failing Restaurant

On November 21, 2011, in Business Sales Process, How to Sell, Industry, News, Restaurants, by Shelli Margolin

By Shelli Margolin, Restaurant Business Broker In the current economy, many restaurants that once thrived are sadly no longer able to sustain a positive cash flow. However, the good news is that selling a restaurant that is operating under a loss or poor revenues is possible. The biggest barrier to entry in the restaurant industry [...]

By Shelli Margolin, Restaurant Business Broker

In the current economy, many restaurants that once thrived are sadly no longer able to sustain a positive cash flow. However, the good news is that selling a restaurant that is operating under a loss or poor revenues is possible.

The biggest barrier to entry in the restaurant industry is the initial build-out costs.  If your restaurant has a functioning hood, flood drains, three part sink and a permitted refrigerator unit, then your restaurant will sell.  If you have a liquor license, your restaurant will sell for more!

The most common obstacles to selling your restaurant are:

1.      The price you want vs. the actual market price

2.      Messy, incomplete or none existent books and records

3.      Deferred maintenance

4.      Not being up to code

5.      Expiring lease

6.      Time and energy

Preparation is the best way to overcome these obstacles:

1.      Be prepared to carry a note, instead on insisting for all cash. If you price your restaurant too high or too low, you won’t get serious responses.  Tailor your expectations to the reality of the market.

2.      Your books and records can be your best friend in selling your restaurant.  They will highlight such things as Discretionary Earning which can actual cause your business to show a positive cash flow for a new buyer.  Any non-operational expense, such as your car payments or cell phone can be added back to your bottom line.

Your books and records can also be your enemy, if they are not kept organized and up to date.  Additionally, many businesses are opting to take cash instead of credit cards.  It is very typical that cash transactions aren’t recorded.  However when selling your restaurant, it is to your advantage to show all your revenue in order to receive a higher selling price.  Keeping a simple hand written or spreadsheet record of cash sales can often be sufficient documentation for a buyer, …but only if those cash sales are real.

3.      Make sure all your major equipment and floor drains are in working order and are up to code.  Otherwise be prepared for a price that will reflect getting those items working and up to code.

4.      A new buyer will need to go through a County health inspection.  If your restaurant isn’t up to code, it will not sell!

5.      Location! Location! Location!  If your lease is expiring this year, you may want to think about getting an extension or exercise your option to make your restaurant more attractive to serious buyers.

6.      If you are planning on trying to sell your restaurant by yourself, be prepared to spend a lot of time and energy on the marketing, looky-loo’s and a barrage of questions from would-be buyers.  Selling a restaurant is a full-time job and proper marketing can get expensive to successfully sell it yourself.

The decision to sell is as much an emotional decision as a business one.  Get some help by enlisting an experienced business broker.  They can help you overcome most obstacles and discreetly bring you qualified buyers, so you can your spend your time and money running your restaurant and living your life.

Enlist an experienced business broker.   They can help you overcome most obstacles and discreetly bring you qualified buyers.  We currently have over 3,000 buyers in our database alone.  For a free consultation, please don’t hesitate to call me.  Shelli Margolin-Mayer, Business Broker: (310) 882-2200 ext. 128.  I’m happy to help.

 

By Shelli Margolin | BizEx Business Broker Profile | 310-882-2200 Ext 128

What Is a Typical Restaurant Business Worth?

As written for ehow.com… 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 [...]

As written for ehow.com

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.

 

By Shelli Margolin | BizEx Business Broker Profile | 310-882-2200 Ext 128

How to Appraise a Restaurant Business

As written for ehow.com… There are several reasons for appraising a restaurant, along with many nuances to the appraisal itself. Let’s review how a prospective buyer can appraise a restaurant for purchase. There are three general ways that restaurants’ sale prices are established: based on profits, assets, or “key costs,” referring to its location value. [...]

As written for ehow.com…

There are several reasons for appraising a restaurant, along with many nuances to the appraisal itself. Let’s review how a prospective buyer can appraise a restaurant for purchase. There are three general ways that restaurants’ sale prices are established: based on profits, assets, or “key costs,” referring to its location value. The buyer should be aware of whether the restaurant is making a profit and what furniture, fixtures and equipment (FF&E) are included in the sale. If a restaurant is profitable, a buyer can take a financial approach to the appraisal. If the restaurant is not turning a profit, it still has value in its equipment. In some cases, a restaurant is sold for key costs: its location, property/lease value and entitlements.

Instructions:

Profitable Restaurants

1 Review all the financial data available. This includes a minimum of the past three years’ tax returns, profit and loss statements, and any additional records of cash sales (cash sales often are not reported on tax returns or elsewhere). Note that cost of goods sold (COG) is usually around 20 to 40 percent of revenues depending on the type of restaurant.

2 Obtain a list of all FF&E that will be included in the sale price. Although the sale will be predicated on the annual profits, the restaurant can’t operate without equipment that has the required permits.

3 Review the entire lease thoroughly before signing it. Understand the monthly rate and any common area maintenance (CAM) fees, along with any other charges and fees. Also, review the term and option to extend.

4 Use a multiplier of the annual profits to determine the restaurant’s value. In a good economy, the rule of thumb for profitable restaurant value is two to three times the restaurant’s annual profits (or discretionary earnings) plus inventory. In a bad economy, it is more likely a 1.5 to 2 multiple of discretionary earnings plus inventory.

Unprofitable Restaurants

 

1 Examine the hood, floor drains, three-part sink and permitted refrigerator units to make sure they are functioning. The restaurant industry is probably one of the few industries where you can sell a business that isn’t making a profit, as the biggest barrier to entry is the initial build-out cost. A restaurant will sell for its permitted and functioning equipment or sometimes for its location and entitlement to operate at that location.

2 Determine what, if any, FF&E are included in the sale, as the restaurant build-out and obtaining the permits for equipment is expensive. Appraise the hood, floor drains, three-part sink and permitted refrigerator units. Ranges, ovens and other equipment are valuable, too, but they are easier to replace without requiring permits. The FF&E should be appraised upon replacement costs in order to determine the value. Don’t overlook the employees; they are often an important asset to consider too. Get a good understanding of their salary and benefit structure

3 Make a thorough review of the lease or the real estate purchase agreement. Make sure the zoning and alcoholic beverage licenses are all in order, before you sign any binding agreements.

Tips & Warnings

It is always a good idea to enlist the aid of a professional. An experienced business broker will provide well-rounded guidance in the appraisal and purchase process. A buyer can engage attorneys and accountants, but a business broker is much more cost-effective. Also, consult your local Small Business Development Center (SBDC). SBDCs are funded by the U.S. Small Business Administration and offer free and low-cost business assistance.

References

  • “CNNMoney”: What’s My Restaurant Worth?; Ingrid Tharasook; December 2007
  • Quantified Marketing Group: Restaurant Financial Analysis
  • The Appraisal Foundation
  • QSR: Valuing Your Store
By Shelli Margolin | BizEx Business Broker Profile | 310-882-2200 Ext 128

Shelli Margolin Joins BizEx Business Brokers in Marina Del Ray

On March 22, 2011, in News, by Shelli Margolin

MARINA DEL REY, California (March 22, 2011) – BizEx is pleased to announce that Shelli Margolin has joined our business broker team. Shelli brings to BizEx a solid background in business sales and acquisitions. She specializes in selling restaurants, retail, professional services, business services and the personal services industry. Shelli comes to BizEx with direct [...]

MARINA DEL REY, California (March 22, 2011) – BizEx is pleased to announce that Shelli Margolin has joined our business broker team. Shelli brings to BizEx a solid background in business sales and acquisitions. She specializes in selling restaurants, retail, professional services, business services and the personal services industry.

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.

###

By Shelli Margolin | BizEx Business Broker Profile | 310-882-2200 Ext 128