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How would you appraised the value of a small restaurant? This is for the sale of a partnership to the other partner which will make him full owner. I did find some info online regarding this subject however, I'm interested in hearing from people who have done this and learn how they were able to put a dollar amount to their business.
btw It's a small restaurant and the transaction is private so hiring a broker will not work for this situation, thx.
How would you appraised the value of a small restaurant?
Very (VERY) low.
Quote:
btw It's a small restaurant and the transaction is private
so hiring a broker will not work for this situation, thx.
Nonsense. It won't be free but they'll still work with you.
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This is for the sale of a partnership to the other partner...
Do you have a CPA? Do you trust the books? How about the other set of books?
Start with the objective assets like land/building (or lease), equipment, inventory, etc.
Can you all agree on the market value of these things? If not then you're sunk.
The rest, the subjective (often called "good will"), is where it can get sticky fast.
Nonsense. It won't be free but they'll still work with you.
Do you have a CPA? Do you trust the books? How about the other set of books?
Start with the objective assets like land/building (or lease), equipment, inventory, etc.
Can you all agree on the market value of these things? If not then you're sunk.
The rest, the subjective (often called "good will"), is where it can get sticky fast.
Do you have a partnership agreement where this is covered? Is the restaurant profitable? Do either of you work in the restaurant?
What about the restaurant's debts or liabilities? You'll need to consider those and make sure your name is removed from everything. Do you still have a good relationship with your partner?
I was only in a partnership once and it didn't end well. I had to hire an attorney to draw up papers to dissolve it so we could go our separate ways.
Do you have a partnership agreement where this is covered? Is the restaurant profitable? Do either of you work in the restaurant?
What about the restaurant's debts or liabilities? You'll need to consider those and make sure your name is removed from everything. Do you still have a good relationship with your partner?
I was only in a partnership once and it didn't end well. I had to hire an attorney to draw up papers to dissolve it so we could go our separate ways.
Partnership is with a family member so it's good and bad to some extent but overall good. I am making a list of the debts, liabilities and things for name to be removed from. Just need to figure a way to estimate share value.
It will be based on assets or it will be based on sales. You need to find out what other restaurants sell for. In my industry it is typically 1x sales or 4x EBITA. In restaurants it could be 1/2x sales since business is transient.
Do your books reflect the real picture or is the real benefit higher than what's reported? Small businesses are notorious for under-reporting and hiding income. Be sure to include benefits to you that don't show on the books when deciding what to accept for your share. I sold my small business for about three times the total benefit to me in the previous year or about four times the profit on the books. I found the business appraiser not worth the crazy high price they wanted. I'd also advise not to agree to any seller financing. The future of the business will be out of your hands and the chances of your relative defaulting on the loan is too great to risk.
Unless you have a better opportunity lined up, think long and hard before walking away from a good paying ownership position. You can probably stay three or four more years and earn the equivalent of what you'll sell for now and still own your share.
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