Restaurant Valuation Services
There are many opinions about how much a restaurant is worth or for how much it will sell. Perhaps you may have heard about "a rule of thumb" that says it should sell for 25%, 30%, 35%, or even 50% of annual sales. These rules of thumb do not take into consideration the expenses and earnings of the unique restaurant in question. Restaurant are primarily valued on the earnings of the business, what some call "adjusted cash flow" or the term adopted by the International Business Brokers Association is "Sellers Discretionary Earnings", or SDE.
A valuation report can uncover the hidden earnings or expose hidden expenses that have not been factored when considering the profitability of the restaurant being valued. A valuation report can also identify possible value drivers which could enhance the value of a particular restaurant. The valuation report will determine the SDE of the restaurant and identify an appropriate multiple of SDE, based on what other similar restaurants have sold. By applying the appropriate multiple to the SDE of the restaurant in question, a valuation price is established.
What about a restaurant that is closed and has no current earnings? These too have value, often for much more than the value of the physical assets of the business. The price at which a closed restaurant will sell depends on the unique Buyer and what it means to that particular buyer.
When it comes to performing a valuation, some common questions that come up:
- What is the cost of a Valuation Report?
- The range starts from under $1000, depending on the purpose of the valuation, size of the business and other factors such as what is being valued, the business or the corporate stock.
- How long does it take to obtain a Valuation Report?
- From the time we receive the necessary documents, it can take anywhere from 7-10 days to several weeks depending on the type of valuation being done.
- What is provided when the valuation is completed?
- A Valuation Report is given to the client that clearly shows the result of the valuation as well as how value has been calculated. This is a document that can be used to show a prospective Buyer or Seller what the value of the restaurant really is and can be helpful in reaching agreement on a selling price. Further, it can also be used as a tool for a restaurant owner to learn how his or her business may be viewed in the marketplace by prospective buyers. Finally, this tool may help the client implement value drivers to enhance the value of their restaurant for a future possible sale.
- Restaurant Valuation Reports are done for many reasons including:
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- Preparation for Sale of a Restaurant
- Before Acquiring A Restaurant To Confirm Value
- Partnership or Shareholder Disputes
- Buy/Sell Agreements
- Divorce Settlements
- Estate and Gift Tax Planning
- Bank Financing Requirements
- Personal Financial Planning
To learn more about a Valuation Report for your restaurant or to obtain a cost estimate, please call us at 603-880-8200 or email info@AllBizBrokers.com and ask about a "Valuation Report".