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Valuing an existing business
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gavinb
Senior Member


Joined: 12 Jan 2006
Posts: 1
Location: Calgary
Expertise: I love coffee

Posted Thu Jan 12, 2006, 2:53pm
Subject: Valuing an existing business
 

New to the forum. Apologies if the post isn't appropriate or in the wrong spot. Did seem like there was alot of expertise here.

I'm currently looking at buying an existing coffee shop. Been around for a few years, does reasonable volume and turns an okay profit. Lease is good and sale is conditional on renegotiating a longer lease term. Staff in place and manager wishes to stay so all in all a pretty sweet little business.

With some new energy in the business I can see turning up the numbers a bit. What I'm really interested in is some professional opinions on valuation. What, typically, does a coffee shop sell for? This one is listed at approximately 3 times earnings which seems reasonable. Any opinions on this? I can understand that there are 101 other variables to consider but am really interested in quick rules of thumb on the valuation process.
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coffeeactivist
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coffeeactivist
Joined: 8 Mar 2005
Posts: 139
Location: Calgary, AB
Expertise: Pro Barista

Espresso: Elektra Micro Casa A Leva...
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Posted Fri Jan 13, 2006, 11:48am
Subject: Re: Valuing an existing business
 

3 times earnings?  That seems a little high.  Is that the net profit after everything is paid in the year, or is it the gross sales?  I've looked into buying a variety of coffeeshops here in Calgary and I can't think of any that were selling for more than the gross sales... they were all equal to or less than.  However, net profit... there was one that had a net profit of negative $17000 per year and was selling for $120000.  The rest were around double the net profit.

 
Jason
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ThanksALatte
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Joined: 11 May 2005
Posts: 119
Location: Near Ottawa, Canada
Expertise: Professional

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Posted Fri Jan 13, 2006, 11:58am
Subject: Re: Valuing an existing business
 

I believe a very quick rule of thumb for selling price is 50% of yearly sales.
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