gavinb Senior Member Joined: 12 Jan 2006 Posts: 1 Location: Calgary Expertise: I love coffee
Posted Thu Jan 12, 2006, 1:53pm 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.
Posted Fri Jan 13, 2006, 10:48am 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.
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