how to check a business worth

motorguy

myright wrote: »

It's a takeaway.

How much should an accountant charge to value it?

Also how do I go about getting a business loan? Grant . It's my first ever business . Venture.

You have no mission of getting £50,000 off a bank to buy a business like that. They "might" if there was property involved, but not for goodwill fixtures and fittings.

Where did the seller get his valuation of £55K from, that hes willing to take a "bargain" price of £50K for?

Theres a million things to consider here.

Whats his turnover?
Whats his overheads?
Any rent increase due?
How long has he owned it? (less than 2 years alarm bells should start ringing)
Whys he selling?
Does his reason for selling ring true?
Whats his net profit look like?
What staff outgoings has he?
Is he there all the time himself, or does it run itself?
How many hours a week does he open?
Can you cope with working every evening for the next ten years, when your partner works days and is home in the evening?
Is his business turnover increasing or going down?
Has another takeaway opened in the area?
Is there a new road planned?
Is there nearby shop units opening?
How does his net profit (ie, your potential pay) look when you take out the loan repayments?

The bottom line is, people rarely sell a goose that is laying golden eggs. It does happen (retirement, etc), but always always question WHY they are selling. What do they know that you dont?

colino

Please speak to a business advisor about what business type may be of interest to you and building up some info on your own background, abilities, knowledge, experience and financial stability. Then you can focus on what you both want to and can do realistically.
Unless this is a destination takeaway, and you don't mention the location, footfall, scope for expansion or any speciality, you are buying a ten year lease (what state is the building and is it down to you?); and even if he presented full accounts for the past three years, they would have little relevance to determining the, "value".

paddyrg

£50k is a heap of change when all you're buying is the right/obligation to use a location, the name, and some fittings. You may also be buying the obligation to employ some staff, etc. Don't even consider it without expert advice, and allow a few grand for that - I would suggest an accountant and a solicitor if you proceed, as the cost of getting it wrong is far bigger than the headline price in terms of legal obligations.

PlutoinCapricorn

If staff come with the business, check for TUPE.

AbbieCadabra

10 year lease sounds scary, make sure there's suitable break clauses in there/available for negotiation if you do go any further.

zygurat789

AbbieCadabra wrote: »

10 year lease sounds scary, make sure there's suitable break clauses in there/available for negotiation if you do go any further.

Sounds like good security if the business is profitable.

zygurat789

paddyrg wrote: »

£50k is a heap of change when all you're buying is the right/obligation to use a location, the name, and some fittings. You may also be buying the obligation to employ some staff, etc. Don't even consider it without expert advice, and allow a few grand for that - I would suggest an accountant and a solicitor if you proceed, as the cost of getting it wrong is far bigger than the headline price in terms of legal obligations.

The biggest thing being purchased in these situations is the profit generated by the business after all expenses, including a notional salary for the owner if he works, ortherwise known as the goodwill.
Always difficult to value, but say there was a £30K net profit which after (say) £20k for the owners salary left a £10k surplus, what would you pay for that business?

paddyrg

zygurat789 wrote: »

The biggest thing being purchased in these situations is the profit generated by the business after all expenses, including a notional salary for the owner if he works, ortherwise known as the goodwill.
Always difficult to value, but say there was a £30K net profit which after (say) £20k for the owners salary left a £10k surplus, what would you pay for that business?

Exactly - the goodwill is baked into the location largely for a takeaway, and to a lesser extent the name. If it were a famous franchise that people would detour for it wouldn't be £50k, so it's probably serving a geographical audience.

In your example, where the owner is taking £20k salary and £10k actual profit, I wouldn't pay 5x the profit for the business myself, but it's not my money so not my business!

colino

Really? It's alright getting down to which profit multiplier if everything checks out in a robust business, but a takeaway in my area is as bankable as a chip poke. Very high turnover, and as fashionable as pubs.

zygurat789

colino wrote: »

Really? It's alright getting down to which profit multiplier if everything checks out in a robust business, but a takeaway in my area is as bankable as a chip poke. Very high turnover, and as fashionable as pubs.

These days they're closing at an alarming rate