how to check a business worth

zygurat789

paddyrg wrote: »

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!

You're a cautious man Paddy, that's a return of 20%, where can you get anything that's a quarter as good as that?
After 5 years you've recouped your outlay and can sell the business for whatever you paid for it plus a bit for inflation with five years left on the lease, maybe a bit of renegotiation with the landlord to extend.

AbbieCadabra

zygurat789 wrote: »

Sounds like good security if the business is profitable.

possibly, or a lead weight around your neck 18months/2 years in & it's not worked out & you've still got 8 years left on the lease with no break clause...

lincroft1710

Some years ago, a friend opened a takeaway and was doing OK until McDonalds set up nearby. He was lucky in being able to sell the business on.

Check to see if there are any new takeaways planned in the vicinity.

BTW £50K seems a lot.

motorguy

zygurat789 wrote: »

You're a cautious man Paddy, that's a return of 20%, where can you get anything that's a quarter as good as that?

But you've had to knock your !!!!!!!! in for five years to do it.

Plus i've seen good chippies go under in less time than that -

New bloke not there as much
Not as popular as previous person
Chip sizes slightly smaller
Chips slightly greasier
Uses different suppliers
Opens slightly different hours
Key staff member leaves
Another chippy opens
Chippy van parks a mile down the road

I think the old adage needs borne in mind - "buying a business with no prior experience is a great way to make a small fortune - out of a large one"

motorguy

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.

I'm sorry, but does this mean you're in favour of it or against it?

Is being as bankable as a chip poke good or bad?

Are pubs fashionable given so many are closing?

colino

It is as good an idea as anyone being the next owner of any business. You are buying what they have worked very hard at, know none of the pitfalls and seem to think that historical profit and turnover will mean anything in something as fickle as a takeaway. With the minute amount of information proferred, It is a 10 year lease with a sign, some second-hand catering equipment and a name for a very large amount of cash.

paddyrg

zygurat789 wrote: »

You're a cautious man Paddy, that's a return of 20%, where can you get anything that's a quarter as good as that?
After 5 years you've recouped your outlay and can sell the business for whatever you paid for it plus a bit for inflation with five years left on the lease, maybe a bit of renegotiation with the landlord to extend.

Ha! That's why I'm not a multimillionaire, but neither am broke . Clearly they were just sample figures, but unlike being an employee, I'll bet you'll work a heap harder for your £20k, have no holiday or benefits, and do a long average week. It *might* be more profitable to just work a second job ;-)

zygurat789

AbbieCadabra wrote: »

possibly, or a lead weight around your neck 18months/2 years in & it's not worked out & you've still got 8 years left on the lease with no break clause...

People who think they're going to fail don't go into business.
Entreprenurs also fail sometimes. When you are selling a business with no premises or only short term you have an uphill job, security of tenure isuch more important than pessimism.

zygurat789

motorguy wrote: »

But you've had to knock your !!!!!!!! in for five years to do it.

Plus i've seen good chippies go under in less time than that -

New bloke not there as much
Not as popular as previous person
Chip sizes slightly smaller
Chips slightly greasier
Uses different suppliers
Opens slightly different hours
Key staff member leaves
Another chippy opens
Chippy van parks a mile down the road

I think the old adage needs borne in mind - "buying a business with no prior experience is a great way to make a small fortune - out of a large one"

I agree with all you say but you are introducing new parameters just to make your point.
You should stick to the original point, which was, in case you ave forgotten, goodwill.

zygurat789

paddyrg wrote: »

Ha! That's why I'm not a multimillionaire, but neither am broke . Clearly they were just sample figures, but unlike being an employee, I'll bet you'll work a heap harder for your £20k, have no holiday or benefits, and do a long average week. It *might* be more profitable to just work a second job ;-)

I know a bit about being self employed after 28 years but I never paid for goodwill. What you say is true, I am just trying to illustrate how you might value goodwill, we have no figures on this takeaway business or any other background information. It may be that the owner has other things to do and employs a manager and the business generates £100,000 per annum and the owner has no idea of its worth. We don't know and it is not relevant to the example or the figures.