Business Value

Hello,

Hope all is well. I am part owner of a Independent Pizzeria located in San Juan Puerto Rico.My question to you is the following. How would one go about estimating the value of ones opertaion in order to sell. In my case my partner and I have been in discussions recently about the posibility of buying either ones stake. Either I am going to buy him out or he will buy me out. Our store has sold approximately 1 million dollars this last year and it was only year number 2 of operation. Our first year we did 659k. So we grew about 40% from our first year to another. Our first year we did about 13% net margins and the second year we did about 16%net margins . Can you give me an idea of what a fair value would be of our operation or how we can get that number. I am new to this so I am not certain. Any help would be appreciated.

Charlie,

There is a thread a few lines down from your post about selling a pizza business. Start by looking there. I think I put in a link to another couple of threads about valuation. Start there and then chime in with more specific questions you want to know about or don’t get answers to.

http://www.pmq.com/tt/viewtopic.php?t=4465

what the market will bear/ what buyers are willing to pay…
sounds trite, but if you are selling a million $ in pizza a year, what would it cost someone else to do the same thing…
hope that helps,
Otis

Charlie,

I have seen 3.5 times EBITDA used for the last 20 years or so. However, if your business is strong, with little or no competition, you might be able to get as much as 5 times.

For instance.

$250,000 annual gross, $25,000 EBITDA, Restaurant Value $88,000.

$500,000 annual gross, $75,000 EBITDA, Restaurant Value $225,000.

$1,000,000 annual gross, $200,000 EBITDA, Restaurant Value $700,000