asking price $300,000 mothly sales $ 48,000 food cost 35% payroll $ 12,00 gross profit before op exp $19,200 monthly expenses rent r.e. tax and water $3,130 electric $800 gas $600 advertising $450 accounting $200 laundry and maint. $250 phone $180 office $100 insurance $1000 total monthly operating expenses $5810 cash before taxes $13390. this pizzeria is located in the boston area 10yrs lease in a strip plaza very clean good equip 25% deliveries cash deal what you think worth persuing ? thank you in advance for your input and sorry for the format of this post not very good with computer or english composition.
If it’s cash-flowing $13,390 per month it’s probably worth more than $300,000. Is this store running “by itself” with a General Manager or is the owner putting in a lot of time?
If it’s being run by a GM, I think this would be a very good investment. If you’ll have to be there 7 days per week open to close, then it may not be.
As an investor in pizza places I am going to give you some free advice.
Ignore most other posts on this board. People here, in general, are very knowledgable. However, as a whole, they grossly overvalue businesses. Probably because most of them are hoping they can get these multiples one day themselves.
$13,390 cash flow is good for a $300,000 asking price. When I buy a business, and I’ve purchased 4 now, I look for a multiple of 1.50-2.00. For the right business, I’d go up to 2.5.
There is no business where you have to be there 7 days a week from open to close. You can always hire a GM.
1.5-2 of cash flow?
Yes sir. I’ve closed in three places in your market, I paid 2.0 on one, 1.4 on one, and 1.9 on the third.
Most business brokers in the DFW area list these businesses at 2.0 or less. Go to any of the MLS sites for businesses and you can see that.
In some markets, the multiple is even less. I am contemplating investing in Jersey. I have 5 investments I am analyzing right now that are less than 1.5 for that market. I just haven’t figured out the logistics yet.
1.5-2.0?What are you figuring those #'s on.I’ve been trying to figure out for 5 minutes and coming up blank as well.So say the business brings in 500K a yr.What would you pay/how does your system work?
What DFW is saying is this:
You’ve got a store cashflowing $1k per week.
$1k x 52 weeks = $52,000
52,000 x 1.5 = $78,000 <~~ the price he’d pay for a store.
What DFW is doing is buying distressed stores, stores where the owners just want out, or stores that just want to sell and can’t find buyers that want to pay their price. Simple economics… buy for 1.5, sell for 2.5, make a profit (in this example) of $52,000. -J_r0kk
That’s true. But if the store is running without a GM now, you can probably shave a good $4,000 off the month cash flow to hire one. That would certainly change the value of the business.
So he would buy the store for whatever the profit was for a year X 1.xx percent.So if a store was profiting 100K he would buy it for 150K or 200K approx.
This is exactly right. If a store profits $100,000 for a year, I will look to buy it for around $200,000. Though, I usually do not flip it. I run them absentee.
I am still working on how and when I want to sell these off.
One thing that I think a lot of people here miss though, is that most stores listed for sale, will fall under this valuation. Maybe that fits into j_rokk’s definition of people wanting out, I don’t know. But for every store that I look at that I cannot get at this price, I find 3 where I can.
I’m sure you guys can find websites that list businesses for sale, don’t take my word for it, go there and see for yourselves what they are listed for.
That is absolutely correct. The initial GM post made it sound like only certain businesses can have GM’s. My point is that is not true.
LOL I guess this is why the guy decided not to sell to me when I offered him 30K.He grosses 450K a yr and I assume profits 75-80k as he only claims half.
If this place is located in Burlington…I looked at it.
no in the south shore
DFW the seller reported minimal sales and as been at this location for less than 2 yrs would this be a deal breaker for you ?
Any suggestions on how to go about due diligence in this situation
Do the expenses look in line for a business this size ?
Does $1000 a month insurance including deliveries insurance seem reasonable ?
IÃ¢â‚¬â„¢ have many more questions to post if it get’s to p&s
Thank you all for sharing valuable info
When you say reported minimal sales, are you meaning reported for tax purposes? I could care less what people report for tax. If he can substantiate higher revenues, I’m fine with that.
The expenses seem somewhat in line. I would get support for his $48,000 monthly average sales. I would make sure they are net sales, and not including sales tax. I’ve had more than one seller try to slip that by me. If it is gross sales, you then have to subtract out sales tax (I’m assuming 7-8% in the Boston area?). That’s a $3500 expense, so it is very material. Also, I don’t see anything for maintenance/repairs or supplies (pizza boxes, wax paper, etc). Sometimes supplies are buried in cost of goods, I don’t know what he is doing here.
$1,000 a month for insurance is far more than I pay at any of my shops, but MA has higher rates than TX. I would have to assume that is probably correct.