Re: Need expert advice: What would you pay for this pizzeria
A couple of glaring inconsistencies I’ve noticed about this situation:
[b]1. Sales in the 225-300 range. Owner claims alot of cash sales not reported
annual Seller Cash Flow 121k
Labor 15.6 [/b]
Here’s why they’re obvious red flags:
When an owner tells you he’s not reporting some sales, a huge flag should pop up because you already know he’s a swindler. Also, if I had a dollar for every owner who’s made that very false statement while trying to sell a store, well, I’d only have about 40 bucks but I’ve heard it a lot.
Cash flow of 50% on $4800/week? I’ve got 3 words for you: NO FRIGGIN WAY. He’s full of crap. Just typical line items from a P&L
Labor%(in his words)…15.6%
His salary(he doesn’t work for free)…$3,200/month
Rent(let’s say it’s cheap)…$1,000/month
Based on a $20,000 month in sales, just these few line items have him paying out $16,380 per month, already limiting his cash flow to $43,440/year.
- Labor % at 15.6%? Let me guess, he’s also paying people under the table, too. At 15.6% labor, his payroll is around $750/week. If you pay just 3 people to work 40 hours a week at $6.20/hour you are already at the Labor% this guy says he’s running.
Here’s the deal:
When you buy a store it should be based on proven cash flow. If this guy says he’s not reporting some sales then he needs to take the fall on the sale price. He can’t have the best of both worlds. Also, if the store is cash flowing $150k/year, why in the Hell would he sell it?
Let’s just take into consideration the numbers that I posted a little earlier. Let’s also take into consideration that this restaurant has no other bills at all:
Reported cash flow…$43,440
x formula (2x’s cash flow)
= Sale price of store…$86,880
With that being said, there’s no way I would pay this much for a store without solid financial statements for the past 3 years. Unfortunately for him, he wants to under-report and over-price. It’s not happening unless you’re a fool.
Chances are, and I’m sorry to be the one to tell you this, this store is worth the cost of the equipment. -J_r0kk