How do you price a DelCo?

[system]

Just wondering what things go into account for giveing a price for a DelCo? I am looking for as much detail in the process of approaching someone to purchase them out, I plan on using the same brand and concept, I just want to work/own the place…

Jesse

 

[j_r0kk]

Jesse,

 That's a very good question and we had quite a nice forum about it a couple weeks ago.  I'll go ahead and fill you in on the "Cliff's Notes" version:

A fair market price for a delco is 3-4 times the cash flow of the store. So, get his income statements for the last couple years, review them, and see what his store is cash flowing. Also, another factor that affects the price is the direction the store is going. If his sales and profits have been steadily dropping over the last couple years you can offer considerably less than formula.

Another thing a member pointed out is that Net Profits and Cash Flow are two totally different things. So, when looking at his financials, you want ALL of his financials. Not just P&L’s. And, of course, the business is only worth what someone is willing to pay for it. Do your homework before you make an offer. It might save you tens of thousands. Hope this helps. -J_r0kk