Potential Opportunity - Thoughts Requested

[bodegahwy]

Rent/Util/Ins is $8500 for the year? That’s $700/month.

He is using a non-standard term and we are just guessing what he is referring to and whether it is per month or annually. That means there is not enough information to draw any conclusions regarding value based on cash flow.

He states that he does 700K in sales and that he listed this business at 250K. This amounts to 35% of revenue. Not a crazy price at all based on real transaction data for pizza restaurants. I would be happy to take that listing and tell that story in my market assuming the costs are in line and the business is at least typically profitable for the size the type.

 

[Piedad]

Income and expense analysis can include many terms for a variety of line items in the Profit & Loss statement. In the case of “direct operating costs” I’m sure that the intent here is to use this term to describe what others may call “operating costs”, “general and administrative expenses” or"non-production costs". In any case these costs should be considered virtually everything that leaves the checkbook,other than food and labor costs, for a restaurant operation. Some might include the employer costs for FICA contributions as part of labor costs. General and administrative expenses will usually include rent, utilities, insurance, repairs, service contract payments, bookeeping/payroll servicing, advertising, cable/phone/internet costs, legal costs, licensing fees, credit card servicing fees and sometimes interest expense. In any case, $8,500 would be viewed with suspicion as way too low. When I first saw it, I thought that maybe it was a typo that missed a zero. If the sellers have indeed proffered that their G&A expenses are only $8,500, disregard every financial disclosure they claim … they are just pulling numbers out of the air … kinda like members of congress sometimes do.