Finding the value of a business can often follow the same pattern regardless of the industry. However, because of the nature of the restaurant industry, it also has some additional elements. Here is how to find out what your restaurant is worth.
First things first, ask yourself these three questions:
- Are you selling the restaurant along with the equipment?
- What is the overall state of the economy?
- What does your customer loyalty look like?
There are a lot of appliances, equipment, and gadgets that go into running a restaurant smoothly. When you are listing your business, are you including everything inside the building or are you taking that with you to your next restaurant investment? This will, understandably, influence the overall worth of your business. The skeleton of a restaurant will be worth a little less than one that can be up and running soon after a deal is struck.
Secondly, eating at restaurants is often seen as a luxury because it can be costly. If the economy is strong, unemployment is down and salaries are going up, people might be more likely to enjoy a meal or two out a week - or possibly more. This detail will affect how much your restaurant is worth to buyers and investors. However, that is not the final deciding factor.
In fact, if you have strong customer loyalty, your restaurant will be worth much more to a potential buyer. Knowing that a transition in management will not affect sales is very appealing. If you have guests who come back, no matter the state of the economy or the changes in your restaurant, you can sell your business at a higher cost. Customer loyalty is a very valuable intangible asset. Check out your own reviews to see how they compare with the competition.
To determine what your restaurant is worth, you can use one of three methods: market valuation, asset valuation, or income valuation. In essence, while one factors in the current state of the market, the other factors in its assets minus liabilities. Finally, and likely the most common is the income valuation which factors in how much money new owners are likely to make once they take over. If you need help determining what your restaurant is worth, Transworld Business Advisors is experienced and ready to assist.