Sell It All?

[jbrink01]

Toying with the idea of selling the catering business, lock, stock and barrell. Question 1) How do you value a catering business?

[bbqbull]

Honestly I have no idea but good luck!

[jbrink01]

Me neither! We've been doing it for almost 6 years now. It's succesful, no debt, and provides a great income which allows my wife to stay home. But - Kids are getting older and we'd like to enjoy life a bit more, maybe goof off a bit more. I think we'd have more time if my wife just had a "real job". Just thinking out-loud.

[PCDoctor_1979]

Valuing a business is far from an exact science. I used to do business valuations in my former life in public accounting. The main issue is that your two most valuable assets don't show up in your books. Those are your cooking skills and your customer list. If the buyer has adequate skills and can retain your customers, then we you can start with an old rule of thumb valuing the business at some multiple of your average earnings over the past several years. Keep in mind that "earnings" are the net profit shown on your tax return plus what you paid yourself each year. Depending on the circumstances you could ask for as much of 7 to 10 times that amount. Given the current business climate, I doubt you could get that much today. Feel free to PM me with questions. You can also do a Google search on how to value a service business. Best of luck!

[landarc]

I went through a similar process 3 times in the past 12 years, one of the problems for me, which is similar to what you are looking at, as a designer, much of the value, other than hard transferable assets were in my skills and my client list, which would not necessarily transfer. I found that the valuation process was tricky, since I had no desire (actually, no ability) to stay on and transition. In the end, I got much less than what my income x factor would have been.

Still, your reasons are solid. Sometimes, it is not about maximizing profit. I was getting more and more ill running my company, I had to get out.

[chad]

Tough question.

If you have a client list with repeats and a track record you can try to value that it, but if you're not selling the "name", too, it won't be as valuable to the buyer.

Note: just read PCDoctor's post and he nailed it better than I.

I know this isn't what you are after, but there are business attorneys that specialize in this type of transaction. If you are trying to get value above the equipment and supplies you might want to consult one. Yes, it gives me hives to type this!!

[chad]

Originally Posted by jbrink01

Me neither! We've been doing it for almost 6 years now. It's succesful, no debt, and provides a great income which allows my wife to stay home. But - Kids are getting older and we'd like to enjoy life a bit more, maybe goof off a bit more. I think we'd have more time if my wife just had a "real job". Just thinking out-loud.

Just an observation, apropos of nothing particular, a "regular" job sux. I've got a decent paying job. I work 40 hour, indoors, paid time off, etc. And I am miserable as heck. I don't love or even like what I do. But, it pays the bills. I was happier busting my ass in a kitchen and fighting with my cooks and associate manager...but the company closed the stores in FL and I didn't want to move back to TX. (It's a family thing...we loved our 9 years in SATX).

So, I'm just sayin'!

[Bill-Chicago]

Originally Posted by chad

And I am miserable as heck. I don't love or even like what I do. But, it pays the bills.

We still love you Chad, if that helps any....


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[chad]

Thanks. I'm miserable at work, only. Everything else is going pretty well right now.

[landarc]

Being miserable at work is why there is The BBQ Brethren.

I would caution against selling your name, which does add value. It also creates market confusion and can have a very bad effect on your own reputation. The firm I sold last had my name in it, fortunately, we chose to go alphabet soup for corporate image, still, some people thought I had died. Just something to think about.

[acguy]

PC DOC's comments are right on. The biggest problem with a "one man band" service type business is that the "one man" IS the business. I don't think you'll get much more than what the current value of the assets.

When this situation comes up in other service oriented businesses, the seller will often stay on smoothing over the transition and training the new owner. It makes the situation closer to selling a "business" rather than a simple transfer of assets. This type of arrangement can add significant value to the potential deal.

[HBMTN]

I have researched this on business value for some time and there is no clear cut formula but the most common idea for placing a value on a business I see is to get the total value of all assets, then add the gross profit of between 1 and 3 years of the business to the assets, then take that total and deduct all debt the business has and the number you get there is a ball park value the business when it come time to sell. I'd love to know if there is a better formula but this is what I have been able to find.

[landarc]

That formula is actually pretty good, but, it assumes that the business is not based upon it being the type of business hinging on one persons work. Thus, something like a restaurant or store, this formula works pretty well.

[tony76248]

I might try to bring some potential buyers in to let them meet your clients and see if there would be a rapport. That way you could maximize the value of the business rather than just selling off the equipment. That said, any potential buyers might already have an idea in place on how they would run the business and you could end up chasing them off.

I think that when we get into the catering business we tend to think we can do it better than the next guy, thus we make the jump. Later we realize that it isn’t as much fun as we had anticipated. Heck it’s a job and you can’t take a day off and when you are sick there is no money coming in.

Of course when you do it part time because you have another job, you find that you have no free time to relax. You always need to have time to recharge your batteries.

Without going too much off track, I might suggest you list it on Craigslist and see who bites. Remember that if you list it high, you can always lower your price but you can never raise your price. You might also try ebay with a set reserve.

[HoDeDo]

It's all about the potential for revenue. The equipment will have some value, but it will be some small fixed payment. Any contracts you have that you can assign, any recurring revenue that you have documented, (vs. one time customers), and vending locations that you transfer to them, all of those add up to some amount of revenue, that you net out, and you add that to the equipment, and have a value....

The question is - what are YOU worth to the business... do the customers come because of you and your wife? Are you going to provide the buyer with any training? is there a value on that, or would you consult and do a "warm" hand-off for a fee? Those types of things will make the buyer feel safer.

It is very hard to pin the value on a business... But I wish you the best of luck!!!