valuing sydney cafes

Too little is known about isn't for any of us to have an estimate of value.

-What sort of wage has been allowed for the owner operator in that profit figure
-amount and condition of equipment
- strength of lease and quality of location, it's not uncommon for prime located hospo venues to sell for decent money even if not profitable

 

The wife will replace the departing chef ( mon tue 7pm till 4) At award rate for chef. This figure was deducted from their existing net profits to the final figure I arrived at.

Extra work if actually replacing existing staff would be treated the same way. Or profits back into business.

Equipment and condition is fairly valued at 20,000k. One fridge looks on the way out $2500 replacement.
Strenght of lease is our biggest hurdle now with not enough time on existing lease. We are asking for 3 x 3 x 3 x 3.

Have upped our offer conditional on the lease.

This is based more on the other benefits of the business which is not included in a formal valuation
1 the business pays for the residential house as part of its lease

 

2 All our food and utilities would be paid by the business.

I think this is a great benefit and should be reflected in the asking price. anyway ball back in their court thanks for the thoughts

 

If you're buying a job, surely it should pay more than $80k!

 

What's your projected hourly rate for you and your wife?
i.e. Biz profits and salaries combined.

 

Maybe just ask them a very simple question,how much of the total wages was paid in"CASH" that can blow the deal out of the water real quick..
'

 

So the value of the rent of the residence and food and utilities will be part of your taxable income

 

The net profit is the business profit that has been verified by bas statements and employee tax returns, cost of good receipts and financial details verified by my accountant.

There is a component of cash employees and the cash used to pay these employees is taken out from the business and not included in recorded financials.

 

So if it were a legitimate business and all done by the books, profits would be less, maybe considerably, than what is shown.
e.g. Simple stuff like workers comp, etc.
Hope you cover yourself if you proceed with this biz.

 

The business pays for all there personal food and utilities use and rental of the house as the lease is a single commercial lease. This may be sailing close to the wind with the ATO but they do declare in their financials a $12,000 benefit to themselves. They real figure would be greater of course.

Projected profit for wife and myself $131,000.
$80,000 actual profit from business with no changes or improvements
$24,000 salary for wife ( two days a week nine hour shifts)
$15,000 cash under table - going off the last three years financials.
$12,000 a year saving from not renting plus not buying any food or paying for utilities again.
$131,000.
of course the last part is worth more and my wife believes she can improve a million things in the cafe

 

Ace in the Hole,
The exposure to workers comp from cash employees is something I have experience with. It is a risk having local teens be waiters especially when there Mum and Dad are regular customers. The current rate is $12 an hour for a few kids to help here and there. (total weekly hours is around 28 so to replace them with legit payment would only cost business around $145 dollars. Business is insured for workers comp for 19 staff and adding three more actually does not change premiums.

The Profit I stated above is the leg profit proven by tax records, cost of goods and weeks of due diligence.
He claims initially net profit of over $150,000 a year but now agrees with the amount of $80,000 a year

 

I have now gone through three cafes financials and this one is by far and away the most honest and straight forward seller. I would say to anyone though that unless you work in the business for at least two weeks as a minimum and control the till it is very easy to be mislead by the financials. They all claim varying degrees of cash under the table. The short method is to only use tax records and ignore all cash.

 

Muscle motion

I meant to say I was not working there apart from building the odd deck and maintenance. So no profit for me. I will build a big smoker / bbq but that is more for me than the business

 

Good luck and all the best, I sincerely hope it works out for you and your circumstances.

To me it seems like a 2nd marriage, and quite a restrictive commitment.
I hope you will get to have some separation between private life and business.

 

You don't pay workers comp on the amount of people on the policy, it is based on the actual amount of wages/super etc paid.

 

Have you checked the business out on the best days from outside to see how busy it is? I don't want to sound negative but BAS statements can be rigged and accountants are not clean as a whistle either. If the owner planned on selling the business a while ago he could easily declare tens of thousands more as income, pay the tax knowing he will get much more back come sale time.

I must say I would be cautious, just the fact he halved the sale price so quickly.

What kind of equipment is in the shop?

 

Biz I meant having staff off the books and the exposure to being sued if they get injured. Your correct the addition of workers raises the insurance premium. Equipment is okay - valued at $20,000. I have checked three years of figures against costs of goods and the BAS.