Business Valuation for Selling a Restaurant
Imagine a successful exit from your current restaurant business. Success can mean different things to each business owner. For you, that may mean a quick business sale before market conditions change. Or, success may mean a high sales price that compensates for years of hard work. Or, it may mean gaining freedom to pursue other ventures. Like many business owners, you may find the thought of selling a restaurant daunting. With a valuation for selling a restaurant, you can maximize your return on investment.
To obtain a comprehensive restaurant appraisal, seek a quality business appraiser. Peak Business Valuation values restaurants across the nation. As a certified business appraiser, we help hundreds of business owners. A restaurant valuation can help you make informed decisions as you navigate the sales process. Schedule a free consultation today and begin your journey towards a successful restaurant sale and valuing a restaurant.
What is a Restaurant Valuation?
A restaurant valuation determines a restaurant’s fair market value. This is what a restaurant would sell for on an open market between a willing buyer and seller. The restaurant appraisal journey begins with a consultation. Then, our team collects relevant financial records and documents of the restaurant. With this information, we conduct in-depth research and precise calculations. A business appraiser uses several methods to determine a restaurant’s fair market value. This involves the market, income, and asset approaches. After evaluating the restaurant’s performance, valuation experts compile a comprehensive restaurant valuation report. This report includes the restaurant’s fair market value, value drivers, and risks. Business owners can use this report to make informed decisions throughout the selling process.
The Purpose of a Restaurant Appraisal
There are many decisions to make during the sale of a restaurant. Each decision impacts the selling process’s duration and the amount of money you walk away with. Poor decision-making can have consequences. Without understanding how to value a restaurant the following are negative consequences:
- Potential disputes during negotiations.
- Financial losses due to undervaluing the restaurant.
- Missed opportunities to attract buyers.
- Prolonged sales process due to overpricing your restaurant.
- Poor decision-making that does not support your future financial plans.
A valuation for selling a restaurant can help you avoid these consequences. See Valuing a Restaurant to learn more.
Maximizing the Value of a Restaurant
How can a business owner increase a restaurant’s value before selling? A business appraiser conducts a value driver assessment during a full-service restaurant valuation. Value drivers are the key success factors of a business’s value. For a restaurant, this may be a loyal customer base or effective cost management. Understanding the unique value drivers of the restaurant can better prepare you for its sale. You can capitalize on opportunities to increase the business’s value. You can also leverage strengths to justify your asking price during negotiations.
See Value Drivers for a Full-Service Restaurant.
Identifying Risks When Selling a Restaurant
When valuing a restaurant, a business appraiser can help owners identify potential risks when selling a restaurant. Here are five key risks an appraiser may assess during a risk analysis:
- Financial performance
- Customer retention post-sale
- Operational risks (inventory control, health and safety regulations)
- Market competition
- Lease terms and location
A valuation for selling a restaurant can identify potential obstacles to a successful sale. Addressing them can increase a restaurant’s value and attract buyers.
Determining a Realistic Listing Price for a Restaurant
Lastly, a realistic listing price for a restaurant is crucial for a successful sale. Otherwise, you risk overvaluing or undervaluing the restaurant.
- Setting too high of a sales price
Too high of a price can lead to a longer time on the market and missed opportunities. This can be a frustrating drain on resources as you wait for a buyer to meet unrealistic expectations.
- Setting too low of a sales price
Conversely, too low of a price risks leaving money on the table and not maximizing your return on investment. A low asking price may signal to potential buyers that there are hidden issues or you are desperate to sell. This can lead to poor negotiations and deter buyers.
A restaurant appraisal determines a restaurant’s fair market value. With this information, you can set a competitive listing price that attracts buyers.
Visit our article about Determining a Listing Price for setting a fair asking price.
The Bottom Line
To conclude, a valuation for selling a restaurant is essential. A restaurant valuation clarifies and simplifies decision-making for business owners. This is critical for setting and negotiating a competitive sales price.
Peak Business Valuation values single-location, full-service restaurants across the nation. Our team helps small business owners prepare for an efficient and rewarding sale. You have invested much time and energy into this business. It is time for a successful exit. Schedule a consultation to obtain a restaurant appraisal today!
Check out Valuing a Restaurant and How to Value a Restaurant.
