Income Valuation
The restaurant industry fixes the price of a restaurant through one of a few different ways, but the “income valuation approach” tends to be the most standard and effective – your Atlanta business brokerage firm ought to be extremely familiar with this method. A restaurant with profit/loss statements valued with the “income valuation approach,” usually has the most attraction for people buying a business in georgia (particular restaurants).
With proof of income, a restaurant buyer in Atlanta could ideally purchase a restaurant with around twenty percent down, and receive a small business administration secured loan for the balance. All in all, the income valuation approach is the best way for buyers to figure out how much they should pay for their restaurant.
Pricing a Restaurant For Sale in Georgia
Atlanta business brokers tend to list a restaurant at a price that’s based on “potential earnings,” or what a new owner could make, if he/she ran the business better, but this isn’t right. The earnings that come from “better operation” go to the business buyer as a bonus, but can’t be added into the earnings. Add-back calculations tend to serve only one purpose, and that’s to determine price a the restaurant for sale. It only makes sense that the seller not be paid for benefit they themselves didn’t establish.
Seller Discretionary Earnings
These are used as a base to multiply in deciding on the price for the restaurant. For example, restaurants in Atlanta for sale trading around 2-3 times earnings. Factors effecting the multiple are varied, including:
Is it a franchise restaurant?
How consistent is the profits/losses with regard to the time of year and location?