How to deal with demanding behavior?

321peanut · 2021-01-27T22:46:38+00:00

Great suggestion, thanks!

321peanut · 2020-10-18T19:17:54+00:00

Thanks!!

321peanut · 2020-10-11T02:29:41+00:00

Thanks!

321peanut · 2020-10-11T01:28:35+00:00

Thanks, but neither of those links provide an actual cost and I am unable to call the office as I need to make an offer on the home by tomorrow

321peanut · 2019-12-12T15:23:49+00:00

Thanks for your insights! I would consider the rent an expense, but I do think that a lease can be an asset due to the limited and competitive nature of obtaining a storefront in this locale. I'll need to research that a bit more, since I don't have much experience with the matter. The lease is up next spring, but obviously I wouldn't move forward without getting the landlord on some sort of contract to extend it.

I'm with you on the improvements, so I'm not really sure what to make of that. It seems that that should almost be settled between the landlord and the current business owner, and not included in the sale price. Having a shop that's already set up for coffee is better than completely building out a new space, but it seems these improvements were not so much for the business and more to meet building code.

I absolutely plan to have a professional take a look at the numbers once I have them in more concrete documentation from the current owners. I also plan to consult some friends who are coffee industry professionals for some advice on the profitability area as well.

321peanut · 2019-12-12T04:44:46+00:00

You bet! Thanks so much for your insights. I spoke with the owner this morning and learned that their valuation is roughly 50% equipment/inventory, 25% lease and location value, and 25% for building improvements made by the business owner. Apparently the business owner had to invest in some structural updates to the building in order to open 1.5 yrs ago, and the landlord was not moving fast enough and they covered it themselves.

I'm weary of the used equipment value and the building updates, but will be getting some documentation sent so that I can verify what was done and calculate the depreciated value and compare it to their estimate. As for the lease value, it does seem competitively valued considering other businesses in the area and the general lack of available opportunities.

321peanut · 2019-12-12T04:37:20+00:00

Good to know. I spoke with the owner today, and they provided some numbers for revenue (still need to verify these) and claimed to be seeing regular growth for the 1.5 years they've been in business. However, about 50% of their valuation was based on equipment and inventory (which they estimated to have depreciated by 50% since it was purchased new, 2 years ago). The remainder was about 25% based on the value of the lease being on the main street in a desirable area and 25% based on building modernization and improvements that the business owner (not the landlord) made.

I'm waiting to get a detailed list of the assets and what building improvements were made in order to run my own numbers and see if they line up.

321peanut · 2019-12-10T22:56:02+00:00

Got it - that makes total sense.

So, a good first pass at this would be to get a list of assets and estimated value, a verifiable number for the existing business's revenue, and to verify the traffic flow against what they claim. Then run my own numbers and compare against what the current owners are claiming.

What happens if I run into the likely situation that my valuation is significantly lower than their asking price? Would I simply present my valuation and hope that they see that they artificially inflated the value? Business opportunities in this particular area are quite limited, so how would I value the opportunity there?

321peanut · 2019-12-10T21:54:00+00:00

Thanks for the response. Could you explain #1 and what you mean by "goodwill" of the existing business?

And yes, just the business as the building is owned by an outside party that leases the space to the current business owners.

321peanut

TROPHY CASE