Cafe Restaurant or Bar Business Valuation

If there is ever a sector that appears so glamorous on the outside and yet involves the hardest work possible to make it a success it is the cafe, restaurant or bar sector.  Business owners jump into them thinking they can sip coffee or wine on the way to fame and riches and often it is the furthest from the truth.

 

Which is why business valuations for a cafe, restaurant or bar is so important, to highlight the areas that need to be performing right. 

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There are low barriers to entry for a cafe, restaurant or bar - but they are typically limited to geographical areas.  High food and beverage costs, staff costs and rent often make the break even point high and therefore the importance of getting the right customer volume through the door is critical.

 

This then falls to marketing and in attempts to keep overheads low, owners often do the marketing and back office work themselves.  This often means the hours that a business owner must work per week is long.

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In most cases the attraction is to pay cash to some staff as the business is typically a cash-based business.  Whilst this may seem lucrative at first, it only hurts the business valuation later as reported revenue is not as high as it should be.

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We often get asked - how do I value a cafe business? The answer is no different to valuing any other business.  You determine the ongoing EBITDA (profits), make sure owners wages and market rent are taken into account, apply a EBITDA multiple for cafes and BOOM - there is the value of your cafe business.

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The key in cafe, restaurant or bar business valuations is to make sure all revenue and costs are included and understand if the customer base is increasing, staying the same or decreasing.

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A cafe or restaurant business valuation can highlight the business areas which are impacting the value of the business and help focus the owner of increasing the value of the business rather than solely focused on cash in their pockets.