Restaurant value is calculated by looking at both assets and liabilities.
Whether you are currently running a restaurant or considering buying one, it is important to know how much the business is worth. Restaurant owners may need to value their business for financing or tax analysis. Prospective buyers need to know how much money they can make from their investment. The value of any business is based on its net income as well as its assets and liabilities. Restaurants can have a lot of revenue without being very profitable. Look at the historical data on the business and any intangible factors before risking your own money.
Instructions
1. Estimate the value of the restaurant's equipment. Restaurants have highly valuable equipment, such as professional stoves, refrigerators and dishwashers. Look up the price for the equipment and estimate its current market value by looking at its age and condition.
2. Add up the liabilities. This includes business loans, rent payments, insurance payments or tax obligations. The seller may be willing to pay off the restaurant's loans with the capital received after the sale of the business.
3. Calculate the net profit of the restaurant. The net income is the amount of profit made by the owner of the business. Investors purchase businesses to make money in the future, so you should look at the future profit potential of the restaurant based on data for previous years. Profit is the most important element of a restaurant's value because this tells prospective buyers how much money they can expect to make from their investment.
4. Figure out the intangible value of the restaurant. Look for local media coverage to see how the business is received by the community in which it operates. The location of the restaurant can help or hurt its ability to get more customers in the future. A well-trained staff helps with the saleability of the restaurant because this is a very labor-intensive industry.
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