When it comes time to sell your restaurant, there are many things that you need to consider. This is the first part of a two-part series in preparing to sell. Here, we’ll talk about tips to increase restaurant valuation. The two parts consist of the following:
Part I – Three Tips to Increase Your Valuation Multiple
Part II – Financial Due Diligence (Quality of Earnings Report)
To kick us off this series, here are three easy tips to help you get top dollar in the sale of your restaurant.
- Prepare your books and records prior to listing your restaurant for sale. The purpose of doing this is twofold. First, it lets the buyer see the true representation of the earnings capacity of your business (the profit and loss statement) and second, it lets the buyer know the type and quantity of assets required to operate your business (the balance sheet). Since buyers usually look at three years of history, it is smart to begin the process now rather than relying on seller’s adjustments to arrive at ongoing earrings. This is because a buyer will more likely than not discount the quality of your financial data and offer a lower price if they see a lot of adjustments.
- Analyze all your locations’ profitability and close underperforming concepts or locations. This might be difficult because of in-place leases, but an underperforming location will decrease the overall value of the restaurant group.
- Review the fixed asset list of the restaurant group and dispose of equipment that is not in use. Also, review the condition of the remaining capital assets owned by the restaurant group to ensure the assets are well maintain and no immediate maintenance is required by the buyer on Day One.
These are relatively easy steps to be taken to increase the value of your restaurant group.
In Part II, we will talk about a financial due diligence or QofE report.
If you need any help with prepping for restaurant valuation, please reach out to one of our restaurant professionals.
Michael R. Metzler, CPA, ABV, CMA, CGMA, ASA