• Business and Finance
• Family
• Computers and Internet
• Auto and Trucks
• Education
• Health
• Hobbies
• Home Improvement
• Legal
• Marketing

• Home
• Arthur's Articles Home
• Browse Categories
• Browse Authors
• Submit an Article
• Search for Articles

Home » Business And Finance Articles » Whats It Worth

What's It Worth?

Sound financial business planning means taking ongoing assessment steps looking at the business from multiple perspectives including capitalization, expansion, menu concepts, cash flow and even an exit strategy. Whether you are a chef dreaming of your own restaurant, the head of a family business discussing succession, an independent considering retirement or you are thinking about buying or selling, determining the business market value is a necessary process for success.

Adjust Cash Flow

To determine the profitability value a business falls into, it is necessary to determine the Adjusted Cash Flow of that business. The Adjusted Cash Flow is equivalent to its earnings before interest, depreciation, and taxes (EBIDT in accounting terms), plus additions or subtractions for owner's salary, discretionary, single occurrence, or non-cash expenses. Once a thorough analysis of the financial information has been completed, and the Adjusted Cash Flow determined, the category of Market Value is defined.

In general, a privately owned single or small (1-3) multi-unit business will fall into one of the three profitability categories:

• Positive Cash Flow
• Break Even
• Asset Sale

Positive Adjusted Cash Flow

This category will generally represent the highest Market Value of an on-going business. In this situation the business is profitable and established. The buyer is purchasing a combination of the historical cash flow, fixed assets, operational assets (trade name, concept, menu, etc.) and goodwill. The Market Value for businesses in this category is based on a multiplier of the Adjusted Cash Flow, that ranges between two (2) and five (5) times Adjusted Cash Flow. A second value is determined by using a multiplier of Gross Sales (net of sales tax) between 30% and 40%. Business value is generally somewhere within the range of these two numbers. A sophisticated buyer expects that the price they pay would net an annual return on investment between 20% and 50%.

EXAMPLE: Adjusted Cash Flow $ 65,000 x 3.75 = $243,750
Gross Sales 725,000 x 35% = $253,750

This business would have a value of approximately $250,000.

Break Even

In this category, the business is marginally profitable or losing money. In this type of transaction, the buyer is more interested in fixed assets, location, lease terms, and the cost of converting the existing business to their intended use. In Break Even transactions, Market Value is determined by combining the value of furniture, fixtures, and equipment (including consideration for installation), leasehold rights, tenant improvements, with some consideration for gross revenues. Break Even Market Value is sustainable only if the business is operational, and the owner has the financial ability to continue operating until the sale is closed.

Asset Sale

This category is comprised of closed businesses or businesses that are experiencing extreme circumstances. An extreme circumstance may include a seller who does not have the financial means to continue operating. It may also be a secured creditor or landlord whom has had to repossess a business, or it may include a business owner being forced to sell for reasons beyond their control. Any of these situations create a severe disadvantage to the seller, and in turn has a dramatic effect on the Market Value. In these situations, value drops to that of auction value for the fixed assets, plus whatever premium might be negotiated for location, leasehold rights, and the fact that the equipment is in place and operational.

Other Considerations

In addition to the cash flow, tangible and non-tangible assets of the business will influence Market Value. These tangible and non-tangible assets may include Furniture, Fixtures and Equipment; Leasehold rights; and Books and Records. Although not quite as important as profitability, these other assets will directly affect Market Value.

Whether you are evaluating a purchase price, planning for succession or positioning your business for sale these other assets should be considered. But is should always be remembered that the bottom line for determining the actual value of your restaurant business is the simple answer: what a willing and able buyer agrees to pay!

And here is another random article you might be interested in...

Cash Back Card – Buy to Save!

Credit card cash back offers have the potential to change the way consumers spend their money. Who would have thought that you could get money just by spending some? With banks rolling out credit card rebates, saving has turned out to be the latest aspect of buying. Consumers can now choose from a wide choice of rebate credit cards according to their specific needs.

Cash Back Card â€" What Are They All About?

A cash back card is ideal for shopaholics! The promise of getting a few bucks back at the end of a spending spree might remove some guilt of burning money â€" on the other hand, it may add to the retail therapy. A cash back card entitles the cardholder to a certain amount of money or a refund for every purchase made by using the card. Credit card rebates range from 1 per cent to 5 per cent and differ from transaction to transaction, depending upon the contract between the credit card company and its associated business partners.

Groceries, shopping, school fees, electricity and other utility bills; mobile phone rentals ... the possibilities are endless! Just about any transaction through a cash back card ensures reimbursements â€" however small â€" for the cardholder.

The Flipside of Rebate Credit Cards

If this was all beginning to sound too good to be true, you were right! This, like every other promotional offer, has certain pitfalls. Finding the right card amongst a host of rebate credit cards out there could be quite a time consuming task as there is no uniformity in the benefits offered by different companies. But be sure to make an informed choice after weighing all the options on hand as well as your specific needs. Each credit card company has tied up with a particular set of businesses, outlets, and service providers to offer these credit card cash back offers. Thus, you would be well advised to obtain a card that offers the most lucrative rebates on your most expensive or more frequent purchases. If you have any big-ticket expenses coming up, that you plan to charge to your card, this could be a good place to start.

Another major area of concern for a cardholder is how these rebates can be redeemed. Some cards have a minimum and maximum cash back limit and any transactions beyond the specified limit remain unaccounted for. Other credit card companies require cardholders to request reimbursements while a few others do it automatically. Most cards will reflect the points in your statements.

Are Credit Card Rebates Really Worth It?

It remains to be seen whether credit card cash backs will be a success or not. Are these offers trying to win the confidence of consumers, or simply trying to tempt them into abandoning old-fashioned cash forever? If you truly want to protect your own interests and beat the credit card companies at their own game, make sure you make a knowledgeable, well-calculated decision while choosing a cash back card.