1) I’m going to give you a few tips about selling a business.
2) I’m going to give you a tour of this cafe for sale right in the heart of Cabbagetown.
Whenever I list Toronto commercial real estate I always employ the help of my good friend and colleague, Tobias Owen. Not only does he have a degree in economics, but he comes from a long line of commercial realtors and I trust him with my numbers.
When we sell a business, what we’re actually selling is cash flow, okay? All these things around you that you see at the business, this nice coffee machine, Tobias’ calculator, this lighting, that’s not actually what we’re selling when we sell a business. These are all resold improvements. What we sell when we sell a business is cash flow. How much money came in and how much money they make. Tobias and I meet with a lot of business owners trying to sell their businesses and the first question we ask them is always the same: “How much money are you making?” You know, time and time again we hear the same thing: “Well, you know what, we’re not making any money right now, but the business has a lot of potential.” We hear that word often, “potential.” You know, for years we’ve been trying to calculate what potential’s worth. We’re actually planning on building a potential empire. One day were going to have potential stands on every corner, but until we figure out what it’s worth, we can’t put a price on it, so that’s not what we sell. What we sell is cash flow.
Now that’s an example of something that you shouldn’t do when you’re trying to price your business. You’re not pricing it how much work someone else is going to put into it or what someone else can do with it, what you’re trying to sell is how much money you made. You’re trying to sell your own profit. In the case of a business like this, we’re asking $54,900 and that’s a direct multiplier of how much money they made last year. The bonus, the extra things you get with a business like this are the leasehold improvements. Such as; the Laminate floor. This is premium laminate. They probably spent about $10,000. Full electrical; the electrical’s been done. Licensed electrician, permits approved. Plumbing; Plumbing’s been done. All upgraded, brand new bathrooms in the back, good for customers. They’ve got a top of the line reverse osmosis water filtration system. In addition, It’s got a prep room out front, brand new. It’s got an industrial strength dishwasher, chill display case, the POS system’s ready to go. You could literally buy this business today for $54,900 and baking tomorrow morning.
Pricing a business is a lot like pricing commercial real estate property in Toronto. You take your gross income, you minus your expenses, that gives you your net income, you can plan a multiplier for how quickly you’d like to make your money back…that’s how you get your sale price.
You know how much this space is to rent? This place, cash in, taxes, maintenance and insurance included is only $1250 a month. $1250 a month to run this cafe. That’s less than you’re probably paying for rent. I mean, how many cups of coffee do you have to sell to make $1250 a month? Not very many. Add some more money on if you’re making cookies and this is a solid business.
Now, although we’re selling cash flow here, the leasehold improvements here have been done to a variety of businesses. You don’t have to sell coffee. You could sell fresh baked goods, you could sell soups and sandwiches, you could even sell gelato out of here. Now, there’s no liquor license, but the world is your oyster. If you’ve got a great idea for a small business and a great product, you can move out of this space.
This is a two-year multiplier. This business is designed to pay you out in two years. If you pay $54,900 for this business, by the end of 2015 you’ve got all your cash back in hand and everything’s raw profit from there. This cafe is ripe for someone to take it over. You know what you should do if you’ve ever thought of owning a cafe? Call a few of your friends, put a few grand together each, make an offer on this place, quit your job, you could be in here serving coffee and baking muffins tomorrow morning.
My name’s Chris Borkowski. You know me as Condo Chris. This is my esteemed colleague Tobias Owen. We both work for Re/Max Hallmark right here in the city of Toronto. If you’re thinking of selling your business or maybe you’d like to make a life change and purchase a business, by all means consider us and give us a call.
If you have any questions, or you’re looking for a Coffee Shop for sale Toronto, Toronto commercial real estate investment, or office space, call me at 416-486-5588 or email firstname.lastname@example.org.