I just ran across an established hot dog cart business for sale in Bakersfield, CA. It’s located in front of a busy Lowe’s home improvement center and has annual sales of $92,000. Not bad.
The owner has listed this business through a broker, and it is a franchise operation, so there are some extra costs involved which bring the profit margins down to 40% which is really low (the average independent hot dog cart operator keeps 60% to 70% of profits). The asking price is $89,000.
Good deal? If you apply the usual business valuation formulas such as setting the asking price as a multiple of revenue or EBIDTA (Earnings Before Interest, Depreciation, Taxes, and Amortization), possibly. But I’m not so sure. Here’s why…
With a little bit of knowledge, you could duplicate this business almost anywhere in the country with start up costs under $5000. With a little more knowledge, you could do it for $1500. You would save $87,500.
That’s what I teach regular folks to do every day. People with no previous business experience. Would you pay $500 to learn how to do this? (Hint: You won’t have to pay nearly that much.)
To your success,