Hi Steve,

I would like to sell my cart and business as one. How do I arrive at a price that’s fair?

Thanks, Anonymous

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Hey Mr A. ,

Is it built to sell? This is a something to keep in mind while you are building your hot dog cart business, not just when you are ready to sell it.

A business usually sells for 1 to 3 times earnings (yearly profits). For example if your business showed a profit of $20,000 last fiscal year, you should be able to get somewhere between $20K and $60K for it.

The range depends on many factors.Here are 21 questions to ask when buying or selling a hot dog business…

  • Is the business is growing or declining?
  • Is the local economy growing or declining?
  • Does the business have a fixed daily location?
  • If so, is the location secured with a contract?
  • Does the business involve fairs, festivals, and special events?
  • If so, does the business have contracts lined up at the same festivals for next year?
  • Does the business run independently of the owner, or would the new owner have to work it themselves?
  • Are there solid financial records (Profit and Loss Statements at a minimum) dating back at least three years?
  • Can you provide the new owner with your business tax returns for the previous three years?
  • Does the business have a good reputation with the authorities? In other words, has the business had any legal or financial problems that can make doing business difficult in the future?
  • Does the business carry any notes or debt on it’s equipment?
  • Is employee turnover high, or does the business have long time, happy employees?
  • What condition is the equipment in? How long will it be serviceable?
  • Does the business have solid relationships with distributors and suppliers?
  • Does the business have a good relationship with and current approval from the local health department?
  • Is the seller willing to assist the new owner for a specified time period to aid in the transition?
  • What do the current customers have to say about the business?
  • Does the business have systems in place to acquire new customers on a regular basis?
  • Can you offer financing to the new owner?
  • Does the business dominate the local area or does it face significant pressure from competitors?
  • Is there room for growth? Can the new owner do things to expand the business?

If the business is not currently running it would only be worth the depreciated value of it’s assets. For this reason alone, even if your business is declining don’t shut it down before you put it up for sale. A running business is always worth more.

I always say to build your hot dog biz with the intention of selling it, even if you never think you will. You will end up with a much more professional and solid enterprise as a result.

Any other thoughts my slingers? Let me and Mr. A know in the comments.

-Steve