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
I agree and can answer yes to 95% of the questions but sorry my business is not for sale. If I ever do sale out; I know that my record keeping would be the biggest selling point and second I would think my standing in the community and my contacts would be a high selling point. I would think that if your business is running that you would also need to add into the selling price the value of the current equipment that you have. I have tracked every event, every point of contact, every day I have operated, every dime that I have made spent, donated, or lost. Yes, I said lost because I have tried things that just did not work and some of these things have cost me money (profits) but I can always explain that I tried this and it did not work for me. As long as it is fun for me I guess I will be doing this for a while longer.
Duggs Doggs
Good!! Good!!
It is so important to try new things. Some will be profitable and some won’t but if you don’t experiment you will never know. Sounds like you run a tight ship Michael. Good for you (and Good!! Good!! for your business)!
I learned so much from this forum about the dog business I “almost” bought a couple of months ago, fortunately, I asked Steve and HDCN before I committed. I strongly suggest you read up these forums both past and present and see what us doggers are talking about, those are the same concerns we would have when buying or selling! Also- for the doggers in Akron,OH area, I came across a flier here in Cleveland about the Bridgestone Invitational Golf Championship August 1-5. Thought it would be a good venue to sell a few dogs.
Knowledge is power. Thanks for the heads up on the gig Robert. I hope it works out for someone here!
Good set of questions. I would also suggest:
1) a non compete agreement for a specified number of years (1 ti 3). You don’t want the previous guy coming back into your neighborhood with a snazzy new cart and grqbbing his previous customers back. AND the agreement can be depreciated over a period of years as an asset.
If you are taking over the business name, make sure your seller has not incurred unemployment liability. Previous workers can file for unemployment down the road and you would get socked with an assessment, since you have the business name.
Great additions to the list Bob. Thanks!
out here I have seen a hot dog stand for sale in front of a lowes hardware store for 90.000.00
now it’s 80.000.00
and I think, that is a lot of dogs to pay for that.
and you are under contract of Street Eats, which works for all the lowes and home depot here.
I asked them once about thier contracts. all they said in the reply was carts/stands are needed in my area now.
but they never answered anyother questions.
I think I can see why 99% of the stores here have no carts.
Try dealing with the store manager first. Sometimes you can deal with them directly which is a lot better way to go.
Steve the store manager has the right to say yes or no to a vender being at the store but Street and eats has the contract you sign and ALL the rules and regs!!