Restaurant Appraisal Service in San Diego
Restaurant appraisal is vital to determine its net worth, just like in any other business. Whether buying or selling a restaurant, financial performance, goodwill, and physical assets are key. The easiest way of appraising a restaurant is by valuing the physical assets such as land, building, furniture, cutlery, kitchen equipment, and other tangible goods. Performing restaurant equipment appraisals will enable you to get an inventory of the physical assets and determine their current value. As a seller, if you want to determine the selling price of your restaurant, review your financials. Examine your books to determine your balance sheet and the cash flow of your business. By considering the insurance policies, long-term leases, and cash assets, you will be able to determine your business’s worth by using a multiplier of the net profit. Wiley Financial has bookkeeping expertise that can enable you to find the highest projected appraisal of your restaurant in San Diego. Employees form part of a restaurant’s business value. You may consider the value of well-known chefs or waiters. Other critical appraisal considerations include intangible assets such as the business name, trademarks, licenses, location, reputation, zoning, and permits. As a buyer, consider the liabilities of the restaurant such as the money owed, insurance policies, repairs, pending lawsuits, and negative business reviews. When combined, these factors can be used in computing restaurant appraisal using different considerations. Wiley Financial in San Diego uses three restaurant appraisal formulas, i.e., income valuation, market valuation, and asset valuation.
Income Valuation Method
The income valuation approach considers the amount of income a restaurant can generate for its owners. When the projected income is high, its valuation rises proportionately. Income valuation is determined in two ways; Sellers Discretionary Earnings (SDE) and the Discounted Cash Flow. SDE is usually the best fit when appraising a restaurant. It considers the pre-taxed business earnings, amortization, depreciation, interest expense, and non-business-related income. Once the SDE has been calculated, it is multiplied by two or three. For a more accurate SDE, a hypothetical employee salary is subtracted to lower the SDE. Income valuation provides a more accurate current estimate of a restaurant’s net worth and can be used to project the future valuation estimate. However, changes in the economy can affect the trajectory of a restaurant making the income valuation method less reliable.
Market Valuation Method
The approach emphasizes the restaurant’s market potential more than its current earnings. Appraisal under market valuation approach is arrived at by considering the worth of a similar restaurant with the same business model in the competitive and open market. When there is a higher trend in the market, a new restaurant can benefit from this approach because its valuation is based on the potential of similar businesses in the industry when it earns current income in an absolute sense. It is a fair approach when the buyer and the seller have the same valuation knowledge as it results in a mutual benefit. However, large companies or conglomerates may take advantage by manipulating the numbers in the market valuation approach and negotiate a higher deal by interpreting the market in multiple ways. By analyzing the market trends in San Diego, Wiley Financial helps its clients find the best market valuation of the target restaurants.
Asset Valuation Method
Asset valuation is a restaurant appraisal formula that bases its computation on the business’s current assets. These assets include furniture, equipment, improvements, and any liabilities incurred by the business. Restaurant equipment appraisal is not a very accurate method of business valuation. It is mainly used when the owner wants to quit the business permanently. It occurs when the restaurant has had lousy publicity or has un-loyal customers, leading to fewer sales. The approach is straightforward and favors the buyer as it provides the lowest appraisal. However, it does not favor the seller. It is essential to note that business valuation depends not on one methodology.
Restaurant owners and investors should consult Certified Appraisers for appropriate appraisal expertise. Wiley Financial in San Diego uses various restaurant appraisal strategies that make it possible for either a buyer or a seller to get the value of their money. Contact Wiley Financial today to learn more about restaurant appraisal in San Diego.