Over a period of 6 weeks we found various cafe’s and coffee shops for sale in Manchester and Birmingham. We visited lots of these cafe’s and coffee shops, spoke to the owners and observed customers.
Here is what we found out – most of these types of businesses don’t have very good financial records and the ones that do have don’t necessarily reflect reality if you know what I mean ;). So you can’t rely on the financials they provide.
It also became clear that business agents live in a different world, they value these businesses by checking the wind direction rather than any clever metric. It would appear that if the business owner says I think it’s worth £70k and thats what I would like for it then that is the price that gets advertised. This price usualy can’t be backed up by any facts or figures so is a work of fiction.
In most cases we judged these businesses to be worth around half of what they were being advertised for. We are also convinced the only way to work out what kind of revenue this type of business is really doing is to sit outside for the lunchtime period (12pm-2pm) and count the number of customers going in. Then work out their average sale per customer by asking them what a customer typically buys * that by the number of customers and you have the bulk of their daily revenue. Add a bit on for breakfast trade and the rest of the day and you have the daily revenue * this by the number of days they are open a week and you have the weekly revenue.