.png)
01
Why do people go into Buying a Hospitality Business
-
To control their own future
-
To take advantage of their skills and abilities
-
To make money
02
Will the bank actually support you with Finance
The short answer is yes, but the trick to getting approved and borrowing the amount you need means having experience, a business plan and good security.
The ideal situation is for your new business to borrow the money, and your new business to make the loan repayments from the profits. Then in the end, you own the entire coffee shop and when you sell it, you get the lump-sum amount.
03
How do I find the right Hospitality Business to buy
Our brokers will help you narrow down a short list of good coffee shops that suit your goals and advise you with your research.
-
We will also recommend solicitors and lawyers that we work with and trust.
-
We will assist and advise you with your research and investigation
-
We will recommend experts in law, business accounting, and finance
04
What is Due Diligence?
Due diligence is used to investigate and evaluate a business opportunity. The term due diligence describes a general duty to exercise care in any transaction. As such, it spans investigation into all relevant aspects of the past, present, and predictable future of the business of a target company.
Due diligence sounds impressive but ultimately it translates into basic common sense success factors such as "thinking things through" and "doing your homework".
05
I found a Business to Buy, now what?
Our brokers are dealing with people buying and selling businesses on a daily basis and you can be confident that we will guide you through every step of the buying process.
-
Financials - Understanding What They MeanProfit margin: The amount by which revenue from sales exceeds costs. When considering adding a product, you should factor in the costs of materials, waste, and labor. This will allow you to price the product so that all these costs are adequately covered. What is Gross Profit? This is the profit after you have paid for the “COG’s” Cost of good is produce, ingredients, coffee, take away cups etc. What is Net Profit? This is the amount you have left after paying wages, rent, electricity, insurance, etc To manage and monitor your money, and clearly see how much is going on COG's, wages and general running costs it is a good idea to us a spreadsheet to manage your P&L. There a many accounting packages available that can assist you in managing your café which allow you to allocate income and expenses to the correct categories and to set up bank feeds. Below is an example of what to aim for when running your cafe. It is based on industry guidelines and has been put together to assist in managing your business.
-
What is your Net ProfitNet Profit is what is left over after you have paid rent, outgoings, wages and salaries, cost of goods, expenses, fees etc. Annualising the amount will give you the profit for a year. The annualised profit amount then uses a multiplier. This number differs from business to business and mean how long the buyer wants to get their money back from the business.
-
How do I increase sales and turnover?Get the basics right and you will start seeing an increase in turnover. Once the processes are in place it is a lot easier to focus on increasing sales and turnover. Fixed costs such as rent, electricity and insurances cannot be changed but wages and cost of goods can play a big part in either letting the costs spiral out of control, or manage them correctly which will be reflected in your profit margin.
-
Getting it right - The FundamentalsA Barista is key to your business, do not underestimate the important of the barista who interacts with your customers everyday and is relied upon to make good consistent coffee. Listen to your customers and appreciate the feedback Customers not only come to your cafe for coffee and food, but also to feel welcome and loved. It is often said, if customers are not taking photographs of your food it is not presentable, or "Instagramable"
-
Efficiency is keyUse a POS system to efficiently control the flow of orders to directly send orders to the barista and kitchen saving time and reducing staff numbers and allowing staff to focus on customers. Make sure work areas, seating and and equipment allow for seamless flow of staff to be more efficient. Efficiency is key in having a team that focus on the important things which increases productivity and increases sales. Reduce your menu size, a bigger menu does not mean more customers. A simple menu allows for a better control of COG's, prevents wastage and allows the kitchen to focus on presentation and keeping the food fresh and consistent. The bigger the menu does not mean you will attract more customers, simplifying the menu allows you to control and manage product waste and allows the kitchen to focus on producing food that showcases fresh produce.
-
Service, Service, Service - Get it rightStaffing is a critical factor in running a business, too many staff cuts into your profit margin, too little staff does not allow for a good customer experience. Customers look for efficient and attentive service. Staff need to understand the menu, up sell when required and understand their job description which allows them to focus on the customer. Customers will soon look fo ra better experience if the staff are not attentive enough, or lack the basic understanding of hospitality.
-
Sales by productSales by product is the best way to see what is selling and what is not, this allows you to keep track of the sales of individual menu items Menu items that have high sales and high margins are more beneficial than menu items that have low sales and have low margins. Focus on dietary requirements, there is a significant shift by customers to look for a menu that has a healthy option. Food costs: How much it costs you in raw materials to make a dish as a percentage of how much revenue you generate from that item. This helps you price your menu appropriately and monitor food waste.
-
Grow your businessNow that you have the correct staffing numbers, increased efficiency, a menu that is manageable, processes in place and table service on point - It is now time to start increasing capacity and grow your business.
01
When the Financials are Difficult to Understand:
When a business cannot clearly show the turnover via the financials, or the financials are incomplete, it makes it difficult to decide whether the business is is a viable purchase.
The good news is that there are ways to conduct due diligence on a business allowing you to make an informed decision and not lose out on what might be a very profitable business.
Follow these steps to assist in conducting Due Diligence when there is missing financials:
01
The Trial Period:
To prove the turnover of a business a trial period is often performed which consists of the buyer being in the business to observe the actual daily and weekly income of the business.
Both the buyer and seller agree on the turnover to be realised over a certain period with a variance of somewhere between 5% - 10%.
A trial period is only performed once an offer has been made based on reported profits and a deposit paid. This is a difficult time for the owner as he must now tell his staff that the business is for sale and he is exposing the inner workings of his business to a potential buyer.
02
Visit and Evaluate
Another form of verifying a vendors reported income is to visit the business at different times of the day to see the foot traffic visiting the place. This will allow you to easily see if the reported figures are are accurate.
Bad weather has an impact on all businesses so be mindful when evaluating the income of a business in bad weather.
03
Spreadsheets and POS Printouts
Business owners often only work on spreadsheets and printouts from the point of sale systems in the business. Your accountants can be a great help at this stage to work through the information and to present the financials to you in an understandable format.
Please be mindful of the owner being reluctant to part with the information as in most cases it is the only copy they have.
04
The Handover Period
The handover period takes place a week or two prior to the settlement date and after the contract and the assignment of the lease have both been signed off with no special conditions outstanding.
This is the time the previous owner introduces the new owner to the staff and suppliers, as well as the customers. The previous owner also uses this time to show the new owner the operation of the business and to make sure that the transition to the new owner is smooth and without incident.
05
Finally
The Coffee Shop Brokers are here to assist you along the way and will make sure you have access to all the information you require to make an informed decision on purchasing a business