Does a cafe Business Summary Contain accurate information?
AnswerNo! Business summaries are the greatest works of fiction since Dickens! They do not tell the truth and cannot be relied on. This book will help you analyse the business summary to get to the truth!
Search result for 'business summary' in The Complete Guide to Buying a Cafe
Chapter 4: Analysing The Business Summary2.
"... it’s not as if you have any choice. After you have sent the NDA back, the broker will send you what they call a business summary. This is a 1 or 2 page document that gives you a high level overview of the café. It will usually contain details such as: • Description of the café • ..."13.
"... of the café • Location • Hours of operation • Reason for sale • Equipment • Staff • Financials. - An Example of a business summary - Café Mocha, 62 Pleasant Street, Pleasantville (nearest cross-street Nice Street) Classification Café Trading Hours 6 ..."48.
"... “Fantastic, it’s making $140k per year and it only costs $120k!” but let’s look into that in a bit more detail... - Reliability of the business summary - It is critically important for you to understand that the business summary is not the truth. It may be a version of the ..."
"...It is critically important for you to understand that the business summary is not the truth. It may be a version of the truth, but the details within the business summary need to be thoroughly scrutinised. Do not, under any circumstances, make a business purchase decision based solely on the information provided in the business summary. ..."63.
"... - Financials - When you ask the broker to see the accounts, he will point you towards the business summary. It is better that you ask to see the “certified accounts”, since these represent a much more accurate view of the business financials. Try to obtain as many sets of ..."
"...all of this is net profit. The way to think of the financials is quite simple: turnover – costs = net profit. But remember that brokers will make assumptions to make a business look more attractive than it actually is. For example, you may find an assumption in the business summary in the fine print at the end such as, “Business currently being run under management but net profit based on business being run by two owners”. They then make the assumption that two owners would work 60 hours a week each and pay themselves $50k a year each. What? ..."198.
"... or, perhaps, to open a second one. - Rent - Rent is a critical (fixed) cost and should represent 10-15% of turnover. Rent is subject to GST so be careful to check whether the rent stated in the business summary includes or excludes GST. Rent will usually be based on a lease which runs ..."202.
"... of total turnover that rent represents if turnover stays constant over a number of years. Let’s now return to the business summary example and put into practice some of the information just learned. ..."
Chapter 5: Analysing The Business Summary - An Example
"...The trial period is a set period, e.g. 1 week that gives you an opportunity to view the business on a daily basis and to confirm the turnover as specified in the business summary. The trial period takes place after you have agreed a price to buy the business, but before the settlement has taken place. We will discuss the trial process in more detail later. ..."50.
"... for café use. - Equipment Checklist - When you visit the café, use the following checklist to note what equipment is present and what condition it is in. Check your notes against the equipment details in the business summary. ..."
"...Obtaining a copy of a detailed roster will help to identify how many staff are working in the business. You should reconcile the information in the roster with the information in the business summary. However, the ultimate test is to observe the business and to identify who is working in it. When you do this try to listen to the owner mentioning the staff member’s name and write down all the names you hear and reconcile the names against the numbers / names ..."
Chapter 6: Other Useful Information47.
"... - For each café business summary you look at it’s important to make an initial decision based on the financials. Don’t waste time at this stage – dismiss those that don’t add up and be quick to identify those that look like good prospects. Next you need to get out and look. ..."
Chapter 7: Assessing The Location0.
"... thoroughly assess the business. OK, so you’ve done a thorough analysis of the business summary and have identified a few cafés to look at. The next stage is to go and have a quick look at the café (or, as we mentioned earlier, first check it out on Google maps). Use the following checklist ..."
"...This is usually enough of an analysis to give you an idea of whether or not the description in the business summary matches reality. If, after conducting the initial visit you are still interested, then the next stage is to arrange a meeting with the owner of the café to thoroughly assess the business. ..."
Chapter 8: Meeting The Owner31.
"... 7 days? Remember that a café opening 60 hours a week and earning $8,000 a week is a more profitable business than a café opening 80 hours a week and earning $8,000 a week. Calculate the $ per hour. Ensure you check the opening hours against the business summary and information on the Internet. ..."37.
"... Questions - Question What to look for What is the average turnover per week? Compare the response to the business summary. Ask about variations of turnover throughout the year (seasonality). Ask if this does or does not include any cash not declared. What are your food costs per ..."40.
"... – ask if it includes owners’ or family members’ wages or staff paid by cash. What is the rent per week? Check against the business summary – ask what the additional outgoings and strata rates are. How much profit do you make per week? Check against the business summary – if it is ..."41.
"... business summary – ask what the additional outgoings and strata rates are. How much profit do you make per week? Check against the business summary – if it is different ask them to explain why it is different. - Staff Questions - Question What to look for How many chefs do you ..."50.
"... that the staffing is less than you have observed. What rates do you currently pay staff? Obtain pay rates for all staff. Use this to populate the roster to calculate weekly staff costs – compare this to the business summary. Do you have a sample roster? If they haven’t provided ..."102.
"... - Premises Questions - Question What to look for How many seats inside and outside? Count the number of seats to verify the business summary numbers. Is there potential for better arrangement of the seats or extra seating? What is the current rent / terms of the lease? Cross ..."103.
"... of the seats or extra seating? What is the current rent / terms of the lease? Cross reference with the business summary / financials. Check if the rent figure includes GST. Check how long is left on the lease and if there is an option to extend. Will the lease be a new lease? Check if ..."108.
"... other outgoings? Other outgoings should include strata fees or any other shared fees, etc. When is rent reviewed? Again any rent increases should correspond with the outgoings in the business summary. What are the percentage yearly increases in rent? This is normally a fixed percentage and ..."
Chapter 9: Analysis Techniques165.
"... contract (of sale) - Any other relevant documentation - Negotiations - So, you’re ready to make an offer. Let’s recap on valuations from our business summary example. Factors that influence the asking price include: • Current profit • Franchise / ..."
Chapter 10: The Trial & Settlement
"...business and sign off on the takings at the end of the day. The aim of the trial period is to ensure that the takings for that week are equal to or greater than the $ amount agreed with you (usually this is the weekly turnover specified in the business summary). ..."