Ok so I found a person who is retiring and wants to sell his convenience store. I don’t have much info as of yet but want to get some direction here.
Asking: 70k + inventory
Average profit 5-6k
Hours are 9am - 8pm, closed sunday
It’s in an industrial area
They sell beer/wine, check cashing, atm
There is hardly anything around as far as businesses go other than industrial.
How can I find out the market value of this place and determine an offer price, etc…?
I do work full time so I would need to find someone to work there. I do have a cousin with some convenience stores and he could assist as far as questions I have. What he does is offer a percentage of profit to a helper he trusts that then manages / works in the place.
You base the relative value of a commercial property on the income it can produce. You can generally figure that the value is net operating income minus debt
service (annually) multiplied by a factor of 10. This is a ballpark figure and it’s subjective.
An immediate question that comes to mind, though, is: What do you know about convenience stores or retail? I don’t want to rain on your parade, but if you’re completely clueless about running any kind of retail establishment you might have trouble coming up with solid numbers by which to make your projections. If you’re relying on the seller’s numbers, you could lose your shirt. Sellers are known to inflate income figures or hide expenses to manipulate value.
I’d think long and hard about what I was getting into and make sure the numbers are good before getting involved in an enterprise like this. I’d also see what
the chances are that I could increase the income – and the value – of the asset. If you don’t have a list of good, proven strategies in mind, you could be
setting yourself up for an expensive education.
IMO these type of business need to be owner operated, especially new owners. C-stores run by individuals not vested, will ultimately cost you in the long run. Losses could come from inaccurate accounting (theft), lost inventory, inadequate customer service, etc.
But to answer your question:
A good way to determine the value is:2x - 3x SDE (Seller Discretionary Earnings) or EBITD (Earnings b/f interest, taxes, depreciation).
Bear in mind this is just an estimate, try to get as much of the “books” as possible b/f you plunge in. Ask if their tax return are even close, look at compeition, look at ways you could increase revenue … deli, smoke shop, lotto, phone cards, specialty items, etc. Lastly, take a look at the fixtures, coolers walk-in if any, repair records. Also does he offer seller financing?? IF not, personally i wouldn’t bother.
If he is retiring, ask for 2week training. Just from what you stated it seems overpriced, but if room to expand and little compeition it might be worth taking a shot - As an owner operator.