Thinking of buying a business, advice wanted!

[ANDREW07]

Hi

I am currently looking at the idea of purchasing a business in my home town in the UK. I have included the link to the advert below

http://uk.businessesforsale.com/uplo...DFD67BD796.pdf

I would appreciate any feedback on what you think, I currently have around 6000GBP saved up and any suggestions on financing the purchase would also be good.

Thanks

Andrew

[jasaunders]

Obviously much more information is needed, such as a detailed analysis of their books and the property. Here are my thoughts:

In the restaurant industry, businesses typically sell at a 3:1 ratio of revenue to sales price. Based on the asking price of 125,000, this is almost exactly a third, based on 12 month revenue of 375,886 (which was interpolated from the 18 month revenue figure given). So this looks reasonable. The profit is given as 116,000 on revenue of 564,000 which is about a 20% margin, a little above industry average, but explained when considering the amount of alcohol sales. The food/drink ratio is rather high (45/55), alcohol sales have a much higher margin than food sales. If you do an income valuation, a typical restaurant industry goal is 30% net income return on investment. With the net income interpolated to a 12 month period and the asking price, you are about double that, which is explained by the higher profit margin and shows this may be a good sales price.

FYI, my information is based on EBITDA. I assumed the numbers stated on the sales sheet were as well, although it does not explicitly say this.

[ANDREW07]

Thanks for the feed back; I will take this into consideration. I feel that there is potential to make more from alcohol sale if events are organized such as live music etc as i know this does not happen at the time being. Every 2 years there is a marie time festival held over 3 days in my home town, this year seen the bar/restaurant turn over 21000 in that weekend alone.