What is your "Brand" worth? I need some help.............

[GotRocks]

I've got a very motivated gentleman who loves what we do, so much that he wants to buy the business, and open us up in a different location with myself and my crew as the backbone.

I owe $185K on my property, I spent 7 long hard years building my brand, my techniques, my clientele, reputation,  my recipes, we have a very recognizable logo too.

He wants to keep my "Brand" and get us set up in a stellar location. I was told to come up with my price, my desired salary, & a desired benefit package to make this happen.

BTW, he wants to open by July 4, 2014

The guy has the liquid assets to make this happen right now, but WTF is the last 7 years of my life worth to hand over control to another corporation and stay on, I'd be giving up my restaurant, my catering, etc.

I would love to have some responsibility lifted from my burden, but this is my baby. I am committed so much that I even have my logo tattooed on my arm.

Have any of you done this?

We are not solely pizza, we are primarily BBQ with pizza. I looked at what franchise licensing costs, but there are so many variables to help me get a price in mind.
I'm thinking $xxx.00 buyout, salary with a percentage of gross, please help me figure out what those "XX's should be.

Thank you.

[breadstoneovens]

Listening to you, the business is your soul and you are the soul of the business.

Is a prime location what you want? Would it change in the way you want?
Is this guy going to take some responsibilities off your shoulders or add some for you?
Would he own your business and you work for him or would he be a partner?
What does he bring to the table other than money?

I see so many people who want to be a part of my business, but all they want is to make money off my back. All the long hours, sleepless night and passion is not what they have to offer.

Antoine

[GotRocks]

He wants to purchase my business, relocate, and I become an employee of his.
It would be a huge burden off of me, but at the same time create another burden because now I am no longer my own employer/boss.

What makes this so hard for me is that we have been friends for a year now, he sold me the property that I am currently in, and for a price half of what he could have got for it, yet he still made money on the deal.

We outgrew our current location within a month of relocating.
I think he has bigger plans down the road, plans that I want to be a part of if he decides to go bigger.


He treats his employees in spectacular fashion, they all love him. So I am not concerned about him turning into a "Richard Cranium"

How do you price 7 years of blood, sweat & tears that you used to build a biz from nothing, and simply turn over control to someone else?

last fall I came up with a number that I would sell my biz for, including realty, name, rights, recipes, processes and stay on for training, and be available for support for 24 months.

I think I may subtract my current property debt, and ask that remaining amount for a total buyout, and then determine a salary/benefit package for myself.
Then we have equipment, I invested everything back into the biz for the first 4 years to build up equipment. it is very specialized stuff too

[misterschu]

I've worked at two start up, my biggest regret after leaving them is not having negotiated for equity. Make sure its a partnership of some sort, you're right that it's hard to put a straight $ value on what you've created, and if he's your friend he should understand you're position, and he should also understand for the business that it's worth you having a stake in its success outside of just a salary.

[Chicago Bob]

I've worked at two start up, my biggest regret after leaving them is not having negotiated for equity. Make sure its a partnership of some sort, you're right that it's hard to put a straight $ value on what you've created, and if he's your friend he should understand you're position, and he should also understand for the business that it's worth you having a stake in its success outside of just a salary.

Good point on the equity(...I would want that along with my salary in contract for guarantee employment for x amount of years. The money you owe on the property has nothing to do with the number you are seeking pertaining to the value of what you have built/created. I believe there is a formula for computing your worth and TXCraig would probably be the man that can best help you here on this forum.

Bob

[BrickStoneOven]

Why not partner with him instead of selling the business and being his employee. Is the bigger location close to your current location? Why not open a second store? It seems like a waste to sell your business then close down and relocate. The money he'd use to buy your current business you could put into a second location.

[mitchjg]

Got Rocks:

My $0.02:

An issue I believe is there is that you seem assessing the value of the business based on what you have put into it - be it money, hours, passion, etc.

That is not the way a business is valued for sale.  The general way a business is valued is based on how much money the owner can make and how much risk is attached.

It is like buying a stock for $20 a share and it drops to $5.  It does not really matter if you paid $10, $15, or $20.  It does not matter if you have spent a huge amount of time researching or if you had to scrimp and save to get the $20.  It is only worth $5.

I really would suggest you try to value the business following one or more of the traditional valuation methods.  Maybe it matches up to what you think you should get, maybe it will be more, maybe it will be less.

No doubt about it, if you are going to work together, you need to respect each other and know that you can have a good working relationship.  Liking each other is great. 

But, it is still a business and business is business.

I am not saying that is the only thing, but it often is.......

Good luck

- Mitch

[TXCraig1]

Mitch beat me to the punch, and he is exactly right. It may sound harsh, but it is what it is. You don't price 7 years of blood, sweat & tears because technically speaking, it isn't worth anything. The business is worth what it is worth regardless of whether you built in in 7 years or 7 days. Pricing the business is tough. Determining the value of the brand is actually quite easy. The problem is you have to know the value of the business first. In a business like yours, for all intents and purposed, the value of the brand = the value of the goodwill = the value of the intangibles. Basically, the value of your brand is the difference between the purchase price and the orderly liquidation value of your assets less the value of your liabilities.

Two of the more common ways to value a business are 1) net present value of future cash flows (a.k.a. discounted cash flow or DCF), and 2) market-based where you compare your business to similar contemporary transactions. This is probably the most straight forward. If there have been any recent sales of similar businesses that you have any insight into, look at the value of that transaction as a multiple of some common factor that you can use to compare to your business such as multiples of revenue, income, or cash flow.

If there are no transactions that you can compare to, the basic premise of DCF is to figure out the cash flow you can take out of the business over some reasonable period and determine how much would you trade those future earnings for today. Remember to subtract any cash that you would need to reinvest in the business from your forecast earnings. How much of a discount on your future earnings you take to get your money today is a function of how much risk you and the buyer can agree there is when it comes to actually achieving your forecasted cash flows. More risk = lower price, all other things equal. Buyers and sellers seldom see the risk the same. Describing all the nuances of DCF is well beyond what can be done in this forum.  However you come up with a value for the going concern, any current or long-term liabilities reduce the valuation dollar-for-dollar.

One way that will often net you a higher valuation is to take equity in the new company in lieu of cash. Of course some buyers won't want you as an owner, and you may not want to be an owner if you don't have any control. Since you will be staying on, you may also want to look at a structure where you get an earn-out in addition to the purchase price if certain milestones are hit. This often works when the buyer and seller see risk very differently. You get paid now based largely on the buyer's perception of risk, and you get paid later when you perform and essentially "prove" that your perception of risk was right. If you go this route and take a lower valuation now, the earn out should be such that if you hit your targets you earn more than you would otherwise be willing to take for the business today and you are taking increased risk by effectively deferring a part of the purchase price. Time is risk as anything can happen.

I've never sold a business lock, stock, and barrel, but I've bought plenty. My time is fairly limited right now, but I'm happy to help if I can.

[dmckean44]

You could sell it all away tomorrow and build it all back within a year.

[Auralnauts]

I'm not quite positive this has to do with how much your "brand" is worth but much more with what you're worth. Either way, it all comes down with what you feel is best for your business. Good luck pal.

[GotRocks]

Spectacular replies.

thank you,

I'll post more later, but right now I have some large catered events that I need to get ready to fly out the door.

[GotRocks]

I'm signing the paperwork on Friday, I may be able to share more when we get this done.

[Chicago Bob]

We'll be awaiting your secret deal/response.....that is, if you're able.

[GotRocks]

Why not partner with him instead of selling the business and being his employee. Is the bigger location close to your current location? Why not open a second store? It seems like a waste to sell your business then close down and relocate. The money he'd use to buy your current business you could put into a second location.

A 2nd location would be great, but the problem that we have over and over here is finding any responsible, sober, employees that I could trust to do things correctly, or even show up when scheduled.

Another issue;
How can I, as a small business owner,  possibly compete with these government welfare programs? 

A good cook here can make $22K-$24K annually working 40 hours/week, or they could sit at home all day playing video games on their new 70" TV, while updating their facebook status on their brand new iPhone 5S,  and doing it all on the government handouts that are averaging 32K-35K annually. So it is not a difficult decision for them to not work, and have a more lucrative income by doing so.

My main "Pizza Guy" has the nickname of "6", because he was the 6th person that I hired for the job, but the first person to actually show up on their first scheduled day, we are already looking for "11" because 7, 8,9 & 10 all pulled no-shows.

If I had a decent labor force to draw from, I wouldn't ever consider selling! After 4 years, I have considered walking away from it on more occasions than I can count.

My latest hire was being groomed for a GM position, and one day he took it upon himself to write a new menu, throw out all of my menu's that I have been using for years, delete them off my computer, and disburse these new menus through the dining room without ever consulting with me. Imagine having  menu's that do not match your POS system, and the havoc that would create.

He figured he would just double my raw cost, and not take into consideration the amount of labor needed,  and yield percentage, and priced it out that way.
Then I found he created a website too, all misspelled words

[Chicago Bob]

My latest hire was being groomed for a GM position, and one day he took it upon himself to write a new menu, throw out all of my menu's that I have been using for years, delete them off my computer, and disburse these new menus through the dining room without ever consulting with me. Imagine having  menu's that do not match your POS system, and the havoc that would create.

He figured he would just double my raw cost, and not take into consideration the amount of labor needed,  and yield percentage, and priced it out that way.
Then I found he created a website too, all misspelled words

And this was someone you were grooming......
With all due respect,GotRocks, this is all sounding like you are greatly lacking in personnel management skills. I don't know how much you are paying/hiring these slackers but you might want to consider going ahead and bite the bullet and hire a full fledged GM that knows how to get the show on the road. Then think about expansion, whatever.

Bob

[dmckean44]

$22-$24k a year for a pizza chef is ridiculously low. You're never going to get people to show up to their jobs if you're not paying them a living wage.

Sheesh.

[GotRocks]

And this was someone you were grooming......
With all due respect,GotRocks, this is all sounding like you are greatly lacking in personnel management skills. I don't know how much you are paying/hiring these slackers but you might want to consider going ahead and bite the bullet and hire a full fledged GM that knows how to get the show on the road. Then think about expansion, whatever.

Bob

Bob, I do appreciate your comments,

I wish it was all just that easy as simply as placing an ad, then hiring an experienced manager experienced in both BBQ & Pizza from the dozens of overly qualified applicants who'll show up for the position. <sarcasm>

Many places around here hire convicts on work release from the local minimum security federal prison, and eastern european students visiting in summer on a limited work visa.
Why? Because they have a better chance of them actually showing up when scheduled.  The labor force in this area is horrible, if they have a pulse, and can remember to breath on their own, they get hired.

When they miss work enough to get fired, they have a new job the very same day because we are so short on people who actualluwant to work.
Our high school (although rated as one of the top 10 in the state) graduates everyone no matter what, I've had grads who cannot read or do simple math.

I've had bad crews in the past in other parts of the country, but at least they tried, and I was able to get them trained properly and turned them into a rockstar crew.
Sadly, I've realized that i've got nothing up here that can even be molded into what I consider a mediocre crew.

How does the saying go;  "In the land of the blind, the one-eyed man is king" 
Translation; There is not a whole heck of a lot to choose from in this area, you take what you can get, and try to get it to work out.

I am not an absentee owner, I am the first one in, And the last one out.

[breadstoneovens]

$22-$24k a year for a pizza chef is ridiculously low. You're never going to get people to show up to their jobs if you're not paying them a living wage.

Sheesh.

I agree with Sheesh. After many years in the industry, I can tell you, especially if there are a lot of job around, you need to pay more. A busboy who doesn't speak English makes more money than that.
So a cook that you actually rely on to make good food it worth more $.

[GotRocks]

$22-$24k a year for a pizza chef is ridiculously low. You're never going to get people to show up to their jobs if you're not paying them a living wage.

Sheesh.

Different area's of the country have different pay scales and living expenses, I am above and beyond what the other places in my area pay. The others are at, or under $17-$19K with no bonuses.
That pay scale is for a "Line Cook", and that description fits the responsibilities at my establishment.
If I had someone who I could have take total ownership of the pizza end of my establishment, with little to zero input from me, and afford me some free time, they would in fact be worth more.
But that person has not walked through my doors yet.

I am not in a major metro area, I am basically in the middle of nowhere.
Back in my 9-5 corporate days, I had offers to relocate within the company to many other parts of the country, and the cost of living indexes and pay scales are wildly different not only from state to state, but within the states different regions as well.

[parallei]

GotRocks,

Is this your restaurant/catering business?

http://www.grabyourpork.com/About.html