Late night delivery store

[WhosHongry]

Hey gang...I am thinking of purchasing a late night take out/delivery pizzeria that is doing fairly well with little or no marketing.  3 year old biz that has seen annual revenue grow from $150k to $170K.  So it is basically 12-14k a month in gross with monthly expenses at about 11K.  Current seller works there at about 40 hours/week.  I work full time as a realtor so this would not be an absentee venture but more likely a 20 hour a week gig.  Since I have good primary income, I would like to focus on the expansion of marketing to really see the business grow.  The location is good as it is near two universities and the biz has niche of late night delivery til 4am.  Lease about to expire so I can renegotiate lease terms that fit my plan hopefully.  Biz is 40K.  Any thoughts?

[chiguy]

 Hi Whoshungry,
  There are plenty of these businesses for sale all over with much better numbers. Take a look at www.bizbuysell.com in you're area. There are many businesses with decent numbers 4 sale. Also is the 12-14K in sales including the sales tax which could be 7%, no?? You also should ask if you want to be awoke by an employee at 3:00am with a problem. Also what if they don't show up, do you want to be making pizza till the sun comes up. If you still are thinking about turning this place around i would total up his USED EQUIPMENT and  offer him .25cents on the dollar total. I am sure you're bid won't exceed $20,000.         Chiguy         

[WhosHongry]

Chiguy, thanks for the response.  I have actually been watching bizbuysell.com for quite a while now.  It was my understanding that a biz is properly priced when it is listed for sale at a price that is 2-3 times it's net profit.  The net profit on this place is $43,000 + for last year and it is for sale for $39,000.  I have not seen anything for sale on any of the business listing websites that I can walk into and take over, renew the lease terms at the same rate and make $40K with a $40k investment.  My goal is not to increase my income right away but to increase the sales through a solid market plan to ultimately increase revenues to a much higher level by the end of the first year.  I do agree with you that I have little interest of getting up at 3am to deal with a probelem at a store that is 19 miles from my house but perhaps that is simply part of the catch 22 of having a unique, niche-style pizzaria by delivering in the wee hours of the night, while also have no competition in doing so.  I understand your advice about structuring it as an asset sale and would prefer that also.  Why, just in case, would a seller NOT want to have it structured as an asset sale?

Thanks again for your input.