Opinions Needed: Ice Cream Business For Sale

[retiredinnyc]

My dad owned a deli in nyc, I know the way it works here on selling small businesses, add up the stock, equipment ,building the add up to FIVE times the profit and that's the maximum I would pay. Otherwise open your own from scratch

 

[jetpack]

Unless you have experience in the business and know how to expand it or make it much more profitable.. it's really not worth it.

My experience is with online businesses, and many of those sell for only 3x annual profit... and generally have very low overhead.

If it could sell mine for even 5x I'd do it in a heartbeat.

 

[Bestwifeever]

Why do you want to buy it? Maybe not the best investment but maybe there are other factors.

Why does the owner want to sell it?

 

[travelover]

Why do you want to buy it? ......

Free ice cream?

 

[Fermion]

What about a banana stand?

 

[retiredinnyc]

Some of these answers are sarcastic and not helpful to his question

 

[pb4uski]

Welcome to our world. You're obviously new here. We are a pretty sarcastic bunch.

 

[Fermion]

I was being serious. There is always money in the banana stand.

 

[harley]

And big hairy spiders.

 

[Totoro]

I don't see how sales alone can tell you anything about value.

It can be helpful if you have lots of comparable businesses that sold earlier.

Gives you a quick ballpark of what the markets is like, and what it should (or could after profit improvement) be worth.

 

[travelover]

There is always money in the banana stand.

Yea, a whole bunch.

 

[HFWR]

Yea, a whole bunch.

And not much appeal...

 

[Texas Proud]

Right, some multiple of profit, not sales. While I hear sales multiples thrown around in terms of valuing a business, I think those are just after-the-fact averages. I don't see how sales alone can tell you anything about value. Sales in a declining market, and/or sales with little/no profit are not worth much, may even be a liability.

Yep, multiple years records, tax forms, etc are needed to paint a picture and a trend. Lots of negatives have been pointed out, I don't see how this can make sense at all, and I'd be even more worried that some unexpected cost (repair, lawsuit, etc), could wipe out all the sales, let alone profit.

This seems far riskier, and far more work, than putting the money in an index fund. Would you put $325K into a single stock? I wouldn't, and I wouldn't recommend it, unless you want tp 'play' a little, and $325K represents less than 5% of your liquidity.

-ERD50

The ratio to sales is just another number.... you compare it to other valuation numbers and see if it is way off or not... as you point out, it might not mean anything... the last temp job I had was with a company that had sales go from $15 mill down to $5 mill.... went from a profit to a loss... when the owner was told that his business was worth less than $1 mill he could not believe it... AFAIK, he still owns it.... (BTW, the value was in the equipment and software, not the revenue or lack of income)....

 

[Jimbo125]

I was being serious. There is always money in the banana stand.

Another Arrested Development fan!

 

[RunningBum]

There is a ice cream business for sale in the old city I use to live in. What do you all think of the attached P&L (2014) and current valuation? The business is being sold for 325k. They only accept cash and are open 6 months a year.

I have a few thoughts to share, but wanted to get your opinions!

So now that you've gotten some feedback, what were your thoughts on this?

 

[Rustic23]

For just about all the reasons above, I concur. RUN AWAY.

Here is another one. Friends in the neighborhood decided to open a Pizza place. Small town, with no big chain pizza stores. In fact no pizza at all. They were going to open it, hire a manager, and..... well you know, enjoy retirement.

In the first year they have burned through several managers, and put in countless hours. Is it making money. I think so, but not near ROE they would be getting on corporate bonds! While they profess to be having a great time, I think they will sell out within another year.

So if you are doing it because you always wanted to have an ice cream store, go for it, otherwise RUN AWAY!

 

[FUEGO]

So if you are doing it because you always wanted to have an ice cream store, go for it, otherwise RUN AWAY!

+1

I'd rather work in a pizza place as a pizza maker or a scooper in an ice cream parlor than own the place. Come in, make/serve food, go home, no worries.

I met with a 30 year old guy recently that was setting out on a very very long sabbatical or perhaps complete early retirement if the numbers end up working out. His plans were to work in some low wage jobs occasionally on a part time basis just for the fun of working in different places (coffee shop, deli, pizza place, etc). Sounds like a much better plan than dropping hundreds of thousands on a place just to make a minimum wage salary and be stuck with the responsibilities of ownership.

 

[travelover]

........ Sounds like a much better plan than dropping hundreds of thousands on a place just to make a minimum wage salary and be stuck with the responsibilities of ownership.

Right, plus all the free ice cream and pizza you can eat.

 

[dsp0725]

Update. Just got this reply from the agent.

###
The expenses could be padded for income tax purposes... The listing agent says the 165K business (including brand name which is well established) net is 9%. The 100K for the building is reasonable as is the 60K for the equipment.


[FONT=trebuchet ms, sans-serif]I ran this by my broker who has investment properties all over town. He thinks it's a decent investment for passive income for 6 months.[/FONT][FONT=trebuchet ms, sans-serif]Wages and product costs can be controlled. The location is excellent as North ******* is really hot now. ***** neighborhood is booming and the ice cream shop is right across from the new ***** Estates residential development. The value of the building and land will only go up.
###

Thoughts guys?
[/FONT]

 

[REWahoo]

Thoughts guys?

At best it can make you several thousand in property appreciation and a few thousand in annual profit. At worst it can absorb all your time and energy six months out of the year, hurt your health and damage your financial well-being.

You seem really eager to go for it, so why not. Me, I'd rather sell a kidney.

 

[dsp0725]

At best it can make you several thousand in property appreciation and a few thousand in annual profit. At worst it can absorb all your time and energy six months out of the year, hurt your health and damage your financial well-being.

You seem really eager to go for it, so why not. Me, I'd rather sell a kidney.

Texas Hill Country? Where abouts? I'm near Dripping Springs.

I'm not eager to go for it, just asking opinions of you all.

 

[FUEGO]

Update. Just got this reply from the agent.

The agent, you mean the guy that makes a commission when he closes a sale?

###
The expenses could be padded for income tax purposes... The listing agent says the 165K business (including brand name which is well established) net is 9%. The 100K for the building is reasonable as is the 60K for the equipment.

That seems like nonsense. 9% on the 165k is meaningless since you have to include the equipment and the building or rent on a building (can't operate without a space and the equipment). Add all that in and you're back to a 4% return. My guess is the deprecation of the building and equipment offsets any real estate appreciation.

 

[CaliforniaMan]

This thread reminds me of an old "I Love Lucy" show episode, "The Diner" where the Ricardos and the Mertzes buy a diner from an old gentleman thinking that with Ricky's connections and Fred's know how they will make lots of money. They don't of course, and when the old guy who sold them the diner comes back in, they gladly sell it back to him at a big loss. Then the old guy immediately puts back up the "Diner For Sale" sign. Makes a decent living selling and reselling the diner Nobody makes any money running it.

 

[pb4uski]

Update. Just got this reply from the agent.

....The expenses could be padded for income tax purposes... .....

So if the seller cheats on their taxes, what else are they not telling you about? Or perhaps they don't and the profits are just poor (the agent did say "could be"). Neither are good.

Sounds like at time sucker to me but if you have the time and interest explore it further. OTOH, you can put the same investment in a balanced portfolio and probably come out the same or better with a lot less hassle.

 

[Bestwifeever]

Why is the seller passing this incredible offer on to a new owner when it apparently is on the cusp of becoming a gold mine?