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  1. #1
    Junior Member
    Join Date
    Aug 2010
    Posts
    2

    coffee shop start up and valuations

    Good morning to all and I'm a first time poster....

    Looking to get into this business and have an opportunity to acquire a coffee shop business in the Upper Midwest and wondering if there is assistance any of you can provide relative to what valuation methods are best used to valuate an ongoing coffee shop and if there are metrics that are industry-proven that one can use in looking at the business's financials...ie, what should COGs be in a healthy business? Is there a revenue per employee range that is used, what % of a coffee shops business should labor represent, food/bakery items, and the like...

    Appreciate any help that folks can provide as I'm looking for a "win-win" with the seller.

  2. #2
    Junior Member
    Join Date
    Nov 2010
    Posts
    7

    Re: coffee shop start up and valuations

    I don't know specific information regarding coffee shops, but I do know a little bit about valuation in general.

    If you are raising capital from Angel groups/ or VC firms for a coffee shop that doesn't have revenue yet then you're best bet is to construct a business plan, and financial projections that indicate how much you believe your business can grow. You're not going to use discounted cash flow analysis because you don't have cash flow. You're not going to use a revenue multiplier because you don't have revenue. If the investor asks for these things then they are either an idiot, or they are testing you to see your response. The best thing you can say is to tell them that you can't use a revenue multiplier or DCF method, but that your projections indicate that they should receive a 10X return in the next 5 years. To justify this claim you will need to look up information on acquisitions of coffee shops to use as a comparison to your own projections.

    If you are looking to acquire operating coffee shops then I would probably use discounted cash flow. Make sure that the owner of the business has a good excuse for selling the business.

    Find a mentor who has done this before.

    Hope this helps,

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