need expert consultant to evaluate eating house business

[salman228]

I am in need of consultation on an investment opportunity in a 24hr eating house business. Anyone have a referral or some insight into what due diligence to perform when evaluating the opportunity.

[taxico]

considering this is a 6-8 digit deal (depending on whether or not it's a reassignment or sale), i am unsure if any expert or company can give you the assurance you want unless you do not intend to up your stall holders' rent.

commercial rental prices has been going down (too)...

[Strong Eagle]

Cash flow is what matters. How much cash is thrown off each month? How much money do you need to invest to get this cash flow? In other words, what is your return, cash on cash, if you invest in this eating house? That's all that matters.

[JR8]

You should find yourself a guide on 'How to analyse and write a business case'.

I'd suggest that going into any significant business venture without having done this, and having considered the estimated P&L from every conceivable angle, is not far short of a death-wish.

[Strong Eagle]

You should find yourself a guide on 'How to analyse and write a business case'.

I'd suggest that going into any significant business venture without having done this, and having considered the estimated P&L from every conceivable angle, is not far short of a death-wish.

Just a few things to look at.

a) What is current foot traffic and what is potential future foot traffic (if your tenants can't get customers they won't be able to pay you).

b) What changes (like a new bus/MRT line or shopping center) are on the horizon that could affect business.

c) How financially sound are your tenants? What is the turnover? How many have become delinquent in rental payments?

d) What is the condition of the structure and what capital improvements are required?

If you are unaware of these kind of questions (and these are only 4 of 50 or more I can think of) you probably shouldn't get involved.

Rule Number 1: Understand the business that you think you want to own.

[JR8]

When I was involved in this kind of work (within a Banking company), if we proposed a major new internal project or business unit we had to write a business case, and formally apply internally for project funding.

I recall my perplexity of how to do this the first time. It was for the funding to open a new trading group in one of our offices. I had to estimate the future financials for something that didn't yes exist. So how, based upon what?! The answer was 'Just try your best to use what might be reasonable figures'.

180 degrees opposite of the usual 'To the cent' way that my head drives me towards re: figures. In the end it was in fact quite an interesting experience. Perhaps even slightly liberating, in that I discovered that I could produce financials of use, that were essentially somewhat-informed guesstimates.

I can use a similar approach now to my own private ventures. For rental property I need x% net ROE to make a rental a viable proposition. For a purchase/develop/sell I need y% net. One thing that's most useful, is that it forces you to go with the head, the pragmatic side, rather the heart. Even the data for tax reporting on my property gets broken down on the tax return form into Income, and about 10 lines for expenses.

Similar principle for business planning.
Income
Variable expenses (further split down)
Fixed expenses (split into say 10 lines*)
Net Income

And try and project that for perhaps 5 years ahead.

The process itself makes you carefully consider issues that you had probably overlooked. So anyone starting out in business should be doing this process anyway. Particularly people who start out their venture by getting locked into $$$-rents and long-term retail leasing (leasing a shop).

You could find a person to do this for you. But he can only work off the data that you give to him anyway. And ultimately he has 'no skin in the game', he likely doesn't care a huge amount whether your business is optimally priced, and whether it flourishes or fails.

p.s. Before you even consider buying this business. I'd suggest getting 3-5 years worth of prior years filed accounts. And a copy of their lease. Maybe use that as a starting point for a business case style analysis

[Beeroclock]

Well said jr8, I especially like this "You could find a person to do this for you. But he can only work off the data that you give to him anyway. And ultimately he has 'no skin in the game', he likely doesn't care a huge amount whether your business is optimally priced, and whether it flourishes or fails. "

[Strong Eagle]

This is what I used as a business plan for obtaining and Entrepass, and to ensure we had adequately defined our business.

http://www.herberts.org/miscdocs/Sample ... ntents.pdf

Oddly enough, or perhaps not odd at all, under the Market Analysis we listed one major risk to our plan as "global recession" and damned if that didn't happen in 2008. MNC buying patterns fit exactly to prediction... they stopped buying IT services.

[JR8]

Yep, the above looks like a good '360' view.

Yeah from the hiring angle, re: consultants, When the recessionary-dung hits, it's the consultants that are first out the door. Well, they're often hired as arse-coverers (allegedly but if it's jobs and costs on the line, you get to chop them immediately, so as to be running a lean-as-possible unit, and to desperately try and take the spotlight off you and your perm employees.

....agh... dirty cynical game ...

[livingontheedge]

Both financial and commercial due diligence can be done - I would think most accounting firms have this expertise in place. If you are willing to pay the fees, then you should be able to engage them. And whilst there are limitations of scope and responsibilities, common in all services rendered (even pet hotels), due diligence experts goes beyond the numbers and data provided to them. They can uncover both pitfalls and statistics useful to your decision making BUT will not conclude on the buy or sell. Only Banks make such decisions. Accounting firms wouldn't. But that would get you as far as the story told from the accounting numbers and historical financial, and research/survey of the location and market.

If it comes down giving you an analysis of the operations behind the scene - matters such as the current operating condition of the equipments (stoves, ovens, etc.) before need for replacement and repairs and day-to-day supplies purchases, stock up and consumption - and you have no clue about this business, I doubt an accounting firm or bank would be able to assist you on this either. Pays to consult a Chef to look into this.

[starspangledbanner]

i like eating at cafes…maybe i can help?

[JR8]

[Ding Dong]

Here we go!