Budget for all Acquisition and Post-Completion Costs
Before making an offer on your target café, you'll need to develop a detailed budget that accounts for both initial acquisition costs and post-completion expenses. Effective budget planning requires thorough analysis of both immediate financial needs and projected post-acquisition costs.
Your financial roadmap should incorporate contingencies for unexpected challenges while maintaining flexibility for growth opportunities.
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Professional fees, including legal, accounting, and business valuation services: $15,000-25,000.
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Working capital buffer for initial 6-12 months of operations: $50,000-100,000, depending on location and scale.
Obtain a Professional Cafe Business Valuation
When exploring business appraisal alternatives, focus on qualified valuator selection - preferably someone with restaurant industry expertise.
They'll analyze your target café using three key methods: income-based (EBITDA/SDC multiples), asset-based (tangible/intangible values), and market-based (comparable sales) approaches. While café valuations typically range between 2-4x earnings, a restaurant broker or professional appraiser will adjust these metrics based on your specific scenario, considering factors like location, brand strength, and market conditions.
Prepare a Conditional Offer to Purchase or a Letter of Intent (LOI) Agreement
When preparing your conditional offer or LOI agreement, you'll need to carefully outline whether you're pursuing an asset sale or share purchase, as this decision vastly impacts tax implications and liability transfers 💼.
Your offer should address critical elements, including proposed seller financing terms, comprehensive asset inspection requirements, and verification of all regulatory compliance documentation, including permits, licenses, and health inspection records.
You'll want to incorporate a detailed seller training and changeover agreement that specifies the duration, scope, and expectations for the handover period to guarantee smooth operational continuity 🤝.
Asset Sale vs. Share Sale Considerations
Understanding the fundamental differences between asset sales and share sales represents a critical decision point in your cafe acquisition journey. You'll need to carefully evaluate asset allocation and legal implications to make an informed choice that aligns with your business objectives.
| Aspect |
Asset Sale |
Share Sale |
| Tax Impact |
Buyer can depreciate assets |
Inherited tax history |
| Liability |
Limited to acquired assets |
Complete business transfer |
| Complexity |
Generally straightforward |
More complex due diligence |
The structure you choose will greatly impact your tax position, risk exposure, and operational flexibility. Asset sales typically offer more protection, while share sales can preserve existing contracts and licenses.
Request Some Partial Seller Financing
Request some seller financing terms that align with your financial capabilities and the cafe's valuation. Consider proposing a 20-30% seller-financed arrangement with clearly defined repayment schedules.
When you negotiate seller financing agreements, focus on key elements like interest rates, payment terms, and security provisions. This approach can bridge funding gaps while demonstrating your commitment to maintaining the cafe's success through a structured changeover of ownership.
Government grants and loans can also be explored to support your cafe acquisition and development goals, offering potentially favourable terms for your business's growth.
Inspect all Business Assets
Your thorough equipment inspection should assess each piece of machinery's condition, maintenance history, and remaining useful life. Document the operational status of espresso machines, grinders, refrigeration units, and POS systems.
A meticulous inventory review must account for all supplies, ingredients, smallwares, and furniture. Don't forget to evaluate the condition of leasehold improvements like counter spaces, seating areas, and kitchen build-outs.
