Crucial Financial Mistakes before expecting a Broker to sell your Restaurant or Hospitality Business – Part 4

Liabilities and Assets.

There is not much to say about liabilities exceeding your assets. It is a ratio that needs to be rectified and managed continuously unless you want to go out of business. 

You have liabilities, and you have assets in every business. When your liabilities exceed your assets, there are red flags and you need to make key decisions and business changes. It becomes exceedingly hard to motivate a potential buyers interest in a struggling restaurant or hospitality business.

Assets:

• Food stock on hand.
• Beverage stock on hand.
• Consumables on hand.
• Float in safe.
• Cash in till.
• Positive bank balance.
• Credit card receipts.
• Accounts receivable.
• Well-trained Team.
• Well maintained assets.
• An organized, clean, and neat workplace.

Liabilities:

• Rent.
• Short-term loans.
• Loans to be paid.
• Interest in overdue accounts.
• Accounts to be paid.
• VAT to be paid.
• Salaries and Wages to be paid.
• Leave due to staff.
• Poorly trained Team.
• Broken and dirty, neglected assets.

While your establishment may be able to run at a ratio of 1:1, you’ll want to increase profits to decrease your ratio. The goal is to become and remain profitable, and it’s very difficult to maintain cash flow when the ratio exceeds 1:1.

Spending Not Based on Cash Flow Statements

Cash flow statements are not there just for the sake of it. They are extremely valuable tools in your business. Neither are they just to see how much money or how little money you have in the bank. 

The business owner has to consider all accounts and invoices payable, paid amounts that might not be reflecting and banking of monies received that is not reflected in the account. The worst error would be to assume that your bank balance is an accurate reflection of your profitability.

There is a saying that it pays to pay! When you want to sell your business and the profitability is not what it should be, it might pay to pay an experienced business broker to maximize your restaurant first before selling your restaurant for less than it is really worth. Call your local specialized restaurant and hospitality brokering team and get them to do a valuation and a rescue report on your business.