In this video, Liquor Store Broker, Harry Sidhu, provides information regarding how to value your liquor store using the most popular type of liquor store valuation for selling a liquor store.
This method is called the Seller’s Discretionary Earnings method which is used for all types of liquor store valuations. Here, Harry applies the Seller’s Discretionary Earnings to value your liquor store.
The SDE formula can be summarized as follows:
Pre-Tax Profit +
Owner’s Salary +
Additional Owner Perks (benefits, car, etc.) +
The SDE formula uses the business’ past 3-5 years of financial information to determine the owner’s salary, debt service, depreciation, amortization and excess personal deductions. The formula assumes that revenue, expenses and profit remains status quo after the buyer assumes ownership. Calculating the business’ profits, plus the owner’s salary and benefits and then adding back (“add-backs”) non-cash expenses (amortization and depreciation), and non-recurring expenses (i.e. one-off legal expense). Though no perfect, this methodology, has proven itself to be the most effective way to establish the valuation basis of small businesses. For selling a liquor store, it is the best method because it show cases the liquor store’s cash flow.
How Mission Peak Brokers can value your liquor store and help you successfully sell your business.
Should you need assistance buying a liquor store, contact Mission Peak Brokers. We have performed hundreds of liquor store valuations and closed numerous liquor store deals. We know the ins and outs of what makes liquor stores valuable and how to get the deal done.