There comes a time when you may wish to sell the business and you will ask the question: "What is my business worth?"

When you work out the gross profit on your business, you get to keep approximately 35% of income. (Prizes, commission, franchise fees, petrol, etc. = 65%)

Prior to COVID-19, a business like ours was often sold on the ratio of 3 times its earnings, i.e., it takes three years for the profits of the business to pay for its purchase price. Coincidentally, the 35% GP for Kiwikrane is quite close to 33% or 1/3 of 100%. Therefore, prior to COVID, a year’s earnings was a good starting point from which to value the business. You would then from this starting point look at the condition of the machines, stock, value of sites, etc.

COVID-19 has changed the market in that other factors like revenue prior to COVID-19 figures, etc. also need to be factored into the equation. We will not always be in a COVID-19 environment.

At a rough pre-COVID guide: (Annual Revenue X 35%) X 3 years plus full stock levels in machines at sale. As you can see, this happens to be very close to annual turnover. This means it's a good ballpark figure to keep in mind.

If a business is doing extremely poorly, you would take the higher of either second-hand machine value, or annual turnover.

The idea with this type of business is that you run it for 5 - 10 years, upgrade a few machines, and sell it for a similar price or a bit less than what you purchased it for to reflect the age of the machines. If your machines are doing $130+ average, you will probably get a reasonable price. If they are doing under $80 per week, you probably won't.

Be realistic - if you've done a good job, you deserve a reward. If you haven't done a good job, then don't expect top dollar.

As franchisors, we don't want to see an incoming franchisee pay more than what a business is worth. We want them to succeed as well.