What is an Optical Store Worth - Opinions Needed Please

[Qoptical]

Hi All,

Forgive my lack of knowledge in this area I am posting on behalf of my Father who has owned and operated a successful Optical Store in the downtown Toronto area for over 25 years. Unfortunately he has suffered a debilitating illness that has rendered him unable to work, although he has an employee managing the store I am trying to sell his business on his behalf or gauge whats its value and looking for your expert inputs.
I also have an academic background in Optician training over two decades ago but never did register with the College since I found my calling in Information Technology.

Brief info on the store:

Located on one of the busiest streets in downtown Toronto area.
250K Total Gross Revenue last year and on pace this year for about 280K
1 Employee
My Father draws a salary as well.
Rent: 3,000 month plus utilities
Full Lab (Gerber Coburn Machines) can provide 30 minute service
Also has full refraction capabilities (Have Optometrist onsite 2 times per week).

Net Profit: 80K / year

I sincerely appreciate your inputs on the value given the market conditions and your expert opinions. Unfortunatley my fathers health is deteriorating rapidly and I can not manage the business with my full time job so I would like to unload it at a aggressive price.

Thank you so much in advance.

[rbaker]

The issue is not what the business is worth but rather what a buyer is willing to pay.

Don't be overly concerned with what its worth as that figure is determined in the mind of the prospective buyer but rather concentrate on getting the word out that the business is for sale and let the buyer tell you the value by way of a offer. You might place an add in the appropriate professional newsletter and make up a one page marketing sheet to mail out to eye care providers in your area. You could also seek out the services of a business broker, preferably one who has experience is the eye care field.

Lotsa luck!

[edKENdance]

3K a month in downtown Toronto sounds incredibly sweet.

[Lab Insight]

Hi All,

Forgive my lack of knowledge in this area I am posting on behalf of my Father who has owned and operated a successful Optical Store in the downtown Toronto area for over 25 years. Unfortunately he has suffered a debilitating illness that has rendered him unable to work, although he has an employee managing the store I am trying to sell his business on his behalf or gauge whats its value and looking for your expert inputs.
I also have an academic background in Optician training over two decades ago but never did register with the College since I found my calling in Information Technology.

Brief info on the store:

Located on one of the busiest streets in downtown Toronto area.
250K Total Gross Revenue last year and on pace this year for about 280K
1 Employee
My Father draws a salary as well.
Rent: 3,000 month plus utilities
Full Lab (Gerber Coburn Machines) can provide 30 minute service
Also has full refraction capabilities (Have Optometrist onsite 2 times per week).

Net Profit: 80K / year

I sincerely appreciate your inputs on the value given the market conditions and your expert opinions. Unfortunatley my fathers health is deteriorating rapidly and I can not manage the business with my full time job so I would like to unload it at a aggressive price.

Thank you so much in advance.

Sorry to hear the unfortunate news. In order to determine a fair asking price, there are many variables to consider. Based on the information you provided, it is worth something but not a substantial amount. Here's my honest opinion (without prejudice) and concerns if I were a potential buyer:

* Market conditions for a small independent in a very large city these days is very challenging, not to mention the Toronto optical market is extremely competitive and has way too many 3 for 1 types which hurts everyone.
* The downtown Toronto market is a dog's breakfast and either very low end or very high end
* Gross revenue is flat and very weak after 25 years in business, having a full lab and doctor coverage twice a week.
* A mature business should be doing at least $500K per year in net sales.
* Even more concerning, what are the net sales numbers?
* When I run the numbers after assuming COGS, staff salary and operational overhead, the margins don't seem to add up.
* What are the assets valued at? How old is the equipment?
* Value of inventory? How many units? Is the inventory old and outdated?
* What are the total business liabilities currently?

It is difficult to gauge an asking price without the value of all these things. However, if I were to pull a number from the air, multiples of net sales and asset value is what is normally used. $80K net profit per year before EBITDA leaves about $40- 50K true bottom line. Based on that alone and assuming an asset value, I would estimate $75-$125K as a fair asking price.

Your best scenario would be to try and find a young OD that wants to start up their own practice. The cost of taking over an existing practice turn key is much more appealing than building a new one from scratch due to lack of experience and high construction costs. A fresh coat of paint and the ability to start refracting without delay is preferred for most.

A business valuator may cost a few thousand bucks, but may be worth the investment.

[Golfnorth]

Sorry to hear the unfortunate news. In order to determine a fair asking price, there are many variables to consider. Based on the information you provided, it is worth something but not a substantial amount. Here's my honest opinion (without prejudice) and concerns if I were a potential buyer:

* Market conditions for a small independent in a very large city these days is very challenging, not to mention the Toronto optical market is extremely competitive and has way too many 3 for 1 types which hurts everyone.
* The downtown Toronto market is a dog's breakfast and either very low end or very high end
* Gross revenue is flat and very weak after 25 years in business, having a full lab and doctor coverage twice a week.
* A mature business should be doing at least $500K per year in net sales.
* Even more concerning, what are the net sales numbers?
* When I run the numbers after assuming COGS, staff salary and operational overhead, the margins don't seem to add up.
* What are the assets valued at? How old is the equipment?
* Value of inventory? How many units? Is the inventory old and outdated?
* What are the total business liabilities currently?

It is difficult to gauge an asking price without the value of all these things. However, if I were to pull a number from the air, multiples of net sales and asset value is what is normally used. $80K net profit per year before EBITDA leaves about $40- 50K true bottom line. Based on that alone and assuming an asset value, I would estimate $75-$125K as a fair asking price.

Your best scenario would be to try and find a young OD that wants to start up their own practice. The cost of taking over an existing practice turn key is much more appealing than building a new one from scratch due to lack of experience and high construction costs. A fresh coat of paint and the ability to start refracting without delay is preferred for most.

A business valuator may cost a few thousand bucks, but may be worth the investment.

Lab Insight...........wouldn't the operation be worth 2 times salaries plus inventory cost?
If not please explain why not.

Many thanks,
Golfnorth

[Lab Insight]

Lab Insight...........wouldn't the operation be worth 2 times salaries plus inventory cost?
If not please explain why not.

Many thanks,
Golfnorth

Business values are derived from a few variables which include:
* net profit (last 3 years min.)
* asset value (inventory, equipment, chattel)
* net profit variable if growing consistently X 3
* market conditions (is the market growing, declining, and amount of competitors)
* business trend last 3 years (growing, declining or flat)
* reason for selling etc.

Owner's salaries are discretionary expenses and not to be used in an evaluation, unless the party buying is an investor and has no plans to work the store in which case he/she would have to either keep the owner on as a manager or hire a competent person to manage the day to day operations and ensure it grows to receive maximum ROI.

ROI for most individuals usually want their investment to be paid back in the 5 year range. If that isn't achievable, it's not usually worth the investment. However, some people have been know to purposely invest into money losing ventures so they can claim the losses against their very profitable ventures to decrease their taxes paid each year.

[Golfnorth]

Lab Insight;

PM sent

[Qoptical]

Sorry to hear the unfortunate news. In order to determine a fair asking price, there are many variables to consider. Based on the information you provided, it is worth something but not a substantial amount. Here's my honest opinion (without prejudice) and concerns if I were a potential buyer:

* Market conditions for a small independent in a very large city these days is very challenging, not to mention the Toronto optical market is extremely competitive and has way too many 3 for 1 types which hurts everyone.
* The downtown Toronto market is a dog's breakfast and either very low end or very high end
* Gross revenue is flat and very weak after 25 years in business, having a full lab and doctor coverage twice a week.
* A mature business should be doing at least $500K per year in net sales.
* Even more concerning, what are the net sales numbers?
* When I run the numbers after assuming COGS, staff salary and operational overhead, the margins don't seem to add up.
* What are the assets valued at? How old is the equipment?
* Value of inventory? How many units? Is the inventory old and outdated?
* What are the total business liabilities currently?

It is difficult to gauge an asking price without the value of all these things. However, if I were to pull a number from the air, multiples of net sales and asset value is what is normally used. $80K net profit per year before EBITDA leaves about $40- 50K true bottom line. Based on that alone and assuming an asset value, I would estimate $75-$125K as a fair asking price.

Your best scenario would be to try and find a young OD that wants to start up their own practice. The cost of taking over an existing practice turn key is much more appealing than building a new one from scratch due to lack of experience and high construction costs. A fresh coat of paint and the ability to start refracting without delay is preferred for most.

A business valuator may cost a few thousand bucks, but may be worth the investment.

Firstly Thank you very much for your time in responding to me and apologies for delay.
To be honest in the last 3-5 years my Father has not aggressively done any marketing or changed his business model to complete with the 3 for 1 or 2 for 1 stores as he has the capabilities too but his focus has been on higher end designer frames and higher margins rather than volume. In fact he refuses to go this route as he strongly dislikes the 3for1 approach as he believes it ruins the integrity of the Optical industry. His lab consists of Gerber Coburn / WECO machines approximately 12 years old but still fully functional and in good condition.
Alot of us didn't realize how badly his mental health deteriorated as well as a result of his illness and his lack of interest in his business.
I agree that finding a new OD would be the best approach however not sure what online resources are available for this. I have put together a feature sheet with a price around 200K asking. Store is not in the downtown core but on the Danforth Avenue.
I will attempt to answer your questions below to the best of my ability.


* The downtown Toronto market is a dog's breakfast and either very low end or very high end
-We focus on high end however have the capabilities to change to low end seamlessly
* Gross revenue is flat and very weak after 25 years in business, having a full lab and doctor coverage twice a week.
Revenue has been flat due to his lack of interest in the business over the last 3-5 years ... Net Sales were in excess of 500K in 2010 and 2011.
* A mature business should be doing at least $500K per year in net sales.
* Even more concerning, what are the net sales numbers?
* When I run the numbers after assuming COGS, staff salary and operational overhead, the margins don't seem to add up.
I will review more of the financials and address this questions shortly.
* What are the assets valued at? How old is the equipment?
Assets valued at (appraisal) 145K
* Value of inventory? How many units? Is the inventory old and outdated?
Inventory of designer frames and sunglasses (D&G, Prada, Gucci etc) Raw Cost 85K
* What are the total business liabilities currently?
Business has 0 liabilities or debts.

[Qoptical]

Hi All,

For those that have been following or commented on this thread just a quick update.
I have decided to price the store at 100K (Firm) aggressiveley for a quick sale given the inventory and equipment is 3 x this value.

For anyone interested please PM me I can send the last 5 years of Income Tax Returns to show that your ROI Break even point will only be 1 - 1.2 years.

His Health circumstances have dictacted this be sold asap and have several interested competitors.

Wishing everyone a wonderful day.

QOptical