Originally Posted by saberger
I don't know what else to say but "whoa". I have to think about this one.
I go on Tuesday for a walk through with the inventory list and a 'tour' of the place.
I own a shop. We do about $700,000 a year with a kitchen staff of three to four plus me. We spent about $250,000 in hard upfit costs, plus have another 100 to 200 thousand in machinery.
When you go to buy a business, they give you a packet of information, which should include both sales figures and a P&L and an inventory of all the hard goods you are buying. You know that rent is 3700, which should be about 10% of your gross revenue, so right there, you know you will need sales of at least $37,000 per month to work a successful business model.
I second the PP notion that you are being taking for a ride. Her recipes aren't worth didly, unless she has the original recipe for Dr. Pepper or something. The most famous bakeries in the world will sell you their recipes for $25...it's called a cookbook. The client list is also worthless, because a bakery isn't typically a business where you do a lot of "outbound" sales calls.
The three things that are of value are 1- the equipment, which is worth 10 to 20 cents on the dollar of new equipment. 2- The physical establishment. The fact that she has already converted the space into a bakery saves you a lot of money and heartache. 3- The " Goodwill" the business has. This really means how valuable is the name of her business. If you could buy " Nike" or " Izod" the most expensive part of the purchase would be the " goodwill" portion, because let's face it, the same tennies without the swoosh sell for 19.95 at Marshalls. The swoosh is worth more than the shoe. Ditto that damn little alligator...
Can you charge more for your cake because it comes from her bakery, or is it a tradition in your town to get some iconic something for special events ? If not, then the "goodwill" as it is called in the industry is also of little value.
Get those numbers, and spend sometime figuring out what the business is worth. Then make an offer if you think you can make it work.
Not to frost my own cookies here, but I am a bangin' fast caker/baker and I can produce about $2000-$2500 of product per day BY MYSELF. But I also have to be the accountant, marketing manager, human resource department, and sales consultant, so I only work in the kitchen on Friday and Saturday. Your average $12- $15 an hour baker ( in my market, 20-30% more in yours) can make about $1200 worth of quality baked goods a day.
To get to the $1500 to $1800 you need to make 37,000 a month ( some stuff will be donated, some stuff will get stale before it sells, etc...) you will need a staff of three plus two dishwashers. That alone will cost you $10,000 a month. Rent you know, your supplies should run around 20% ( bakery is a low food cost, high labor cost business) or $7400. With just rent, labor and food you are at $20,000 a month, so don't think you are going to get rich. An average business nets about 20% when all is said and done, so if you do your job well you can expect to make about 7000 a month. Hardly a fortune for the amount of hours.