Reading a Business for Sale Listing: What the Figures Mean

Business for sale listings use a handful of terms that sound simple but are easy to misread. Understanding them helps you shortlist quickly and ask agents better questions. Here is what the common figures mean, and what to ask about each.

Asking price

The price the seller hopes to get, usually for the goodwill, fixtures, fittings and equipment. Watch for wording like "plus stock at valuation" (stock is paid for separately on completion) or "offers in the region of". On a freehold, the price usually includes the property. Some listings give no price at all, or say "price on application"; ask the agent for a guide before you spend time on it.

Turnover

Total sales in a year, before any costs. Turnover shows the size of the business, but on its own it says little about how much it makes. Two businesses with the same turnover can have very different profits. Check whether turnover includes VAT, and which year it is for.

Gross profit

Turnover minus the direct cost of what was sold (food and drink in a cafe, stock in a shop). The gross margin, gross profit as a percentage of turnover, is a useful check on how well the business buys and prices.

Net profit

What is left after all running costs: wages, rent, rates, utilities, insurance and so on. This is the figure that pays you and any finance. Check whether it is before or after the owner's own salary or drawings.

Adjusted net profit

Many listings quote an adjusted profit (sometimes called discretionary earnings): net profit with the owner's salary and other personal or one-off costs added back. It is a fair way to compare businesses, but only if the add-backs are genuine. Ask for the list.

Leasehold, freehold and lease terms

Leasehold means the business rents its premises; freehold means the property is included. For a leasehold business the listing should give the rent and how long the lease has left. See our guide to buying a leasehold business.

Other details worth checking

• Opening hours and how many the owner works. A business open seven days with the owner doing most shifts is a different proposition from one run by a manager.
• Staff: how many, full or part time, and who does what.
• Reason for sale: retirement and relocation are common; ask if it is not given.
• Accommodation included with the premises, and whether it is let separately.
• Confidential listings hide the name and exact location until you sign an NDA.

What listings do not tell you

A listing is marketing, written to interest buyers. It will not usually show the trend over several years, how the profit was calculated, the lease's full terms or the business's weak points. Use it to decide whether to ask for more information, not whether to buy. On Find My Businesses your Finder reads each listing against your brief and lists the questions worth putting to the agent.