Docstoc

BEST BUY ELECTRICAL, CANNING VALE

Document Sample
BEST BUY ELECTRICAL, CANNING VALE Powered By Docstoc
					                                                   FORTUNE BUSINESS AND PROPERTY MARKETING A.B.N. 30 201 264 353
                                                   Licensee C.D. Blake
                                           BUSINESS BROKERS AGENTS
                                                     REAL ESTATE
                                                                                    Phil Mulcahy
                                           REAL ESTATE AGENTS                       Telephone (08) 9361 2494
                                                     BUSINESS BROKERS
                                                                                    Fax        (08) 9361 6986
                                                     CONSULTANTS
                                           CONSULTANTS                              Mobile      0418 689 423
                                                     BUSINESS APPRAISAL
                                           BUSINESS APPRAISAL
                                                          PROPERTY APPRAISAL        Email pmulcahy@wn.com.au
                                           PROPERTY APPRAISAL Pleasant.
                                                  C14 / 1 The Esplanade, Mt

                                           All correspondence to:
                                           PO Box 1344
                                           Canning Bridge W.A. 6153
                                           Telephone (08) 9315 2700
                                           Facsimile (08) 9315 2755
                                           Email admin@fortune.com.au
                                           Web www.fortune.net.au


               BEST BUY ELECTRICAL, CANNING VALE




NOW A FRANCHISEE OF THE HUGE RETRAVISION GROUP

ESTABLISHED 17 YEARS IN SAME LOCATION

EXCELLENT CONSISTENT PROFIT RECORD

ENORMOUS SCOPE TO EXPAND AND DIVERSIFY

LONG SECURE LEASE

SAME OWNERSHIP SINCE BUSINESS COMMENCED

OWNERS NOW WISH TO RETIRE

BRILLIANT CENTRAL SOUTHERN SUBURBS LOCATION
BRILLIANT EXPOSURE OPPOSITE CANNING VALE MARKETS


D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc                       Page 1 of 18
AFFLUENT               DENSLY             POPULATED           RESIDENTIAL           MARKET
SOURCE




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc          Page 2 of 18
Business Profile - Summary



Contact                    Phil Mulcahy              (08) 315 4401
                                                     0418 689 423


Registered Business Name                             Best Buy Electrical, Canning Vale

Location                                             Shop 6, South City Fair
                                                     Corner Bannister Rd and South St, Canning
                                                     Vale

Turnover          June 30, 2006                      $ 1,743,732

Gross Profit June 30, 2006                           $ 269,196

Net Adjusted Profit June 30, 2006                    $ 122,496

Lease Details
Commencement Date                                    1/11/2007
Expiry Date                                          31/10/2010
Option Periods                                       1 x 3 years – future options available
Current rent                                         $50992.20 P.A. Payable calendar monthly at
                                                     rate of $4249.35 + GST + O/G

Variable Outgoings                                   Water Rates $1213.00 + GST
                                                     Council Rates $3107.00 + GST
                                                     Land Tax      $ 961.00 + GST

Staff Requirements                                   2 Owner Operators full time
                                                     1 Full Time employee or two casuals
Opening Hours                                        Monday to Friday - 9.00 am to 5.00 pm
                                                     Thursday        - 9.00 am to 7.00 pm
                                                     Saturday        - 9.00 am to 4.00 pm
                                                     Sunday and Public Holidays - Closed

Staff Wages         Y/E June 30, 06                  Non Directors - $17,254

Asking Price
Plant and Equipment                                  $45,000
Goodwill                                             $69,000

Price                                                $114,000 PSAV
Stock estimated                                      $100,000




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc                    Page 3 of 18
LOCATION

Shop 6, South City Fair
259 Bannister Road
(Corner Bannister Road and South Street)
Canning Vale

See Location Map Annexure A.


HISTORY

Two husband and wife partnerships commenced the business in September 1990. This
essentially retail electrical and gas home appliances business traded from September 1990
to January 2007 as a “Betta Electrical” franchise. In January 2007 the business converted to
a “Best Buy Electrical” franchise. The Best Buy brand is owned and operated by the huge
Retravision Group


THE BUSINESS PREMISES

Shop 6, South City Fair, Canning Vale
Bannister Road Corner South Street

The large bold external signage facing the intersection of South Street and Bannister Road
offers excellent exposure to the high traffic in this area. Signage also attracts further
business from people working in the Canning Vale area.

The store is easily accessed from Roe Highway, Mitchell Freeway, Ranford and Nicholson
Roads.

The stores immaculate presentation offers an enjoyable shopping experience for clients.

The store is well secured with monitored alarm system, security grills to all front windows,
bollards at the front door and a secured rear access.

The front area of the store features a purpose built kitchen display of 50 m2

The main showroom is 285 m2
Storage Areas 1 & 2 combined is 50 m2 – Total floor area is 385 m2
Rear access to parking and facilities
Evaporative air conditioning
Ample parking in front of the store offers easy access
Secure tenancy – No trading hour restrictions

Refer Annexure A Floor Sketch Plan.




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc            Page 4 of 18
BUSINESS HOURS

Monday to Friday           9.00am - 5.00pm
Thursday                   9.00am - 7.00pm
Saturday                   9.000am - 4.00pm
Sunday                     Closed


PLANT AND EQUIPMENT

A comprehensive list of all plant and equipment is included in the profile as Annexure B.


LEASE DETAILS

The original lease was dated was October 2, 1990.
The current Head Lease is dated October 24, 2000.
  • Commencement Date               1.11.2000
  • Expiry Date                     31.10.2003
  • Rent Reviews                    Annually Nil
  • Market Review                   1.11.2003

A Renewal of Lease is dated January 28, 2004.
  • Commencement Date               1.11.2003
  • Expiry Date                     31.10.2006
  • Rent Reviews                    Annually Nil
  • Market Review                   31.10.2006

A renewal of lease is currently being prepared for execution between the parties.
  • Commencement Date                 1.11.2007
  • Expiry Date                       31.10.2010
  • Option Period 1 x 3 years ends 31.10.2013
  • Rent Reviews                      Annually to CPI
  • Market Review                     Every three years

Current rent is $50,992.20 plus GST plus Outgoings. Rent is payable calendar monthly in
advance at the rate of $4,249.35 plus GST.

The landlord is quite happy to offer further extensions to qualified future lessees.

Any offer would be subject to the assignment of the lease to the purchaser at settlement.


SOUTH CITY FAIR RETAILERS

The growth in Canning Vale in both the residential and commercial sectors has been and
continues to be very high. There are many drawcards in the area one of them being Market
City opposite Best Buy Electrical. Market City is the primary fruit and vegetable wholesale




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc            Page 5 of 18
market for the State. It is also the home to Perth’s largest markets regularly attracting
crowds of 7000 or more.

Other service and retail outlets in the direct vicinity of the store are:
       • Commonwealth Bank
       • Canning Vale Auto Parts
       • Cash Converters
       • Canning Healthcare Centre
       • Westpac Bank
       • Canning Vale Travel
       • Bedroom Gallery
       • Carpet Choice
       • Salvation Army
       • Rug Station
       • Canning Vale Bicycle World
       • Canning Vale Hardware
       • Southside Pool & Spar Service


REGISTERED BUSINESS NAMES

The registered business name is Best Buy Electrical, Canning Vale. See Annexure C.


LICENCES

The business holds two licences which would need to be transferred to the purchaser at
settlement.

1) Australia Performing Right Associated Ltd (APRA). This licence allows background
music to be played in the store. Fee; 1.04.07 to 31.03.08 - $263.76 plus GST.

2) Refrigeration and Air Conditioning Industry Registration Board of Western Australia Inc
(RACIRB). This licence requires an individual to be trained in the sale and purchase of
refrigerants and equipment containing refrigerants. The licence is due for renewal for 12
months on January 01, 2008 at a fee of $214 plus GST.

Details of these licences are incorporated in the profile as Annexure D.


BEST BUY ELECTRICAL FRANCHISE AGREEMENT

A formal franchise agreement exists between Electcom Ltd and Retravision (WA) Ltd (The
franchisor) and South City Electrics, Canning Vale (the franchisee).

Any offer to purchase would be subject to the agreement being assigned to the purchaser at
settlement.

Basic terms of the Franchise Agreement include but are not limited to


D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc                 Page 6 of 18
Commencement Date                   15.01.07
Initial Term                        10 years
Renewal Term                        10 years

Fees and Levies
a) Ongoing Franchise Fee – 1.5% per annum of Gross Revenue of Business to $3,000,000
P.A.

b) Marketing Levy 1.5% of Gross revenue.

c) These fees are payable monthly in arrears 30 business days after the end of each month
based on Monthly Gross Revenue.

A copy of the Schedule to this Agreement is incorporated in the profile as Annexure E.


RETRAVISION GROUP

When Betta Electrical – Betta Stores Limited went into receivership, there were a number
of opportunities to join other buying groups
       Retail Consortium
       Bi-Right Electrical
       Leading Edge Group
       Retravision

Retravision was the stand out option for the group. After many years of franchising with a
company based in Brisbane there were issues with time differences, travel and getting the
West Australian voice heard.

Retravision is a West Australian company that has been operating for 35 years. They have
40% of the market share made up from their stable of owner operator business’s consisting
of Retravision, West Coast Hi Fi, Fridge & Washer City, Best Buy Electrical and the
company owned commercial division Electcom.
This huge market share combined with their Australia wide connections give the company a
very large footprint nationwide with all leading manufactures. Retravision is Electrolux’s
largest account. Retravision’s market share offers smaller retail stores in the group buying
prices that compare with competitors in other buying groups and access to product brand
names that would not be available without Retravison.
Retravision’s Western Australian based advertising agency enables quick and hard hitting
promotion.


RETAIL OUTLETS WESTERN AUSTRALIA

Retravision:                        50 stores
Fridge & Washer City:               10 stores
West Coast Hi Fi:                   10 stores
Best Buy Electrical:                10 stores
ElectCom:                           1 metropolitan commercial division


D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc              Page 7 of 18
RETAIL OUTLETS NORTHERN TERRITORY

Retravision:                        6 stores


RETAIL OUTLETS SOUTH AUSTRALIA

Retravision:                        24 stores


RETAIL OUTLETS NORTHERN TERRITORY

Retravision:                        6 stores


RETAIL OUTLETS EAST COAST, QLD, NSW, VIC

Retravision:                        294 stores
Best Buy Electrical:                1 store

Total Outlets in Australia           412


BEST BUY ELECTRICAL

Advertising
Current media coverage to build the Best Buy Electrical brand is in the West Australian
newspaper with advertising placed three out of four weeks. The first catalogue was released
in November 2007.
Best Buy Electrical website: http://www.bestbuyelectrical.com.au/
Yellow Pages
Electrical Appliances Retail is listed on page 860 of the A to K Directory
Directly under this heading there is a Yellow Web Guide Colour Advertisement – Visit
these businesses online!
The first business listed is Best Buy Electrical
www.bestbuyelectrical.com.au

Best Buy Electrical is listed with a bold heading with each of the stores listed. On page 861
there is a quarter page full colour advertisement using the Best Buy Electrical logo with a
list of the stores, the web site address www.bestbuyelectrical.com.au and the strap line “A
better buy!”

White Pages
Best Buy Electrical is listed with a bold heading with each of the stores listed by suburb.
There is also a listing for South City Best Buy Electrical under “S”

Steering Committee
Storeowners are encouraged to be part of the Best Buy Electrical steering committee


D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc            Page 8 of 18
Purchasing
Apart from the extensive core range of products available from Retravision the store is also
free to carry a range of products outside the core range that is unique to the individual store.
Product costs, rebates and manufacturers web sites are available in the computer. A price
book is available in the computer with pricing updates sent out on a daily basis.
System generated orders are produced by the computer, printed from the system and faxed
to suppliers.

Warehouse
Retravision has a massive multi million-dollar warehouse conveniently located 15 minutes
away in Bibra Lake offering the majority of the core range of products. Most of the stock
holding is purchased from the warehouse almost eliminating the need to carry bulk back up
stock in the store. Goods can be picked up directly from the warehouse or delivered to the
store within 24 hours.
The warehouse stock holding report is updated on a weekly basis and accessible on the
computer every Tuesday.

IT and Point of Sale System
The Client Record Management system offers the franchisee a wide range of functionality.
The system is linked to Retravision’s head office with support available 7 days a week.
Broadband TPIPS
Retravision uses the Telstra TPIPS service for their broadband to communicate within the
Retravision Virtual Private Network. The features of the private network are:
    •  The service is fully managed by Telstra
    •  There are no download limits imposed on stores
    •  The service is linked to all stores and Head Office as a single network and provides
       seamless communications with the Retravision Head Office.
All computers within the Retravision VPN are protected from hackers, viruses and spam
mail.

IT Support
The benefits of the Retravision IT support are:
    •    Central helpdesk for all areas associated with the use of RMS or CRMS to conduct
         store retail business
    •    Support of network hardware and infrastructure provided by Retravision (W.A.)
         Ltd.
    •    Automatic Microsoft Security updates for all servers and computers on the
         Retravision VPN.
    •    Automatic Trend Micro Antivirus definition updates for all servers and computers
         on the Retravision VPN.
    •    Automatic scanning of emails for viruses.
    •    Automatic blocking of spam mail
    •    Auto content filtering for web access through Retravision’s VPN

CRMS Functionality
Not all of the functions available are currently being utilised.



D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc             Page 9 of 18
Features include:
    •    Point of Sale Invoicing and Gift Vouchers
    •    Purchase Orders
    •    Price Book
    •    Price Update Notification
    •    Product Search
    •    Product Enquiry
    •    Credit Claims Ledger
    •    Rebates Ledger
    •    GST Summary
    •    Reporting
             o Aged Debtors, Statements, Lay-by COD Listing
             o Margin Analysis, Current Day’s Sales
             o Back Order Report
             o Stock Valuation, Stock Aging
             o GST Report

Monthly Fees
  • POS Licence Support $240.00 per month excluding GST
  • TPIPS               $121.25 per month excluding GST

Consumer Finance
GE Finance offers access to excellent finance rates, which enable the franchisee to offer
clients a range of interest free options.

Administration
Each store is given a unique identification number. This number is used for all
administration functionality and is part of the system generated number for client invoices,
manufacturer purchase orders and credit claims.

Invoicing
Retravision uses a central billing system. Weekly Listing Reports are available on a weekly
basis in supplier order. The listing displays the supplier invoice number, order number,
quantity purchased, invoice value excl GST, GST value, rebate value and total value
including GST, total value for each invoice and total value for each supplier.

There are four Weekly Listing Reports each month.

Goods are delivered into store with a delivery docket or invoice dependant on the
manufacturer policy then simply matched to the Weekly Listing Report each week.

Early payment / settlement discount options are available.

Goods invoiced from the 1st to the end of the current month, less 2 trading days are payable
on the last day of the following month.

Rebates
Guaranteed rebates are paid on the Weekly Listing Report



D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc          Page 10 of 18
Further rebates that are related to achievement of allocated targets or special bonuses are
detailed on a monthly report available on the 19th of the following month. The value of this
report is included as a deduction on the monthly remittance.

Claims Ledger
Claims reports are generated on a monthly basis. The value of this report is included as a
deduction on the monthly remittance. Items are only removed from the claims report when
Retravision receives the supplier credit note.

Extended Terms
Items delivered to the store on the last two working days of the month from the Retravision
warehouse are invoiced in the following month.
Goods ordered from suppliers with agreed extended terms are listed on an Extended Credit
Advice and included as a deduction on the monthly remittance.

DEALERS MANUAL
Retravison supplies a comprehensive Best Buy Electrical Dealers Manual. Contents of the
manual cover instructions and policies on:
  • Credit Policy
  • Claims
  • Extended Terms
  • Settlement Discount / Prompt Payment
  • Goods Not Received
  • Completing Remittance Advice & Direct Debit Form
  • Retravision Gift Voucher Procedures
  • Retravision Finance Debentures
  • Presentation Slides

Training
Retravision has an in store training program for the Best Buy Electrical Client Record
Management System.




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc          Page 11 of 18
SUMMARY OF PROFIT AND LOSS STATEMENTS

The following summary has been derived from the accountant prepared profit and loss
statements which form part of the vendor’s tax return.

 12 months end June 30                      2007       %         2,006      %        2,005          %        2,004      %


 Sales                                1,509,330       100     1,743,732    100    1,823,558        100    1,750,714    100


 Cost of Sales                        1,264,781     83.80     1,474,536   84.56   1,543,783    84.66      1,477,313   84.38


 Gross Profit                           244,549     16.20      269,196    15.44    279,775     15.34       273,401    15.62


 Expenses                               250,502 16.60          299,378 17.17       294,918    16.17        292,192    16.69


 NOP                                      -5,953                -30,182             -15,143                 -18,791

 Add Back

 Depreciation                              1,285                 1,018               1,116                   1,448
 Interest                                    661                   401
 Leasing                                  13,800                13,297              13,424                  13,456
 Motor Vehicle (0.5)                       4,002                 5,222               3,968                   3,860
 Directors Wage                           90,272               149,074             147,084                 152,813
 Directors Super                          10,573                17,666              17,488                  17,980
 Directors Fees
 GST Compliance Costs
 Wages - (Full time
                                         -35,000                -34,000             -33,000                 -30,000
 employee)

 Adjusted NOP                             79,640      5.28     122,496     7.02    134,937         7.40    140,766     8.04



D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc                        Page 12 of 18
12 months end June 30              2,003       %        2,002          %        2,001     %        2,000         %        1,999      %


Sales                         1,778,358       100   1,757,575         100    1,742,066   100   1,796,353        100    1,799,226    100


Cost of Sales                 1,459,584 82.07 1,482,530 84.35 1,504,424 86.36 1,577,212                        87.80   1,582,939   87.98


Gross Profit                    318,774 17.93         275,045 15.65           237,642 13.64     219,141        12.20    216,287    12.02


Expenses                        296,078 16.65         263,364 14.98           253,056 4.53      223,458        12.44    220,677    12.27


NOP                               22,696               11,681                  -15,414            -4,317                  -4,390

Add Back

Depreciation                       1,793                2,570                   2,639              1,428                  1,902
Interest                                                                          211              1,696                  3,365
Leasing                          13,330                11,884                  11,435             11,435                 11,435
Motor Vehicle (0.5)               3,309                 2,812                   3,320              3,166                  3,039
Directors Wage                  152,279               130,008                 130,008             101,192               101,000
Directors Super                  16,648                10,401                  10,401              7,070                  7,070
Directors Fees                                                                  2,000              2,000
GST Compliance Costs                                                                                 448
Wages - (Full time
                                 -30,000              -28,000                  -28,000           -27,000                 -27,000
employee)

Adjusted NOP                    180,055 10.12         141,356         8.04    116,600 6.69        97,118        5.41     96,421     5.36



        NOTES ON PROFIT AND LOSS SUMMARY SHEET

        (1) Leasing relates to leased motor vehicles which are essentially used for private purposes.
        (2) Motor Vehicle expenses. Half of motor vehicle expenses have been added back as
        private use. Note deliveries are included in freight and cartage.
        (3) GST Compliance Cost – one off extraordinary item
        (4) There are four directors of the vendor company (two married couples). Two directors
        work full time in the business. One director works part time doing book work.

        On the basis that two owner operators will acquire the business, one full time employee has
        been added to wages to provide an adequate (and current) staff level and is in lieu of one of
        the directors.




        D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc                            Page 13 of 18
COMMENTS ON PROFIT AND LOSS RECORDS – OPPORTUNITY TO EXPAND
AND DIVERSIFY

With the exception of 2007 (see detailed explanation later) there is a very definite pattern in
sales, cost of sales and net adjusted profit. There is an absolute and obvious consistency in
the years 1999 to 2006 inclusive.

This reflects the philosophy of the current owners and their ages. They have deliberately
run the business with a conservative approach. Stock holding is kept at a minimum and the
owners have concentrated on traditional white goods sales.

There therefore remains an outstanding opportunity for younger more energetic owners to
expand and diversify and build on top of this strong established traditional business with
new ideas and technology. This expansion could include but is not limited to digital
cameras, recorders, computers, BBQ’s, outdoor furniture, I pods etc.




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc            Page 14 of 18
ESTABLISHMENT OF ASKING PRICE - BUSINESS

APPRAISAL OF BUSINESS

It is emphasised that Fortune Business and Property Marketing are NOT licensed valuers.
However Fortune does consult licensed valuers and has a data base of statistical
information relating to sales of businesses in all industries throughout Australia.

A business is an investment just like any other investment. If you were to invest in a rental
property you would look at the rental return offered and the possibility of a capital gain.
For an investment of cash in a term deposit you would consider the interest rate offered.
Investment properties offer returns (rent) of anywhere from 4% to 12% or more depending
on location and type. Term deposits (cash) can range from as little as 0% to 6% or 7%. A
business on the other hand can offer returns of 25% to over 100%!!

Buying a business is an investment like any other. You have to consider the return. Normal
investment rules apply - the higher the risk the greater the returns. The lower the risk, the
lower the return.

Gone are the days when you added up the business assets and then add one years' net profit
as goodwill. Astute purchasers particularly with professional advice require more.

Arriving at a price for a small business is not guess-work when using the Return on
Investment or ROI calculation method. ROI is the time it takes to recoup the money
invested based on the actual return of a business. If it takes two years to get your
investment back you are in effect getting an annual return of 50%.

ROI is now the yardstick used by Business Valuers and Business Brokers to determine the
price of a business based on sales of similar businesses across Australia. Return On
Investment is the adjusted net profit of the business divided by the total purchase price
expressed as a percentage.

That is

                                ROI%=             Adjusted Net Profit x100
                                                      Purchase Price

                                                      OR

                                 Purchase Price = Adjusted NOP x 100
                                                  ROI%

Purchase Price             =        Adjusted NOP x 100
                                           ROI




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc                  Page 15 of 18
BETTA ELECTRICAL FRANCHISOR ADMINISTRATOR – APPOINTED

The drop in sales of the subject business is clearly demonstrated as follows.

Sales Year Ending June 30, 2005               $1,823,588      100%
Sales Year Ending June 30, 2006               $1,743,732      95.6% 4.4% decrease
Sales Year Ending June 30, 2007               $1,509,330      82.8% 17.2% decrease

In 2006 cracks in the Bette Electrical Franchise system started to appear. There were
several defections from the franchise to other franchise groups. There was considerable
discontent from franchisees over the way advertising funds were being spent. On top of this
manufacturers were withdrawing advertising support in the belief that the advertising
money was being directed into other areas not benefiting the retailers.

On October 5, 2006 Administrators were appointed to Betta Electrical. The Administrators
declared that the difficult financial situation in which Betta Electrical found themselves,
was caused by massive losses in “its non core business activities”. In other words its core
business, namely profitable franchisees across the country, had been neglected. For
example the main source of advertising for Betta Electrical Stores in W.A. namely a
monthly catalogue home delivered to post code areas allocated to each store, ceased
production in July 2006. Newspaper advertising was also minimal leading up to the
administrator being appointed.

On January 15, 2007 Betta Electrical Canning Vale joined the massive and most successful
franchise group in Australia in this industry, the Retravision Group. The new “Best Buy
Electrical” brand was created by Retravision for the former Betta Electrical W.A. members.
Betta Electrical Canning Vale was renamed “Best Buy Electrical Canning Vale”. The new
group backed by Retravision’s massive buying power and very accessible stock holdings is
in a building phase in as much as obtaining recognition for the new brand. The first
catalogue under the new brand was released in November 2007.
During the period from January 07 to July 07 there was no white pages or yellow pages
listings for the new brand “Best Buy Electrical” – “A better buy!” adversely affecting the
new business brand.


ESTABLISHMENT OF SUITABLE NET ADJUSTED PROFIT GIVEN NORMAL
TRADING CONDITIONS

Fortune has to hand a data base of “Retail – General” businesses which have sold in recent
times. For businesses that have generated a net adjusted profit in excess of $100,000 the
following ROI was achieved. NOP $100,000           55% to 70%

Remember these statistics are based on actual sales comparing net adjusted profit at the
time of sale to the purchase price and expressed as a % age. I.E.

ROI = NOP x 100
      Purchase Price

In calculating an asking price for a business Fortune would normally look at the last years
actual results and use that data only in its calculations reflecting the very important point


D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc                 Page 16 of 18
that the business is being acquired in its present current condition. Extra ordinary factors
however exist with the performance of this business in 2007 as clearly portrayed above
under heading “Betta Electrical Administrator Appointed”. It has been demonstrated that
sales started to suffer because of the beginning of the demise of the Betta Electrical
franchise in 2006. To be conservative Fortune has therefore adopted an average of the two
years preceding 2007 as best portraying a fair profit expected from this business given
normal average trading conditions and circumstances. Clearly 2007 was an extraordinary
year where external factors beyond the control of the business had a direct and substantial
negative impact on profits.

Accordingly

Adjusted NOP               2006 $122496
                           2005 $134937
                                $257,433
Average $128,716

Adopt $128,500


ESTABLISHMENT OF SUITABLE ROI – BEST BUY ELECTRICAL CANNING
VALE

This business has been in the same ownership for the last 17 years, and the same location
since the inception of the business. The same partners (two couples) started the business in
Bannister Road, Canning Vale when Canning Vale was a backwater. In recent years
extraordinary residential growth has abounded in the area and surrounding districts
resulting in Canning Vale becoming a major retail and commercial centre feeding close by
a large, affluent residential area with a high demand for electrical goods.

The business has shown constant steady profits since 1999 with a firm pattern established.
There is enormous scope to increase sales with the introduction of new technology
products. The current owners by their own admission are not qualified in this area and
simply rely on traditional whitegoods electrical appliances. This is reflected in the owners
ages being 60 years plus and at retiring age.

There remains therefore an outstanding opportunity for an energetic young couple to
acquire a vibrant existing stable business with proven profitability and be able to expand
and diversify.

For all the above reasons Fortune therefore considers the business to be low risk.

Accordingly Fortune has conservatively adopted an ROI of 60% for this business. If the
Betta Electrical adverse effect had not occurred then a 55% ROI would have been adopted,
thus resulting in a higher asking price




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc           Page 17 of 18
ESTABLISHMENT OF ASKING PRICE – BEST BUY ELECTRICAL CANNING
VALE

Price    = NOP x 100
                ROI
         = $128,500 x 100
                60

         = $214,166

         Adopt $214,000

         This is broken down as follows

         Plant and Equipment                  $45,000
         Goodwill                             $69,000
         Stock Estimated                      $100,000
         Total Walk In Walk Out               $214,000 estimated


Disclaimer

Information contained in this profile is subject to the following disclaimer.

The information in this profile has been compiled from information supplied by the vendors
of the relevant property/business. Fortune Business and Property Marketing has no reason
to doubt its accuracy. However, Fortune Business and Property Marketing cannot guarantee
the accuracy or content of this report. Nor can Fortune Business and Property Marketing
take any responsibility for any estimate, projections, errors or omissions.

Accordingly, all interested parties are recommended to seek independent financial and legal
advice concerning the relevant property/business.


                 EXCLUSIVE AGENTS
     FORTUNE BUSINESS AND PROPERTY MARKETING

                                   ALL ENQUIRIES
                                   PHIL MULCAHY
                            (08) 9315 4401 or 0418 689 423
                                  www.fortune.net.au




D:\My Documents\Profiles\Best Buy Electrical\BBEprofile.doc            Page 18 of 18

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:45
posted:4/1/2010
language:English
pages:18
Description: BEST BUY ELECTRICAL, CANNING VALE