First off, why should you evaluate your food truck business? Knowing how much your enterprise is worth is precisely the reason why there is a need to evaluate it. You might think of getting rid of it in the future if things don’t go well so knowing its worth today would give you an idea of how much sales you are going to generate from your mobile kitchen business. 

Second, there are still more reasons for valuing what you own at the moment like investing for future expansion, introducing a new partner into the business or else, presenting it as a collateral if you intend to make a loan.

In general terms, the usual way of finding how much your venture is worth is by assessing the value of all your assets and liabilities and then taking away the cost of the assets from the liabilities. And that’s according to how the experts do it. As well, net income and other related factors influence the overall value of the business.  

Simple as it may seem but in reality, calculating the fair market value of any business, especially food trucks, could be a bit complicated. Add to that the emotional attachment the owner has for the business, making it hard on his part to evaluate its repute. And this is where a professional business evaluator comes helpful. Being an ‘outsider’, he will be able to do a realistic evaluation devoid of any emotional connections.

So, how do you evaluate a food truck business?

Evaluating a Food Truck: 3 Factors to Consider

Consider these factors when valuing your food truck:

• Cost of the food truck upon purchase
• Cost of the all the upgrades or makeover like changing its kitchen design
• Cost of amortization or depreciated value of the food truck

To compute the amortization cost, divide the cost of the food truck by the number of years you intend to use it. Case for instance,

$120,000/10 years = $12,000 per year x 5 years = $60,000

$120,000 – $60,000 = $60,000 estimated value after 5 years of use

Presuming that you’ve been using the vehicle for 5 years, its value will now be nearly $60,000. However, for a more accurate estimation, there are free online tools available for use like the amortization calculator.  It is a convenient way to estimate your loan repayments on a monthly basis so that you will be able to see how much the amount you owe on a loan is gradually reduced. 

According to industry standards, 5 to 7 years is the time period best to estimate the depreciation cost for trucks weighing 6000 kgs on the average. That is only on the food truck aspect. But then your business also involves other things like the food preparation and serving equipment you are using. So, there has to be a separate evaluation for such things.

Evaluating Your Equipment: 2 Factors to Consider

• Amount spent for purchase of equipment
• Amount spent for upgrade on equipment

Computing the value of your equipment is more or less similar to the way the amortization or depreciated value is done, as shown in the example used above. That is, dividing the cost of equipment by the number of years of intended use. The resulting figure then is to be multiplied by the number of years of actual usage and finally, deducted from the equipment cost. 

Based on what the National Restaurant Association in America says, most business owners embark on equipment upgrades between 6 and 8 years but the industry standard is set at 12 years.

How to Evaluate Your Business as a Whole

There is this basic formula commonly used by financial experts to determine the value of the entire food truck enterprise. Whether your truck is brand-new, slightly-used or recently converted, this formula can be applicable:

Value of food truck = amount of truck purchase + amount of equipment purchase + amount of labor during installation

Experts say there are more than one method to arrive at an estimated valuation of the whole mobile kitchen business. The following must be taken into consideration:

• Gross sales
• Actual cost of building the truck
• Income or earnings
• Market value
• Asset value

Using these factors mentioned above will enable you to arrive at a clearer evaluation of the business as a whole. Nevertheless, as they say, a one-size-fits-all system of valuing would not apply to all food truck ventures. Therefore, hiring a professional to do the job can provide you better and more precise results.

Now, if you’re looking to dispose of your business in the long run for one reason or another, you might as well keep your financial books handy. Potential buyers will surely look into how much your business is generating income on a daily, weekly and monthly basis. 

You may create a simplified financial report or better yet, avail of QuickBooks. For a certain fee, you can get hold of an accounting software package that can help you monitor your expenses, manage your cash flow and produce invoices all “under one roof”. This is very valuable if you put your business up for listing online.

If you need more information on how to buy or sell used food trucks, check out UsedVending today. You’d get all the assistance you need to dispose of your business without too much hassle. Visit this page to know how.