Produce Market Valuation

The valuation of a Produce Market depends upon many factors:

1. Type of location (free standing versus shopping center).

2. Wholesale versus retail operation.

3. Lease terms (are they reasonable?).

4. Verifiable income and expenses (are there sales receipts or cash register tapes to verify seller representations?).

A rule of thumb valuation for a retail produce market is a price multiple of 3.25 times monthly gross sales plus inventory. If the business being sold includes real estate then you should add the fair market value of the real estate. When determining the fair market value of the real estate you should make careful inquiry with your appraiser to verify that the current operation as a produce market is "highest and best use" unless your intent is to operate the market to minimize property holding expenses until you sell the real estate as an investment property.  Click on the link below for a pricing model to use for a rule of thumb valuation approach.

Pricing Model - Produce Market

Customer mix becomes important when considering value of wholesale versus retail customers. Wholesale customers may include a variety of restaurants or similar establishments who buy produce on a regular basis. A diversified wholesale customer base (say 20 or more customers) adds value but a wholesale customer base of only a few high volume customers carries more risk than a diversified retail customer base because the loss of a single wholesale account could be devastating. Basically you are making a risk determination decision when reviewing wholesale customer information during your due diligence process.

Equipment is typically minimal in a retail produce operation but could be important to the pricing determination if the cost of needed repairs or replacements are needed to adequately handle the proper display or management of produce inventory. 

Employee turnover may be a consideration in a larger size operation, but may not be an issue in a family operation. 

Stand alone locations may have more value than shopping center locations due to increased recognition to passing motorists. However, good signage and history of being in the same location for a period of years can prove to be of more value - even if in a shopping center location. 

The sale of convenience store items or deli items along with produce can add value. However, the nearby presence of a convenience store, deli or discount beverage store may not be a competitive factor unless they are also attempting to market produce. The produce market is typically more of a competitive threat to nearby convenience stores than the convenience stores are to the produce market since it is usually easier to add convenience items in a produce market than it is to add produce items to a convenience store. The reason for this is due to "shelf life" being longer for convenience items than produce items in the event an item does not sell as quickly as the owner anticipated. 

For a buyer the aspect of seller financing is always considered beneficial.