Pizza Place Worth it? Annual Revenue vs Cashflow Question

[Ibrahim Yamini]

As I've paid off massive debt, I've noticed extra money in my bank account that I would like to invest. I've been looking to buy a SFH or Townhouse but I have yet to find a piece of property that will yield me the ROI I'm looking for.

After I do my cash-out refinance, I’ll have a decent portion in the bank but I don’t think I’ll find a rental property this year that meets my criteria.   I probably won’t even find it next year either.  I don’t want to buy a property just to buy it, but also I don’t want my money to just sit in a bank account not being active.  So I decided to go online to find out what rich people do with small sums, like $10K.

A Kris Kohn video appeared and he mentioned that you could buy a small business and possibly put only $10K down.

I’ve found a few websites that caught my eye and there was a Pizza Place that appeared in my area.

Now, I have significant knowledge working in an industrial kitchen because that was my primary job in the military, so I know what everything should look like, but I don’t have a lot of knowledge about a civilian Pizza shop directly.  When I ran a flight kitchen overseas, we had crusts, cheese, sauce, toppings, etc and employees to get the pizzas done but we were also focused on getting a large variety of foods out, not just pizza, but I digress.

What I’m trying to understand is the mathematical language.  This shop appears to have longevity, so that’s a good sign at least.

The Pizza Place has been in business since 2005.

Asking Price is $79K

Annual Revenue is $475K

Cash flow is $75K 

Net profit not disclosed.

My first question with buying a business such as this is, do you normally have to pay the full $79K up front or do they take a down payment like any other real estate deal? If it’s 20% or less, I can easily put $16K down.

My second question is about the annual revenue.  Why is it so disproportionately different than the cashflow?   I know you have to buy equipment, pay employees, pay utilities etc, but a half a million dollars a year to pocket $75K?  Really?  I’m not familiar with business ownership but if someone could enlighten me I’d appreciate it.

-Ibrahim