[Phoenix]

I've always been interested to know how much small businesses are making and how their revenue and costs are structured.

Often I'll look at a cafe and think "what is its ROE?". Or I'll look at a bar or small hotel and think "how much would that cost to buy or setup?". You can't just go into a cafe, ask for the owner, and start interviewing him about his cash flow. I assume they do all keep accounting books or computer records though.

So how could I source or access this information?

[heavy]

Lotsa variety there. Lawyer, Coffee shop, Plumber, Copywriter, Builder...

You can look up average expense ratios by industry at BizStats, which might help. The $ figures will vary a lot (by location), but you can count on these ratios.

You still need at least one piece of information or assumption, for which I would either ask around or google it (I just googled and found the avg coffee shop sells 230 cups a day, or around $250k revenue...obviously varies a ton by location).

How much an owner is "making" varies a ton. For instance, a guy who went in debt for the business is 'making' a lot less than the same dude who paid cash for his business because he's paying interest on his assets. So many people say 'well it's paid for so he's making a ton'...well yeah, that's sorta true, but that guy could sell the business and make interest elsewhere. You have to look at opportunity cost.

Depending on the industry, the size of the company may change some of the ratios. A solo-builder/contractor (let's say rev <$1 million) will have very different ratios than big builder with many employees doing over $10 million.

Great discussion tho and fun to think about. No doubt other guys here are far more knowledgeable than me on this.

[The Beast1]

(03-05-2015 12:01 PM)Phoenix Wrote:  

You can't just go into a cafe, ask for the owner, and start interviewing him about his cash flow. I assume they do all keep accounting books or computer records though.

Actually, you'd be surprised. Maybe you should try to reach out to a small business owner and ask some questions. The worst they'll do is say no and at best won't respond.

I'd also let them know that you aren't interested in becoming a competitor and are more interested in the mechanics of how a small business operates. Where all of the "ins" are and where the outs are.

[Tyler Belfort]

A company called DueDil do this in the UK for all limited companies. Lists the previous years P&L, cash etc for all private businesses.

Not sure if there's equivalents in each country, but would be a good place to start.

If you want any info on UK companies let me know, I've got an account there so can send it over for free.

[tarquin]

If you have some sort of business experience or degree that you can leverage, tell the small business owner that you are working on becoming a consultant in that industry but that you would need experience in order to start charging what the work is worth. Then ask if you could study his business intensely for a week and then monitor it for a few months to get a handle on it. At the end you will give him a report on the ups and downs of his business without any cost to the owner in which you give advice regarding cost-cutting measures and ways to increase revenue.

I'm not a consultant, but I'm guessing it's a good way to get started consulting in a specific industry, which is what it sounds like you want to do.

[Beyond Borders]

Make friends, or even just acquaintances, with business owners and then just ask them.

If you just want the basic numbers, I don't recommend being slick - just be plain and upfront about it. Maybe say something like, "Feel free to tell me if it's none of my business, but I'm curious..." or some other phrase that gives them an easy out. Easily done over a cocktail or coffee.

Simply put, some biz owners will have no problem sharing their numbers and some wouldn't tell them to their best friend. Just don't take their decision personally, and if they'd rather not talk about it, don't bring it up again.

If you really want an in-depth look, I suppose you could become a part-time bookkeeper for a while and select your clients wisely. There's no better way to learn from another entrepreneur than to work with them.