Book Value Is Not Market Value

A Common Misconception

If you’re thinking about selling your hospitality business, here’s one thing I want every operator to understand clearly before they go to market: book value is not market value.

Just because you spent $200k, $500k, or $1m+ on your fit-out doesn’t mean the business is worth that figure today. In fact, in most cases, it’s not even close. The market doesn’t reward what something cost to build. It values earnings.

This is a tough pill for some sellers to swallow, especially in hospitality where there’s a huge emotional and personal investment layered over the financial one.

Commercial Reality

The reality is simple: "Buyers care about what the assets are worth in context of earnings, not what they originally cost.” (Barn Wilkes)

It’s not enough to point to invoices or high-spec finishes and expect that to carry the value. Buyers today are looking beyond the build cost. They’re looking at performance and potential. If the business is profitable, or if there’s a clear, tangible upside that can be realised with the right operator, then that becomes the basis for value.

Buyers are pragmatic. They’re weighing up the lease, staffing model, operating risk, kitchen capability, equipment condition and how those factors support reliable cashflow. That doesn’t mean creativity and concept don’t matter, they absolutely do, but businesses are assessed through a much more commercial lens.

The market has evolved. We’re not in a cycle where buyers are paying speculative goodwill or chasing vision alone. They want return, reliability, and a venue they can operate with confidence from day one.

Reframing Value

This doesn’t mean your business isn’t valuable, far from it, but value needs to be positioned correctly. If the numbers are a bit lumpy, or the business is still building back, then the story we tell needs to shift away from what was spent and toward what’s there now: the physical assets, the quality of the lease, the location, and the platform it provides for growth.

At Retail Business, we’ve sold hundreds of hospitality businesses across Sydney and NSW. We know what buyers respond to, and what they don’t. The campaigns that succeed are those where pricing and positioning are based on earnings, evidence, and opportunity.

Let’s Talk

If you're thinking of selling and want a grounded, market-tested view of what the business is likely to achieve (or if you've got a different perspective and want to explore it) I’d welcome the discussion. These conversations are where the best results stem from.

Barn Wilkes | Director & Licensee | Retail Business, Sydney’s No.1 Hospitality Brokers