I want to merge my friend's carpet cleaning part of his business into mine

Discussion in 'Lets talk Business!' started by Matt Wood, Dec 24, 2016.

  1. Bob Pruitt
    Bob Pruitt

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    If you add his commission to your price this isn't an issue since you earned your rate and they paid his commission. Will fall apart if he notices you have worked for his Client and he was not paid = bad blood and not worth it IMO. Bad news travels fast...
    Make the same deal with the House Cleaning Companies...they will refer you for the 20 to 30 percent and the referrals and fabric protector or tile cleaning all works the same- Your price plus their commission - They will be your best Salespeople!
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  2. Matt Wood
    Matt Wood

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    How should I keep it honest without letting someone fall through the cracks? Does service monster have a place for me to leave a note on the client's file so I won't overlook it?
  3. Bob Pruitt
    Bob Pruitt

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    IDK since I don't use SM or anything at the moment but I just added a note on the paper invoice and on our schedule... Would think SM would have a place to make notes about your job. They will call you directly- if you do outstanding work your new Customer will refer their friends and that is your Customer. Just what I did and worked very well for me...a Van driver... Good luck Matt!
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  4. TomKing
    TomKing

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    Matt
    1. Have him provide documentation of sales for the last 3 years.

    2. What was his profit from carpet cleaning services for the last 3 years?

    3. That profit is what you will buy the business with.

    4. Don't buy old crappy equipment. Used carpet cleaning equipment is worth about 30 cents on the dollar in a asset only purchase.

    5. Make your purchase a asset only purchase. You do not want any liability that can be transferred to you.

    6. I would want the transaction over in 2-3 years. I would set up annual payments and make him finance the loan 0% interest.

    Lots of people want to talk about % or lump sum purchase. Most carpet cleaning operations are not worth much.

    Do not look at gross when buying a business look at net profits.

    I would also want to have a clear list of clients serviced in the last 3 years.

    Is his client list growing or shrinking?

    Lots of owners want to sell you a list that is 20 years of clients the truth is only the last 3 years are worth buying.

    If this is part of a larger business is there a direct phone line for carpet cleaning services? If not you probably will get very few of his clients unless they are still willing to take contact information and then transfer to you quickly as in the next 5 minutes so you can book them.

    I would take the simple route. Sub to him under a guaranteed contract for a lower rate. Let his profit be on his side of the transaction.
    Make him mark the work up. You get your cash and move on.

    Good luck!
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  5. Jimmy L
    Jimmy L

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    Yeah do the sub work like I said.
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  6. Matt Wood
    Matt Wood

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    Tom, thanks a bunch for giving your input on my question. To reply to your 6 points
    1. I've already told him I wanted to see his list of clients and whether it was commercial or Residential

    2. I asked him to look at his numbers and find out what his profit was.

    3. I told him that I would pay him a commission equal to his net %

    4. I don't plan on buying any of his equipment

    5. I'm not to sure what an asset only purchase is...Can you break that down a little bit. I'm in the Northeast Georgia mountains over here. LOL

    6. I was thinking about making it stretch to 3years. I never considered making one big purchase at the end of the year. I was just gonna pay him monthly on all the jobs he subs out to me. Why do you think yearly is better than monthly?

    I'm not sure yet whether his client list is growing or shrinking. His main business is based on Commercial Janitorial accounts. He told me last year was the first year he Grossed $1m. I think he has dozens of commercial contracts where all the carpet cleaning would be subbed out to me. That was my main goal, to pay him his net percentage on that. If I"m wrong on that, and he doesn't clean carpet there much, then the numbers will change.

    I like the fact that you think he should still be in to dealing with his customers he subs out to me and letting him do the markup. But can you explain a little more what you mean by "sub to him under a guaranteed contract for a lower rate?"

    Once again, thanks for your input. I have no clue what I"m doing. Let's hope I'm making the right decision if he wants to go through this
  7. Matt Wood
    Matt Wood

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    Service Monster Called me today on this very subject. They must've saw this conversation and they went out of there way to give me a call and help me with this, if this ever comes up.

    I don't see Microsoft going out of there way to call their customers and answer their questions . Service Monster is the only way to go in the software for our business guys. Don't hesitate to sign on if you haven't already.
  8. TomKing
    TomKing

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    Asset only purchase is when you are buying only the assets.
    These can be any or all of the following: business name, equipment, customer lists, web domains, phone lines and even buildings.
    You are not purchasing his corporation or legal entity. If you do this then you could be liable for anything he has ever done under that legal entity.

    For example when I purchased my Flooring store a few years back I did a asset only purchase. This means legally I am not responsible for product or installs sold prior to the sale date. Now we both know good business leads me to try to handle these situations but it gives me an out in the event I have a customer that is just unreasonable.

    Paying a % of the sale. Why would you want to do this? Make it simple. If he is budgeting carpet cleaning for a Janitorial account at say $1000. Charge him $850 he then bills the client or pays you out of his monthly fees.

    Guaranteed contract. I would come to a written agreement if you are going to work off of his numbers and give him a percent but you get all of the work. I would also ask for a calendar of when these cleanings are written into the contract. I would also agree upon in writing payment terms. Most Janitorial is set up on monthly billing and the client has 14 days to pay. Some will take terms to 30 days. You may need to be willing to work on a 45 day from service for payment. I would agree upon if payment is not received within the terms bill is 100% of budgeted cleaning. I would also want to look over the scope of the work to be done in the contract. I would not ask for the contract that might kill the deal. Just list of dates, scope and what is being billed. You might be able to help him create more value and bill the client differently or offer more services when the contract renews next year. I also sold carpet, chairs and mats owned by the client as a bundle in the contract. the reason to do this is CC is one of the first things a client wants to take out of the contract to control costs. You may also need to be willing to do some emergency stain clean up from Janitors who drag garbage bags through the facility leaving a long stain or trail on the carpet.

    We teach our Commercial carpet cleaning clients to have written in their contracts that when the janitorial company does this they pay us for the 911 trip and we make it hurt. This stops that crap quickly.

    Now some guys are reading this and jumping out of their skin that you are not telling him how it is going to be or what your rates are.
    So here is my response to that thought process. If your friend is really doing 1 million. Carpet cleaning could make up $100 - $150 k of that work if he is bidding correctly.
    If you are wanting to get a second truck going doing this night work this could be a catalyst to expanding. What a blessing to have this sort of base. On just $100k you can easily cover 2 techs to do the work a truck payment and expenses. You now have capacity to go and sell other accounts or add this to the commercial work you may already be doing. This is how you get a commercial truck doing $250 to $300 k
    Commercial work is not priced by the sf when you think of profit to yourself. You may bid it to the client like that but that means nothing when it comes to making a profit. Production rates are the key. How much can be done in an evening and what does it cost to do that? The difference in those two numbers is what you take home.

    We did this when we started 9 years ago. We started with about 12 Janitorial accounts and bought 2 small 1 truck CC companies over time to fill out a commercial route. We still run one commercial truck every week Monday to Thursday. We still have many of those CC accounts also.

    Ask your self what do you want your future to be? This could be a great opportunity for your self and your family.

    The key to making this deal work is finding your friends pain points and solving them for him.

    I always tell our guys that when we do a great job at our commercial work they should never think of us.

    Hope this helps.
  9. PrimaDonna
    PrimaDonna

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    Nothing short of awesome info, @TomKing .
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  10. Matt Wood
    Matt Wood

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    Thank you so much for taking the time to answer my questions. I know I'm not the only one who's gonna benefit from your explanation and experience, and I hope this helps someone else reading this. I'll keep this thread updated in what happens
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  11. SamIam
    SamIam

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    I really appreciate all you've done for me over the years, and I would love to help you out like you've helped me.

    Would you be interested in me taking over your carpet cleaning needs and of course what would be the best deal for both of us?

    You get to feel him out with out being insulting.

    Say something like it could be a win win for both of us.
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  12. SamIam
    SamIam

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    Never mind Tom nailed it peace out Napoleon
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