Hmmmmm

[Willy P]

A friend of mine is getting out of the carpet cleaning business due to a messed up back and is selling everything, lock , stock and barrel. He's built a good business over the years, charges a decent price and offered the hard assets, phone number and customer list to me for a very reasonable price. He netted a little over 65 k last year on a gross of 80 according to his books. The asking price is 25000 which includes an older Astro van and equipment. The equipment includes a 175,1 ninja, 1 fiberglass box extractor, 1 walk behind, 2 spotting machines, 2 snail fans, a cool old Harloff electric sprayer, wands, hand and stair tools, a ton of dyes and chems, and a whole bunch more.

What to do........

I've arranged for my accountant to look over the books. Is there any other suggestions of what to ask and look out for? One part of me is excited and one part is screaming WHOA NELLY!. I'm capable of putting the money together and I know he's firm in the price.

 

[dgargan]

You can count on maybe doing 50% of what his sales were. What happens with small owner operator business's is that the customer base is tied to "him" not the business. The equpiment sounds like nothing you would want. I would offer 20% of the sales that it takes in for the next year.

 

[Jay D]

Net probably more like 55,000, Your buying his list because the van/equipment is probably worth 5000. Commercial accounts might make it worthwhile. Take off your rose colored glasses and really look at this properly and really listen to your accountant on HIS evaluation of the business. What systems are in place to make it worth your while. Does he have his database on a computer or is it a box of receipts. Does he send marketing to the database or just wait for calls. I would be hesitant to write a check for that amount for a owner operator business for someone getting out. Just my opinion. I tried to get out in another state by cashing in and got zilch. :roll:

 

[Chris A]

Even if you only gross 40k you'll still probably net close to 25, I would do it, but that's just me...

 

[Jim Martin]

the equipment .. you need to figure out what it is worth to you and the condition it is in and how it was maintained......buying a customer list is like buying air..........there are better ways of doing it.....

 

[Jay D]

One more thing, I agree a percentage of first years sales is fair Plus a down payment. If he did 80K 20% is 16K. Maybe 10K down. :|

 

[Desk Jockey]

Are his customers in the same price range that you charge?

 

[Willy P]

Are his customers in the same price range that you charge?

He charges 10 cents more a square than I do.

The van has 65,000 miles in A-1 condition with shelves and a headache partition, the equipment is in excellent shape (the Ninja is the new one, less than 50 hours), I know a few of his regular commercial customers as I've subbed for him when his back was wrecked too bad to work. I'm really leaning on making him an offer, but I'll wait until the accountant looks things over.

 

[Askal]

In addition to his books looked over by your accountant I would get copies of his last two years bank statements (detailed by deposit) to see what he actually deposited in the bank. Not saying he is dishonest but I could rework my quickbooks to show a LOT more annual profit in just a few hours.
Al

 

[Desk Jockey]

Cold be a good opportunity. ???

I agree you may lose some, a letter from him to his data base couldn't hurt.

I'd call all his top customers after the letter to introduce yourself.

 

[LeeCory]

I don't think I would do it for what he is asking. Too much money for a portable business customer list. All of those customers will be looking for new cleaners when he is gone anyway, and chances are you could get them anyway. Especially the commercial accounts you've already subbed for. Go take them NOW before somebody else does.

Put that much money to work in wonderful advertising and i'd bet you would make more than his business is worth.

 

[XTREME1]

The big question is. Do his customers know he is going out of business?
If so it ain't worth diddly if they don't if you already don't have an office staff hire someone to answer the phones to say "jay, jim, Steve whatever his name is moving all his calls to the call center" it will still be a business, it may not be him but if you underperform that is your problem but you will get everyone of his regular customers happy and happy he is moving on to a better lif(in there opinion)

 

[randy]

I would only agree to do the deal if he writes a letter saying that he is retiring and has gone to great trouble selecting a buyer for his business that is an experienced carpet cleaning professional with allot of integrity , as well as a long time friend. Getting the highest price for the business was not my main concern but rather finding someone committed to continuing the quality I have always offered. I have full faith in .....

Second: I would require him to take me around to any commercial accounts preferably when he is cleaning them and introduce me as the new owner to the management or contact person. Cultivating the relationship with the customer is essential. Perhaps have him help you on the next cleaning of that account.

What do you think you could realistically liquidate all the hard assets for within 90 days ? If you think maybe say $5,000-$6,000 you are only paying $19,000-$20,000 for the business. If you can handle the extra work without his equipment perhaps liquidating it would be a wise move. Astro vans kind of have a following in several different trades and it would be a easy sale.
Another option would be continuing to run his operation as a second operation for awhile and then absorb it into yours, re letter his truck and hire a tech to operate that van.

I don't accept the all to common idea that owner/operators accounts have little or no value do to loyalty to a particular person. That crap is all based on that bullshit owner/operator mentality/ ego trip "my customers won't allow any other cleaner in their home". Nice pat on the back for the owner/operator but not real world reality. Go away for awhile and see how quick the greatest cleaner can be replaced in the market place. Often the customers of these tiny operations are extremely loyal, unless you do something really stupid or don't have the previous owner communicate with them property, You should be able to keep the majority of the customers. Since he charges 10 cents more a square foot than you do anyway print up GIFT CARDS with his business name & picture on the card. I would make it good for $50 with a one or two year expiration date. Send the gift card to every one of his residential customers in a wonderful Hallmark style /size thank you card basically thanking them for their business over the years. This will bump your retention rate by an amazing percentage, guaranteed.

$19,000-$20,000 for $80,000 in annual revenues isn't a bad deal, just make sure that's the true number and has been pretty consistent with a limited variance over the last 3-4 years.

I think this could be a real winner if you know he ran a solid business. Definitely keep his phone number, even if you need to transfer the number to a cellphone.

 

[LeeCory]

If you decide you want to do this.... offer him a lower price. He WILL take it.

 

[harryhides]

Willy, if you want or need the extra work/business, I'd offer him more than his asking price say - 31k but only on condition that he answer the incoming calls for six months and that he introduces you to all of his major customers.
His estimate of his "net" is irrelevant, you know what your net from 80k would be and that is what counts.

If you can "net" 30k in six months and your investment is essentially paid for ( except of course, your free labor) then little else matters.

Having said that :
I'd be a bit dubious about the quality of this guy's business since if he is only grossing 80k after several years it doesn't sound like there is a whole lot of repeat business. Heck we added that much in commercial work this year alone.

For those that don't know downtown Vancouver - there isn't much Truck-mount work to be found, it's all high rise buildings.

 

[Willy P]

Thanks- Lots of sound advice and good points to think about. His financials were down from previous years as the back was degenerative and he became unable to work as much as he had been. He operated for years with a simple 100 psi fiberglass box extractor and has got his prices up to 38 cents a square for basic cleaning . He bought the new one to update his gear after endless torment from me, but found it too heavy. The rest of his equipment is very well looked after.That being said, if I had to hire a carpet cleaner, he would have been my first choice as he is very meticulous in his work. We've worked together many times, so I'm pretty sure he just wants out. His mortgage is payed, his wife owns a busy bookstore, he has a nice shiny new convertible. And I know him well enough to be sure he's saved a few quid over the years as he tosses pennies around like manhole covers. Tomorrow I'll know more and I'll definitely be making a list of things to bring up with him from the above posts. Thanks again.

Hiring a tech is going to be tough. It's high flood season and the restoration companies gobble up the likely candidates like pacman. Weird fact- Vancouver has more restoration companies than any other city in North America.

 

[GeneMiller]

In these times he will have a hard time selling his business. Most banks aren't going to loan money for this venture. I had a friend who closed who was grossing over 120k and he couldn't sale it to save his life. I ended up buying his phone number for 2k. He thought that it had a lot of value also but nobody else did. If you wait his price will drop like a rock, or it could sale, but I would wait.

Gene

 

[Spurling]

If hes willing to answer the phone for the next year, (familliar voice to current customers).. you could say youre the helper or business partner .. so the next time they call and see you , it would be normal ..who knows .. he may need the extra income taking calls ..

Id do it .. 20k?

 

[Torn]

The only way I would do it is for a buy out arrangement. The post that said the business is tied to his relationship is the most truth you're going to get. You need to keep him involved until you can comfortably cultivate your own relationship with those clients.

The equipment is not worth your money. Lastly, don't if there is mention of a non compete agreement remember that there not worth the paper their written on.