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  • How much to offer for this Biz?

    Found "make offer" for "Moving-must sell drain cleaning biz-5 yrs old-225k gross-150k net-
    option 1- phone number,2008 letered truck-equipment-website-name-customers
    option 2- phone number,customers, website
    1 employee -assume he is 1099

    What stops the seller or the employee from stealing customers?

    I have seen lawn cutters sell customers but what about drain cleaners?

    I would need to relocate.

    I am thinking of offering to "work" the biz for several months and then get a non competition agreement signed by both guys.

    But I am clueless at what a offer for this should be.

    Please help me decide if this is worth any cash at all- and I want to be fair. Motown

  • #2
    Re: How much to offer for this Biz?

    You'd have to get a look at his books/customer breakdown. If he has a majority of business coming from one customer(big maintenance contract perhaps) then you would have to take that into consideration as well.

    General rule of thumb is a business is worth anywhere from 3 to 5 years of gross, depending on business, how long in business, customer list, contracts, etc.

    I would assume that in this case if the business was solid, long-term, growing, then the owner's accountant/business manager would have given him a sale price and gone from there.

    The "make me an offer" thing for a business out of your comfort/work area sounds kinda sketchy.

    But then again, that's just my opinion. Others may vary.
    I'm on "The List" and I love it!!

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    • #3
      Re: How much to offer for this Biz?

      look at his books.
      Look at his bank accounts.
      Talk to his suppliers. Talk to his customers.
      See if he has any pending legal troubles.
      Look at his equipment.
      See if they are owned or leased.
      Get legal advice before you sign anything.
      Do some basic math to see what his shop is really worth. Just because you get his customers names and addresses does not mean they will call you once you are running the shop.

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      • #4
        Re: How much to offer for this Biz?

        The only way I'd buy it is on time; he has to carry a note. Then he can't get paid if he takes all the customers. Preferably he would stay with the business for 6 mo or a year as well, paid of course.

        225k gross, 150 net? how does that work paying an employee? employee's gotta cost 50, even if owner takes no salary that leaves 25k/yr in expenses? no way. somethings not right.
        This is my reminder to myself that no good will ever come from discussing politics or religion with anyone, ever.

        Comment


        • #5
          Re: How much to offer for this Biz?

          Start your own business. Save yourself the headache. Maybe save a few bucks too.
          Rod
          MT. Washington Sewer & Drain Cleaning
          Serving Berlin, NH and North Conway, NH areas
          http://unclognh.com
          http://mtwashingtonseweranddrainclea...m/default.aspx

          Charging less does not mean more call volume it just means you have to work harder to reach your goals.

          Comment


          • #6
            Re: How much to offer for this Biz?

            it's one thing if you know the area and the people. but relocating and buying a service orientated business is not something i would want to take a chance on.

            it only takes a couple years to make a name for yourself and the money you spend on an existing business might not make sense.

            25k in yearly expenses is very doable. especially if they work out of their house. 2k a month in expenses for a drain cleaning company is actually a lot.

            drain cleaning is very little expenses once you own the machine. plumbing supplies cost money and result in monthly expenses. drain cleaning is more of a maintenance issue. little material and lots of maintenance. your initial investment is costly for machines, especially if you get into jetting, pipe bursting / lining and video inspections/ locating.

            my drain related equipment is expensive, but my plumbing related materials and equipment is the main reason for the shop building. sure the jetters and pipe bursting trailer requires a place to park it, but you don't need to have these items to be successful in running a drain cleaning company. a decent size van can carry everything needed to run drain cleaning calls.

            so to sum it all up, unless the business is sold at a giveaway price, all you're getting is an expensive customer list. 1 employee is no guarantee he will be there to help run the calls.

            rick.
            phoebe it is

            Comment


            • #7
              Re: How much to offer for this Biz?

              Originally posted by PLUMBER RICK View Post
              it's one thing if you know the area and the people. but relocating and buying a service orientated business is not something i would want to take a chance on.

              it only takes a couple years to make a name for yourself and the money you spend on an existing business might not make sense.

              25k in yearly expenses is very doable. especially if they work out of their house. 2k a month in expenses for a drain cleaning company is actually a lot.

              drain cleaning is very little expenses once you own the machine. plumbing supplies cost money and result in monthly expenses. drain cleaning is more of a maintenance issue. little material and lots of maintenance. your initial investment is costly for machines, especially if you get into jetting, pipe bursting / lining and video inspections/ locating.

              my drain related equipment is expensive, but my plumbing related materials and equipment is the main reason for the shop building. sure the jetters and pipe bursting trailer requires a place to park it, but you don't need to have these items to be successful in running a drain cleaning company. a decent size van can carry everything needed to run drain cleaning calls.

              so to sum it all up, unless the business is sold at a giveaway price, all you're getting is an expensive customer list. 1 employee is no guarantee he will be there to help run the calls.

              rick.
              I dunno Rick... I spend $8k/yr just on gas. $1600 of rubber every fall, plates, insurance, oil, filters, brakes, etc... vehicles alone is easily $12k/yr.

              Non-payroll expense for me is in the $60k range.
              This is my reminder to myself that no good will ever come from discussing politics or religion with anyone, ever.

              Comment


              • #8
                Re: How much to offer for this Biz?

                alex, it cost you 5k a month in drain cleaning material and vehicle expenses? 1 truck or 2 on the road?

                i'm not referring to rental of a building, as that is a variable that can change based on location and size.

                i doubt that there are too many self employed drain guys that have shops outside of their home or garage.

                of course you, ron, and myself are an exception

                rick.
                phoebe it is

                Comment


                • #9
                  Re: How much to offer for this Biz?

                  Unless you're going to enforce the noncompete clause, which will be very expensive, it's not worth a thing.
                  Buy cheap, buy twice.

                  Comment


                  • #10
                    Re: How much to offer for this Biz?

                    Originally posted by tinmack View Post

                    General rule of thumb is a business is worth anywhere from 3 to 5 years of gross, depending on business, how long in business, customer list, contracts, etc.
                    The greater the "growth" the company is experiencing the greater the multiple of sales a company can garner. The problem with the drain cleaning company is that the growth probably is not particularly large. Given that they've been in business 5 years they are not probably well established or have a widely known reputation in that area.

                    I sold a vibration analysis business a while back and got 1.3x sales. I know of a CPA who's trying to sell his well established business and is hoping to get 2x sales. (and is having trouble selling)

                    That aside, the truth is the business is worth whatever some buyer is willing to pay. I suspect that unless someone is buying a roto-rooter type franchise that it's probably just wiser to start your own business. Unless you really know, and are intimately familiar with the seller.

                    I had a brother in law who purchased a plumbing business. He worked for the business for several years before purchasing it. The seller carried a note and the buyer paid for the business over ten years. The seller did occasionally go out and do jobs for previous customers from time to time which really pissed my brother in law off. But there was nothing he could do about it. I would suggest that in the contract a clause should be inserted that if the seller performs plumbing/drain cleaning services for existing customers that the contract becomes void. (Large incentive there. Eh?)
                    Time flies like an arrow.

                    Fruit flies like a banana.

                    Comment


                    • #11
                      Re: How much to offer for this Biz?

                      Originally posted by PLUMBER RICK View Post
                      alex, it cost you 5k a month in drain cleaning material and vehicle expenses? 1 truck or 2 on the road?

                      i'm not referring to rental of a building, as that is a variable that can change based on location and size.

                      i doubt that there are too many self employed drain guys that have shops outside of their home or garage.

                      of course you, ron, and myself are an exception

                      rick.
                      two vans

                      well, gross was ~260, net was ~80, payroll was probably ~120 once you add in employer match and workman's comp, etc. so that leaves 60. 25k of the sixty was rent building rent, so that may account for the discrepancy, plus I bought a third van for 7500 (it just sits for a spare when one breaks) and there's some equipment rental and pumping fees in there... I could run closer to the bone if I needed to I guess, but 25k, man, that's a shoestring.
                      This is my reminder to myself that no good will ever come from discussing politics or religion with anyone, ever.

                      Comment


                      • #12
                        Re: How much to offer for this Biz?

                        Originally posted by PLUMBER RICK View Post
                        alex, it cost you 5k a month in drain cleaning material and vehicle expenses? 1 truck or 2 on the road?

                        i'm not referring to rental of a building, as that is a variable that can change based on location and size.

                        i doubt that there are too many self employed drain guys that have shops outside of their home or garage.

                        of course you, ron, and myself are an exception

                        rick.
                        Hey............Now
                        Seattle Drain Service

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