Hey guys, quick question. If you were to sell a WC route how would you come up with your asking price? Let’s say you made 200k for the last 5 yrs, and can prove it, what would you sell your company{no vehichles} for? Thanks in advance
I’ve bought one biz and am in the process of buying another. The first time I paid cash for four months gross. I am currently negotiating a years gross for a larger purchase, with an out clause for accounts that fall off within 90 days of the transition date. It’s more than what I want to pay, honestly, but the work is real good work and it’s being self financed over 5 years.
It’s really up to you.
What do you NEED from the sale?
What number are you hoping for?
If you are not anxious to sell, you can dictate terms.
Interesting question from someone with the user name “WindowNoob.” Is it your business we’re discussing?
I sold my first window cleaning business back in the 80’s. My CPA told me that three months gross was the going rate. I have worked as a sales rep for some large cleaning companies and about three months gross was the going rate for all five. Of course the accounts have to be profitable. The going rate in our industry is paying the help about 30% of the gross. If the route is profitable 30% of the gross should be a nice wage if not you’ll have trouble finding good help to work for peanuts. If you are forced to pay more than 30% the profit margin will be to low to make the business worth while.
I have heard these numbers over and over again for the last 35 years. This NOT my personal opinion.
I’ve heard those numbers for years as well, but not all businesses are equal as you point out. Also, I believe a business broker specializing in WC’ing is much more qualified than a CPA to determine value. A business could be doing $200K per year and not be profitable. Variables includes contracts in place, net profit, owner salary, etc.
Check out Steve Miller’s posts on the World Archives for some valuable information.
Ive heard 3x what you net in a year from an accountant. Ive always wondered myself about the value.
Thanks for the responses, and no it’s not my company, hence the name WindowNoob!!! I was looking into buying a route and have been on this site for the past 2 weeks everyday!! Tons of great info on this site, it really opened me up to the WC world. Recently I have been going on route with the owner of the company I was interested in, just to see if WC was for me, and to get a general feel for things. When I first started I was so frustrated!!! No offense to you guys, but prior to doing this, I thought WC was easy and never knew there was so much technique involved, as well as many different variables. I now have a new respect for the bussiness, and how much work and attention to detail goes into it. I loved the feeling and satisfaction after doing a good job, and am excited to get going. I now have to look at all his books, and go over everything in detail, but was just trying to gauge how much one would value the price of a WC bussiness. I look forward to posting on this site, and appreciate any pointers for a newbie like me!!! Thanks again guys
Hi there and welcome! Any asset is worth whatever someone is willing to pay for it. However with that said, total revenue minus every single possible expense including depreciation and the owners salary will give you then net profit for THE BUSINESS. Another HUGE thing to take into account is how the company is currently positioned. How well is the branding? How respected is it in the community?
Also, did the current owner build his company around himself? Or did he build a business… There is quite a difference.
Take all that into account.
I’ve never purchased another company myself.
I’ve been around a few people who did and those that put it in to the contract that the selling party was required for x amount of time to be available to ease the transition for clients seemed to be in a better place 12 months down the road than those who didn’t.
I’m assuming your talking comm. work and the vast majority of my experience is in the residental world. Probably oranges and apples but just my two cents. Best of luck to you
I love your company name and logo.
Hey Larry,
I have read posts and business books in the past that give a recommended percentage value to every operating expense. I only mentioned the payroll expense percentage one because it is the most important one and the only one I can remember.
If the overall pricing on the route is so low that 30% of gross is to low to pay good help you can not survive, because what is left for the other expenses after you raise the payroll expense percentage to let’s say 45% will not be enough to cover all the other operating expenses.
If you are operating out of your home and have no insurance and no office staff and no utility bills etc etc then you can pay more than 30% for your help but that’s not a real business that someone would want to buy.
This is also the main reason lowerballers do not last.
In service businesses like ours where the crew drives a truck to the customer’s home provides a service and leaves the numbers are all about the same or so I’ve been told.
A really profitable business would be able to pay the crew less than 30% and still have well paid and therefore happy workers. This would also mean a higher profit margin.
Mike: Sorry for confusing you; my comment was in regard to valuing a business and not payroll expense.
Hey Larry,
Actually I thought you were confused. I tried to clear up the misunderstanding in my other post and I guess I failed. I know you are talking about business value.
Can we agree that the profit margin is the most important percentage in determining a businesses value?
Can we also agree that if payroll on a manually labor service business, like window washing, is to high the profit margin will be lowered?
PS
One of the reasons the guys love WFP work is that payroll is much less than 30%, right? Well actually the money is so good in WFPing you could pay a guy 50% and still make money but nobody is doing that, are they?
But we’re not talking about that here, are we? We are talking about regular storefront window cleaning. Nothing fancy that would push the price structure up higher than normal, right?
Where do I find The World Archive ( Steve Miller ) you are referring to ? Please !
