Someone recently approached me about buying his business. It is 90% residential. He does window cleaning, gutter cleaning, pressure washing, and Christmas lights. He said he did $270,000 last year. There were 3 guys doing the work.
He has some equipment like a Sky-Vac (for gutter cleaning), a few blowers, a wfp, and some screen cleaners that are part of the package.
Basically, I would be buying his customer list.
He said he has tax returns, and bank statements, but does not have any invoices in his CRM (Jobber), because he did all paper invoices.
How would I go about determining what this is worth?
His window cleaning prices are 25-30% less than mine. His gutter cleaning prices are close to mine - perhaps 15% less. His pressure washing prices are probably 40% less. My 8 technicians are paid on commission, so that would mean that they would be paid less doing jobs that we purchase from this guy, and that’s not going to go over real well.
I would really appreciate any wisdom any of you have in this realm.
He’s asking $60,000 cash for his customer list and equipment.
25-40% less is a lot. (100/hr vs 60/hr) that lower pricing is going to haunt you forever, it’s coming out of someone’s pocket, and why should it?unless you’re employees just have no work and low pay work is better than no work. but otherwise it’s a mess since everything including profitability is based on your correct pricing. the guys will hate it, you will hate it. how many years get them to current rates? (and at that point your own rates will still be that much higher) that is an additional cost of aquiring that business beyond the cash out. a lot to consider, but new volume is always tempting, there just may be more signifigant ongoing costs than the cash to buy them.
think too of the additional staff possibly needed to do that work, your fixed costs stay the same with truck, employee expenses, supplies consumed etc, but now with 25-40% less coming in to cover that
reverse it and think instead how beneficial it would be to buy a cust list with prices higher than yours
unfortunately most of the time the ones who are selling seem to be the ones that have jobs priced lower
Lots to unpack… with the uncertainty of essentially no true trail of payment, I would go with a payment plan buyout over 2-3 years, some money as a down payment. Maybe a clause that states if “x” number of clients drop off the price drops down.
Personally, that’s not a bad price at face value. A customer list like that probably has 800-1200 names and the marketing value on there for roof cleaning alone would be worth it to me… maybe 40-45k one time payment just to lock down the deal with time to market.
Good points all around , but this is the way I see it . If you were allocate an extra $20k for marketing a year for the next 3 years? How much volume would you get at your going prices ?
Dealing with someone else’s clients list that is already below the going market rate is no fun and you will be kicking your self in the rear
Doesn’t sound like a bad deal. Could be a great opportunity. I would tell him he can keep his equipment and just buy his name and phone number, website and all that good stuff for say $10,000? And then increase all his prices and pay him a 15% or so royalty for all his customers you service for the 1st year. Should work well for both of you. I’ve never done this but just recently heard it from Brandon Vaughn how he bought out a few different companies.
The price, in my opinion, is very good but you are on the right track thinking about the other factors.
Will his guys be staying on? If so, you could keep them at the same pay plan as they currently have and they know the jobs. Are any of his guys strong enough to be a lead?
With the residential prices that are that much lower than yours (25-30%) that’s eat almost all your profit and need to be raised. Think about your close rate as it relates to your previous price increases. IF you tell his clients you are raising the price due to inflation, ~9% (thank you Mr. President) that’s still significantly lower and, as you said, your guys are commission and it would be a moral deflator.
I have bought 2 WC businesses, thankfully from good guys that I trusted and knew for several years before the purchase. The first time around I lost 30% of active clients, I was not the other guy and he had an out of this world personality that they loved and his prices were 25-30% below market (your same boat). I did not raise prices the first year so they could get to know me and have only increased then slightly, with great resistance from most. My new clients love the work and the price ($4 out, $3 in, $3 screens with discount for quarterly).
Of the “list” I bought, another 65% of the list never answered postcards, phone calls or text, or were no longer at the location. I archived them last spring, after 3 years of trying. The giant list I bought, that were “GOLDEN” went from ~4,000 to under 1,000 over 4 years now.
The other business I purchased 6 months ago is mostly commercial and that is a steady income that will pay itself off in about 2-2.5 years. But I have lost several regulars and there seems to be a different method to commercial than my usual business (95% residential).
Tax returns can only go so far. Get his employees pay info, vehicle cost, equipment condition is huge (first business I replaced EVERYTHING, second business I got really good equipment). Why is he selling?
Check the percentages of everything, employee cost is likely higher than normal due to low pricing.
It could be a good buy or a long migraine to repair. I don’t see it as a steal based on the limited info.
We bought a business before and I’ll tell you to be prepared for some clients to look for any and all reasons to leave you. Others on that list may have been only one time customers.
Honestly unless the contact list comes with contracts for repeat services then it’s not a really good deal.
With wear and tear, that equipment may not be worth it either.
I’m with the other comments, if you already have an established business then there’s a whole lot better ways to use 60k. Imagine putting that into google ads or a direct mail campaign… bananas
If I could go back I’d do it this way with the first business for sure. We get to emotionally attached to our clients and the work, sweat, sleepless nights, employees, etc and forget this is a business transaction. Numbers don’t lie…unless you’re the CDC.
follow your gut, if you’re not sure. Be still.
If he really feels he wants to buy it. This is the way I would go about it for sure.
I don’t like the fact that he doesn’t have a
CRM with alll info with each and every customer. Like how long he’s been doing them, how often they get serviced , and How often he’s raised prices.
I don’t like the fact that he’s going to be asking his 8 techs to take a pay cut becisse he wants to expand that won’t go over well and could cause issues with quality and motivation.
Anyone who buys a exciting service business will lose a percentage of customers that should be expected his losses could be higher , because of lower paid techs
This is a tough call … it’s a shame this guy prices so low. It would of been a no brainer.
I agree that if the prices were higher, it would be a no brainer at an even higher price.
I don’t know how to effectively and efficiently track that much work, income, and employee details without a good CRM or he must be a master spreadsheet hero…in which case the CRM would still make the owners life easier.
Yes , but I’m still not cashing this guy out. Like Mike says put a percentage down an pay off a monthly note over a 3-5 year period. With a guarantee that any customers not serviced that year comes off the principle.
He needs a list of all the customers and what the ticket was
that would be great but most guys I’ve spoken to want cash yesterday. To either fund the next venture or to through with it, understandably. I think, when the glorious hallowed day come for me!, I’ll take a center amount up front then % payment for 3-4 years. I am confident in what I’m building and that it will only continue to grow.
