I'm selling my business - NEED ADVICE!

The Office Business
1

Hello All,

I’m hoping some of you out there will have some wise advice for me. I’ve relocated to a different area, and would like to sell the business I built up where I used to live. I’ve found a guy, trained him, and he’s been doing the work there for the last 3 months. He’s interested in buying the business. I am including a 2000 Toyota tacoma, with pressure washer (4 gpm, 3,000 psi); 36’ Tucker pole, 2 hose reels, leaf blower, 2 ladders, and all the other window cleaning supplies needed. When he takes over buying the business, he would be henceforth responsible for all business expenses. I would give him the customer contact information for all 1,200 residential customers.

  1. What is a fair price to ask? I’ve heard 1 year’s gross. The problem is in 2007 my business grossed $176,000. But in 2009, in the midst of the recession, it grossed $80,000. Would it be fair to ask for a price in between those 2 figures – say $130,000. He is putting no money down. My thoughts are for him to pay me a minimum of 20% of the gross sales each month until this figure is achieved. What do you think?

  2. He is offended easily, and several disputes have already arisen over the last 3 months. I would prefer to sell to somebody else easier more reasonably minded, but I have no prospects, and have found that I can’t successfully run 2 different businesses in 2 locations at the same time. I need to sell it. I will include in the final contract a statement that if the buyer fails to make payments, that the seller will take ownership of the business back. What do I need to do to protect myself from troublesome situations in the future? Where would I find the right kind of lawyer to draw up a contract which would protect my interests?

  3. How can I be sure he is giving me the true report of gross sales each month? I’m thinking that there is probably nothing I can do to make sure he is completely honest with me. But at least if I have a $130,000 selling figure, it is to his best interest to pay the complete 20% each month so that the business is paid off faster.

Thanks for your help!

Brian Anderson
Master’s Window Cleaning, LLC
Sacramento, CA

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Great questions. I know that Kevin Dubroski recently sold. You may want to talk to him about it.
As far as price go’s, I think you are asking too much. I would like to hear what the seasoned pro’s have to say about it. I may be wrong, but I believe that a great price is 30% of all jobs for a year, and not up to a certain amount just because we put a number on it. I am probably wrong…look forward to hearing other answers though.

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If you get a specific price make sure the buyer personally guarantees the purchase

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Hey bro, I am totalling your hardware at (depending on the model and miles on your rig and the make of your engine and pump on your pw)between 5 an 7 grand. And unfortunately 2 year old p&l’s wouldn’t cut hot hot butter… Not one dime over 18 G’s.

But here don’t deal w/ your guy it’s gonna be heartache for certain! wait for the cash. Someone will cough it up.

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You’re not selling a “bricks and mortor” business here (comes with a building -real estate etc). If you are unloading the business and it has a $80,000 potential. I would say that you could get a maximum of 1/3 of that asking price. I have looked into buying a business myself nin the past and got cold feet because the owner wanted me to pay interest on his initial small business loan. he outlined a payment plan that involved me paying an outrageous amount of interest. I got offended and walked out of his office. They way i looked at the whole deal was that I could have spent the thousands of $$ promoting my existing business and that since he would eventually go out of business and they would eventually end up (a large % ) with me anyway. The right buyer could fetch some sweet $$ though. If the guy is an employee, i would bet not. Maybe you could advertise it with a broker. Broker fees are probably really high though. Good luck.

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Brian I think you need to contact a business broker asap. They will take 10% off the top, but they will handle all the leg work for you and figure out exactly what its worth and back it up with mathematical formulas.

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Plus 1 on Chris’ comment about the Broker. They really do a lot to help you sell the business and figure out what it’s worth. They will do all the marketing for you as well. They’ll even screen potential clients to see if they actually have the cash before talking to you.

Regarding the current deal - Be wary of a transaction with no cash down. If he blows it, there’s much collateral for you to take back to reclaim the debt. You can put the truck in a lean, so that he can’t sell it until he pays you off, but that’s not much money I would think.

I would do a little advertising and try to find someone that’s more qualified. If you can’t, you can always sell to him.

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Thanks to everyone for your input on this topic.

As to a business broker – how do I find one?

If I don’t sell to the current employee, he’ll quit, and I’ll be back to trying to find someone to run the business in the short term until I can find a buyer, which could take several months. I’m trying to run 2 businesses, 1 a 2-hour drive away. I don’t feel I can keep it up and do a good job in both. That’s why, even though I may have problems down the road, I feel inclined to try to sell to my current employee. I’m just hoping that if I get a good contractual attorney, I can work out the potential bugs up front.

Thanks for your help!

Brian Anderson
Master’s Window Cleaning, LLC
Sacramento, CA

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Just google your area / business broker you’ll find lots of them… This employe sounds like a major problem… Be rid of him as quickly as possible.

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Why can’t you run both businesses? Give your current employee a raise and load him up with more responsibility. Why do you feel you need to be at the current location if this guy can run the business there?

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Brian,
One MAJOR thing you are missing here is that the employee is PART OF THE ASSETS. Lets say for example that a retired couple are looking into buying a business to supplement their income. They have a nice nest egg and want to invest it into a business that has low overhead and minimal start up cost. They Google low start up business or pick up a magazine and find out window cleaning has all of the above. They check with a broker in the area and there you are, Tools,equipment,vehicle,EMPLOYEE, and a current list of over 1,200 customers! The employee is almost just a big of an asset as a 1,200 customer database.
If you are serious about getting it done and over with, get with a broker. Try to keep your employee happy until it gets sold.

You could also keep it and hire a manager to run it for you. Stop in a day or two a week and make sure its running ok.

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Good question…

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[I]Here are a few tips that will help you determine your selling price and complete a deal:
[/I]
Myself, I recently secured a sale price of [B]50% gross[/B], and while I wasn’t thrilled with it, I didn’t hate it, either.

The reality is that very few people have extra money sitting around, looking for a place to be spent. Especially if they are in the window cleaning industry. So while your business may truly have immense value (an assumption, since I know nothing about your clients), the [B]market to sell it is weak.[/B]

A second thought: The real value of any window cleaning client list is in the [B]hourly rate.[/B] If you have $176,000 of work, but it’s all $40/hr, then your company is worth significantly less than if the work was all $100/hr. Personally, I would discourage anyone from buying any jobs that paid less than $60/hr, unless they were being offered at a crazy low price.

[B]Client composition[/B] is also a big deal, as well as the length of [B]time[/B] that you have had the client relationship.
A client with a 5 year working relationship is worth more than one with a 2 year relationship. How much more? I don’t know.

In the end, your business is worth what someone is willing to pay for it. Just like window cleaning.

Lastly: Focus on basing the price on [B]last year’s numbers[/B], as discouraging as that is to think about, and present the more profitable previous years as a bonus for the potential buyer. Explain what factors are responsible for the massive drop in revenue (55%), and why you believe the business revenue will trend upwards (if you do believe that) over the next 12 months.

[B]That 55% drop is the elephant in the room.[/B] Introduce Jumbo, and give people free rides on it, so that potential buyers aren’t scared of it.

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What about all of the business for sale websites on the net for selling a business?

I haven’t heard anything about them and I wonder if they would work?

I also wonder which would be the best ones?

Window cleaners should have a place on the net to advertise businesses for sale.

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I agree Merv. Maybe Chris or Alex can add an area for this on the forum?

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Huh?! Boy, I miss a lot when I don’t come around for a minute. Good for him… I hope he made some good
money from it.

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Hey Paul!

Yeah, I cut the business in half, one guy bought the residential with the logo, websites, and name, and one guy bought the commercial.

50% gross sale price.

How are you doing?

Long time no hear…

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Why did you sell? Are you moving on to something better?

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I’m doing well. I am glad to hear you are moving onto the
next challenge.

I LOVE it. (not that I hated window cleaning)

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[FONT=Arial][SIZE=3][COLOR=#1f497d]Sounds like your company is already being held for ransom by your employee. [/COLOR][/SIZE][/FONT]
[FONT=Arial][SIZE=3][COLOR=#1f497d][/COLOR][/SIZE][/FONT]
[FONT=Arial][SIZE=3][COLOR=#1f497d]If he would just up and quit if he didn’t get his way because you sold to someone else, what makes you think he would stick with the business and honor your agreement even if you did sell it to him?[/COLOR][/SIZE][/FONT]
[FONT=Arial][SIZE=3][COLOR=#1f497d][/COLOR][/SIZE][/FONT]
[FONT=Arial][SIZE=3][COLOR=#1f497d]If you’re not absolutely set on selling the company, maybe you should seek out a better employee who can run it for you. Someone already suggested doing that, and I agree with the idea. [/COLOR][/SIZE][/FONT]
[FONT=Arial][SIZE=3][COLOR=#1f497d][/COLOR][/SIZE][/FONT]
[FONT=Arial][SIZE=3][COLOR=#1f497d]Even though you would likely have to pay him more than your current employee, you might still come away better off.

[/COLOR][/SIZE][/FONT]