Opportunity to buy existing company

Hello Everyone,

I’ve worked for a window cleaning company for almost 3 years now, and the owner has decided to sell the company. Two co-workers of mine and I have been giving serious consideration to purchasing it, because it could turn out to be a fantastic opportunity for us.

A little background info for you…The company is only 4 years old but is on pace to do $350k in gross sales this year. In 2009, this number could reasonably be $450k-$500k if a few things are fine tuned. Commercial window cleaning makes up roughly 85% of accounts while the other 15% is comprised of residential window cleaning, gutter cleaning, and occasionally some awning cleaning.

The city we live in plus the immediate surrounding suburbs total a little over 1.1 million people, with several middle upper class to wealthy areas in which we’ve barely tapped into at this point in regards to the residential window cleaning and gutter cleaning aspect of the business is concerned. We intend on adding power washing to our list of services within a year or two, so there’s definitely a tremendous opportunity for future growth. There are a few fairly large competitors in our area, but the company I work for has either caught up with or surpassed all of them in only 4 years, so competition won’t be an obstacle to our success.

Currently there are 5 full time cleaners, a full time office assistant, and a part time salesman. The office assistant and salesman wouldn’t be retained if we were to end up purchasing the company because we would take over their duties. During the peak season (April to September) we typically have 8 or 9 cleaners on board.

The total package would include all the accounts, two work vehicles, several ladders, tons of window cleaning equipment including two Tucker poles, office furniture, computer, printer, office supplies, marketing materials, etc.

The plan would be for one of us to concentrate solely on sales, one of us on operations (supervising the cleaners, training new employees, and cleaning a few days each week), and one of us to concentrate on the office related stuff like answering the phones, scheduling, hiring/firing, accounts receivable and payable, bookkeeping, etc. The office person would also help with cleaning and sales whenever necessary.

Here’s where I need your two cents. If you were in our shoes, what would you be willing to pay? We already know what the owner’s asking price is but I’m not going to tell you just yet, because I want your unbiased answer.

Thanks in advance!

You should contact a CPA and/or WC’ing business evaluation professional to determine the value (you didn’t state what the current owner’s draw was, etc.), as well as a lawyer.

250k?

I would base my purchase price on the [B]profitability [/B]of the work they have.

Even $450k doesn’t impress me, if its all $30/hr.

I wouldn’t even buy it, if that’s what it was.

Here are some quick numbers, based on what you’ve said:

5 cleaners
1 office person

3 or 4 more cleaners during peak season (6 months/yr)

5 full time cleaners x 40 hrs/wk x 50 weeks = 10000 hours
3 - 4 peak cleaners x 40 hrs/wk x 25 weeks = 3000 - 4000 hours

[B]So, around 13000+ work hours to generate $350k?[/B]

That’s around only $25-$27/hr per worker being generated for the company.

Then, you have the expenses that need to come out of that, including your office person’s FULL-TIME wages, vehicle expenses, etc, etc, and whatever’s left will go in your pocket, and your partners.

I hate to burst your bubble, but it sounds like a weak business, profitability-wise. Of course, I don’t have any details beyond what you’ve said, and certainly am making some assumptions, but based on what you’ve outlined,

I wouldn’t buy it, unless it was $10,000.

If the client base is as low-priced as it appears to be, then it won’t be easy to up-sell or cross-sell them, either.

Please be careful with these big, gross numbers.

I could do $5 mil in annual business and have a trash heap of a company, profit-wise.

Is that documented income?

Yes it is. As of today (Dec. 1st) the company is at a little over $329k for the year. With 30 days to go in 2008, we would have to do another $21k to reach $350k for the year, which will definitely happen unless something disastrous occurs. If all goes according to plan, we should finish somewhere in the $355k to $365k range.

Kevin,

Your numbers are somewhat accurate, but it’s not nearly as bad of a situation as you just made it out to be. With $350k in gross sales, the owner will earn about $110k for himself this year. Mind you, he barely lifts a finger as he has another company (not related to window cleaning) that takes up 99% of his time. He doesn’t clean, sell, or do much of anything to be honest. He has the people in place to run things for him, so he basically just signs the paychecks.

Having said this though, there’s definitely an opportunity to make this company much bigger and better if there were owners who gave it 100% of their attention. The sales efforts are currently mediocre at best. If the three of us were to buy this company and we made sales our #1 priority, we’ll do $500k in gross sales next year for sure.

With $500K in gross sales, we would have about a 35% profit, which would allow all three of us to pay ourselves $60,000. This also assumes we didn’t clean a single window which probably won’t happen. With a little window cleaning mixed in with our daily duties, we should each be able to earn $70k to $75k under this scenario.

Is this company a well oiled machine? Absolutely not. The reason we want to buy it is because we see the opportunity to make it a well oiled machine and grow it fairly quickly if we took it a lot more seriously than the current owner takes it.

Fair enough. Like I said, I don’t know all the details, or the price of your workers, or the calibre of your clients.

I still don’t get these numbers, but hey - you know them, not me.
[SIZE=“1”](I’m not being sarcastic, although it sounds like it…:))
[/SIZE]

15000 hours (with the full-time office person) divided into $240,000 comes out to $16/hr, with zero operating expenses aside from wages. Maybe the guys are all paid peanuts, I dunno.

Anyway, I’ll stop. The truth is, its none of my business, and I don’t need to “get” it.

If he does nothing and earns $110,000, then he’s got a sweet deal, no doubt.

I just encourage you to take a very long look at this before dishing out big bucks.

Gentle, suspicious rant complete!

here’s my 2 cents.

How well do you know the potential partners?
Dividing the work load amongst 3 leaves the door open for argument.
Who works harder.
Who is more committed to the company.
Who thinks they deserve more money.
A partnership is like a marriage and I would never want to work with my wife.
If the price was right, I would buy it alone if I could.

Keep digging and crunch those numbers before doing anything.

We are all just outside observers taking a look at this scenario for you upon request, but here is my take.

I can’t think of one good reason to sell a business that makes me $110,000.00 a year for such a small amount of my time.

I would want to see his tax returns as this is the number that I would be very concerned with.

Good luck to you and I certainly hope it works out for you.

yeah, I don’t understand…if he makes $110K a year just stroking checks what an easy gig. Why sell? Is something going to happen that he wants out?

So he makes $110K a year doing nothing with window cleaning and has another business, which I’m sure makes him some other sum of income, he kinda has it made by what I’m hearing…why not ask about joint venturing with him so you don’t have to spend any money and you can kinda take control of it…which would be hard since you mentioned that you and two other guys want to do it too. So you would have 2 other Owner/Partners:eek::eek: that’s going to be tough
Does he want money all at once, or will he take chunks?

I never understood why anyone would sell any business that makes them money when they do little to nothing. There is a guy here who was or is or did sell his business. Stated it made 50 grand per 100 days. He was asking 6 grand with truck an tools. I sat back and told myself. Why? Why not hire someone, give them $200 per job and sell them on that fact that their pay is now on par with 60 grand per year. Sit back, make 30 grand for sitting in the home an manageing customers. Oh well, I guess some just don’t want to do it.

Yup - or - they’re horribly exaggerating/lying.

I don’t know if he was doing either. I looked into buying the business. I spoke with him on the phone and he did not have any of his customers under contract. The area his customers are in is a very wealthy area. I was kind of shocked that he was charging roughly $500 per home. These are 4k sq ft home minium. Either way, when he told me he had nothing in writing other then his bank statements, I still offered to buy it. But under the conditions that I would be allowed to call all his customers (in front of him) and ask them if they would consider keeping on a new company if they took over the business. If the customer said yes and had a large price on the home IE $1000.00 twice per year, then I would give him $200 to $400 for the customer depending on how many times the clean per year is. If the customer said yes and had a smaller job, I would give him less for the smaller job customer. If the customer said NO then I would not buy that customer from him. Long story short, it was to complicated for him and he was not interested. But I did get another letter from him stating he was not able to sell the company. He claimed he had a buyer but (ready for this) reason he was not selling to the guy was because the guy could not FAN lol. Who gives a crap. If the guy has the money and you are selling, sell it. But goes to show you the mentality of some of these guys. He already wrote letters to his customers telling them he was shutting up shop. SO I decided he can screw himself. I decided to start bombarding his area with direct mail. So far 2 clients.

One big word for you: SHADY

Yeah the guy jugg is talking about sent us both a real nice presentation packet. We called each other up and immediately determined something was off.

Back to the original question. I would have business broker take a look at it. Also as others have mentioned… think real hard about a 3 way partnership. I can imagine it would be very tough to deal with.