Buying a Business

[tvstop]

I have the opportunity to buy a pressure washing business for $15,000.
The owner does not have many records but the business is 3 years old and they say it does around $50,000 a year. I know they do business as i have worked for them the past 2 months and in that time we have done over $12,000 worth of big commercial jobs, the equipment is worth about $2000 used.
So my question is would i be better off starting on my own and putting $15,000 in advertising or buying this with no guarentees as to what next year will bring.
Thanks
mike

 

[douseahouse]

with the equipment being used and only worth about 2k then i think that you may need to negotiate a little further. does he want the money up front or is he willing to take payments? that may make the price more in line since he is actually "financing" it for you. does he have contracts? does he have any liabilites that you may be responsible for?

good luck,

rando

 

[R L S]

What does the 15gs get you? A business name and 2gs worth of equipment.
Without contracted accounts and GOOD records its probably not worth 15,000.
Also after only 3years why is he quitting? Could it be that his business is going to the dumpster and he wants out quick? Do you want to mess with and revive a failing business Just a thought.

 

[north coast]

$50,000/year in sales is nothing. You have to figure in all the cost of doing business and don’t ever forget to pay yourself a decent wage or there is no point in doing it. I think when you do the math and deduct all expenses to operate a legitimate company you will find out why he wants out. Take your 15k and start something up your self with equipment that cost more than $2,000.

 

[goatroper]

I agree with Eric. Take the $15K and the knowledge of the work that has been done for the last 2 months and start your own deal. You can lease-to-purchase the equipment, get some basic advertising. Call on the very same companies you've been cleaning for him (he shouldn't mind, he's going out of business), and inform them that their "normal" PW'r is leaving the biz, you've been working for him for a while, and would like to continue the work under your own company.

Unless this guy has an iron-clad 2-3 yr contract with the comm'l propery owners for $50K / yr, giving him $13,000 for the privilege of getting outta Dodge ain't worth it.

 

[tvstop]

There are no contracts just people calling from refferals or the phone book(which is all the advertiseing they had done), they are selling because it is a 50 year old woman that does not have the energy.
How much is a name and phone number + small client list that i can market + $2000 equipment and all the paperwork worth?
I thank you guys for the help. I just bought a new Hydro Tek hotwater 8GPM/3000PSI that i will be using weather i buy this or start on my own,
Thanks
Mike

 

[Clean County]

Since you already bought a heck of a powerwasher and you have the know how to do this business I would say do not buy there business unless of course they have contracts that are worth something. Since they kept shoddy records that there is a red flag.

Take the money you have and get Insurance, a contractors lic. if its required and then spend some capital on your advertising. You could pass them up in no time.......

Good luck

 

[Larry L.]

I disagree with the others,buy it,several reasons why...buy it.

 

[Kory]

What part of florida are you in?

 

[A Plus Power]

I buy the phone number of any contractor going out of business in my area. I determine the price depending on how many cleints they can document from the last three years and what the sales volume was.

If they go out of business the clients will look in the phone book or somewhere else and start shopping. You may or may not get them. If you buy the number and mailing list you get them all.

Just keep the number active and call forward calls to your number for a couple of years until you get them all.

As far as the equipment goes we custom make all of our vans and load them with hot water, stainless steel machines so I don't buy used.

You can see by the other replies that nobody else would give them a dime so make them an offer for their phone number only.

Nothing ventured nothing gained.

 

[Larry L.]

WE all know about the "what if" this and "what if" that.

Who to say someone that is already in business buys them out with all their marbles in a roll.IF they do who do you think the accounts will go with? you or the new owner.Say someone thats been in business for a few years buys it,the accounts knows they aren't going to be left out and they do not have to deal with a newbee that may or may not stay in business.The owner of the business will help make sure the new owners keep the accounts plus help in other ways.

As you can see by the other replys this is a dog eat dog trade,you may not be the only one buying a new rig to go after their business.With the accounts they already have you can pay for it in a few months plus you can take it off your taxes.

Some day you may want to sale out and your helper(s) may already own their own rig just waiting to eat your dog too.I'm a old dog with over 15 yrs. in and have seen this new type dog roaming the streets ready to eat the hands that help feed them.

 

[tvstop]

Kory

I am in clearwater area, you from tampa?

Mike

 

[Bridget]

I know my 2 cents are a little late, but some food for thought if they haven't sold it already.

Offer a percentage. Since they have worked with you and I take it they trust you, draft an agreement that you will pay them a percentage (i.e. 5%) for a determined amount of time - no more than 36 mths would be my advice.

The agreement would state that if an account is lost for whatever reason, then the agreement with that account is void. It modivates the seller to help in the transfer, to talk up your service. If you have questions on the account they will surely answer them for you, because they are counting on you to succeed.

The seller has to swallow the fact they they are not going to receive a windfall - which I agree with the above, they're getting out becuase it's not doing too well.

You still get the phone number, just change the billing address and pay the phone bill - after they show you a recent bill that is current. It's a safer bet for you if you are interested in the business. Otherwise, I agree with the guys, start out on your own.

Best of luck!!
Bridget

 

[Douglas Hicks]

I was once told that a service business should pay for itself in 18 months. Or
Sales
- Expenses (labor, fuel, vehicle expense, parts, tools)
= ability to pay off purchase in 18 months.

If the business will not pay for itself in 18 months the price is too high.

Information needed;
1.last 3 years of taxes, including Schedule C
2. Confidentiality agreement to be signed by both parties
3. Customer list, limited to customers who have purchased consistantlyfor last 3 years. It is not diffucult to get a customer list by low-balling. You want a customer list made of steady customers
4. Proof of insurance, bond and worker's compensation
5. Non-compete from present owner

Have your accountant look at the info and advise you on the purchase.

The fact that the present owners do not have good financial records is a red flag.

Douglas Hicks
General Fire Equipment Co of Eastern Oregon, Inc