What is it worth?

I've been seeing a few cleaners around here closing their doors for good. Not because they were failed businesses, in fact many were doing very well, but simply due to burn-out. What value do they have to the next guy?

Take a guy who runs a single van operation for decades and has built up a huge client list, but has decided to throw in the towel. The business had been grossing over 200k per year, but the desire is gone. Where would you place the value on a business like that? Does it have a lot of value or would you consider that client list a little more than just a cold call resource?

I *Think* since there is no real positive proof the biz grosses 200k per year it real worth is not like a normal retail store, where I believe it's said it's worth is what it's gross is in a years take./.......I could be very wrong though. I'm no expert on this but it seems to me most CC'ers tell "big fish" stories very well, so I'm not sure what most say could be totally trusted.

The other thing is, who's to say that when you take over/buy out a guys biz his customers are going to want you or anyone else to provide service for them?.....Long ago, I actually had some personal experience with this....

A friend I had helped get into the cleaning biz 8 years prior, was moving out of state and asked me if I'd take care of his customers, just in case he ended up moving back (he didn't). We came to an agreement, and he wrote up a nice explanation and recommendation for me to send to his customers (several hundred), and we mailed them out to all of his customers....I as hopeful with the strong recommendation I would get many call's to service his customers. But the reality was I got very few calls, and many that I did work for it was just one time.....Which is unusual for me, because I really go out of my way to make customers for life, and have many customers I've been working for 15-20 years.

The thing about o/o business is the value depends greatly on how much the owner is involved. A few things need to be know to represent to true market value of a business like his.

One what is the annual debt owed? The longer the debt the more it decreases the sellable value.

Second, of that owner is slinging the wand everyday and handling all the day to day business. That will decrease the value more also.

Third is what is the annual growth potential each year for the next five years. If that value is Zero to low then that will lower the value more over.

My guess if you were to put a value of this company on numbers with the above factors being medium, the value would be 80-90K.

I found a website the other day that helped me value my current business today. Sorry I can't give it to ya. But, I'm not a smart google guy and I had a plethora of sites to choose from.

Great responses gang.

I have been approached many times by cleaners like this and like Davey pointed out, their clients don't always become your clients.

I've said it many times, in this business you get the jobs because of you and not the equipment or fancy ads. If they like and trust you, they will be a customer for life, but that doesn't mean you can hand them off to another cleaner and it continues. That client list may not have any real value at all.

What would have value, is any active commercial contracts that you could just take over. On commercial, you get the jobs based on price / value and not so much on the person so then the transfer can work. Residential client lists....not so much.

Well, I disagree, I think it can work however the approach has to be different, sending postcards or notifications is not a great idea because for most people they're cautious already due to new face/s showing up in front of their door, if they don't know that would be a different story, here's a scenario, oh hello Mrs. Jones, Dave is not available today but I certainly can help you in scheduling an appointment for you, the answer most likely will be yes please, then when you showed up in front of her door, you have to step it up a notch and be extremely polite and presentable and accomodating, etc, if she asks where Dave is, let her know that Dave is not available today and that you will do your absolute best to clean her carpets, etc, then the 2nd service you can tell her that you had taken the company over and you'll be the one servicing her in the future, humans are nature of habit, they don't like changes.
I would take over an established company in a heart beat ( within the right price of course ), you have to take into consideration that not 100% are going to be become your customers, I would say aim at 50% and you should be good, and make offers based on that 50% numbers.

the business has really not much value without customer retention

if all the 200k/yr is new customers from coupons then the business is only worth the value of equipment

if the 200k a year is all repeat customers that have a bi yearly contract for scheduled cleanings then there is a lot of value just in the business.

this is why I have talked about scheduled cleanings and having customers agree to a bi yearly cleaning schedule, same thing as their yard maintenance... why should carpet cleaning be any different.

Well, because our service is an inconvenience to them and their lives. The lawn guy can come when ever, we have to be let in and they have to make those arrangements. You can prove your customer list is recurring, with good record keeping.

I'll be different from the crowd.

I will contend a sole truck operation is worth the market value of the equipment and nothing more.

Some one else can't repeat YOU, and YOU are the only REAL value of your business. If you want your business to be sellable, then YOU have to not be the value.

A S/P's customer list is valueless to me. Contracts DO have value to me however.

Freemind1 wrote:I'll be different from the crowd.

I will contend a sole truck operation is worth the market value of the equipment and nothing more.

Some one else can't repeat YOU, and YOU are the only REAL value of your business. If you want your business to be sellable, then YOU have to not be the value.

A S/P's customer list is valueless to me. Contracts DO have value to me however.

We are in total agreement here. The guy could have 15,000 people on his client list, but it is just a list of people to the next owner, no different than the phone book. It is the commercial contracts that a new owner can just take over smoothly that are the gold in that mine.

Funny part is that few cleaners like to work commercial...

Just buy his phone number and have some fun selling