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Wanting to buy a new business

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Wanting to buy a new business

Post by GabeECS on Wed Nov 11, 2015 10:06 am

Hi guys, I was wondering if any of you have info regarding how to price a carpet cleaning business? I have been in business for 2 years now and an older gentleman has offered for us to buy his business as he is retiring.

Here are some details: He is asking $125K for everything, and he grosses around $100k every year. All his equipment is older from the 90s but still runs. (I would imagine its worth $5k at most) He has 2 vans both 1995s, 1 truck mount with rebuilt engine, and various other supplies and smaller machines. I would think I would basically be buying his name and clients as everything else isn't worth much.

The nice thing is he has a good reputation in our town and long term clients etc. My question is, is he asking a fair price?

Any advice is appreciated. Thanks

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Re: Wanting to buy a new business

Post by milspec6 on Wed Nov 11, 2015 12:24 pm

Pass on it....here is why.

First off, he has lots of repeat customers because they liked him and that doesn't mean they will feel the same way towards you. If he has commercial contracts, they may not want to work with you either and not re-new when they end. In both cases, you are in trouble.

Starting out and making 100k gross after a couple years shouldn't be that difficult if you know your market and do quality work, so again, he isn't offering you that much over what you can do for yourself.

As for equipment, doesn't sound like he has upgraded it in a long time....that isn't going to help you either. Trust me, the equipment has to be reliable or it will destroy your reputation and your company's finances.

I would buy the guy lunch and see if he would pass on some advice. Then I would keep in touch with him and offer to hire him to sub on some jobs....my guess is he will become bored and jump at the chance to push a wand once in awhile.

To me, a cleaner like that's best value is as a friend / mentor and not for his equipment nor business.

You said that you have been in business for 2 years, so you should be getting established by now yourself. If that isn't going smoothly (I struggled with it until I made changes into year 3) then this guy can be a great mentor for you.

Oh, and visit here often.....lots of help found here daily.
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Re: Wanting to buy a new business

Post by Rainbow Rider on Wed Nov 11, 2015 12:54 pm

I made the mistake of buying a client list from a guy going out of business. It wasn't much money. I farmed the list and nothing every came of it. Lesson learned.

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Re: Wanting to buy a new business

Post by milspec6 on Wed Nov 11, 2015 1:19 pm

I almost did the same thing....I think we all end up getting one of those offers at some point. Luckily, someone talked me off the ledge....someone on this board or the previous one I believe.
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Re: Wanting to buy a new business

Post by Rainbow Rider on Wed Nov 11, 2015 1:34 pm

You don't always lose when you buy a carpet cleaning business. You just have to go in with your eyes open. In 1984 my good friend who happened to be in the business previously in Western Kansas decided to start again in Hawaii. He bought two companies (don't know the price). The biggest one included the Pizza Hut chain as well as some other commercial clients. I worked with him for about two years before he decided he didn't want to be a carpet cleaner after all. I bought him out. Top this day we still clean the Pizza Huts and one other restaurant which recently closed. Sometimes it works out.

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Re: Wanting to buy a new business

Post by Devon07 on Wed Nov 11, 2015 6:03 pm

Way to much. He is attached and may feel the value of what he built but his value and what the market will bring will be way off...and it is. You are basically buying a number....sounds like everything is ready to need replaced or repaired etc....for a $100k you can have new equip and the phone ringing pretty easy.

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Re: Wanting to buy a new business

Post by ACpower1 on Wed Nov 11, 2015 7:29 pm

just not enough info, does he make that 100k in 100 jobs or 600 jobs.

with really established businesses that can prove solid revenue over many years and an established business location you can expect to pay what they gross in 1 year.

This pretty much doesnt apply to a carpet cleaning business with that just relies on people calling a phone number for service without actual signed contracts, so it would be worth much much less... and hes asking 25k over what he grosses in a year.



I would still be very interested and personally would try and talk him into a deal that doesnt involve any cash up front, of course depending on his pricing structure.


wouldnt take the deal hes offering, but also definitely wouldnt just shrug it off... he could have a great client list and this is how many larger companies are formed.


A good friend of mine about 12 years ago bought a failing pressure washing, painting, and siding business from a guy that was running it into the ground..

he took the company to a new level starting with the existing customer base, now he owns 7 rental homes in an expensive area plus his lake washington view home and easily has a million in the bank.


so it can work for sure, just have to be careful and make sure its a good deal
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Re: Wanting to buy a new business

Post by Matt; My carpet cleaner on Wed Nov 11, 2015 10:57 pm

For $100k; I could buy a fairly new TM pakg. Sent out 20k flyers a month to residential. Post cards to Dr, DDS, chiro, lawyers, and other professional offices- - - for 3 years. And still have some of that 100k left over.
Lease the business from him for x per month. Take over the operations and control.
There's a deal to be made, he wants to retire. Make the terms favorable to you, but financially rewarding o him.

PS, you got $100k laying around.?

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Re: Wanting to buy a new business

Post by milspec6 on Thu Nov 12, 2015 12:52 am

Okay Matt, you made me chuckle on that.....if you have 100k laying around why would need this guy's business?

Maybe it is a sweet deal, but the fact that he hasn't taken good care of his equipment (condition or updating) tells me that this isn't one of those golden situations.

It would be different if this guy had a small shop, a couple of employees, good contracts that were valid through 2016, and a couple well-equipped late model vans. Then absorbing this business would make sense to me, but not in this situation.

I was offered a company a year ago where the owner was burned out and wanted to retire. He had some good contracts and 25 years worth of a customer list all updated into quickbooks.

He downsized from a 6 truck to just 1 truck 2 years ago, but it was still in good shape with a prochem apex machine on-board. The asking price was $85,000, just to give you an idea.

I was going to buy him out, but the business was located 2.5 hours away from me and so were most of the customers. I didn't want to move and the remaining employee was not skilled at managing himself let alone a business route.

The owner decided to hang in for another year and is still going, but remains burned out and talks about shutting it all down at any moment. I still might buy him out when that day comes, but I'm not certain I want to put that much money into the ring right now.

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Re: Wanting to buy a new business

Post by GabeECS on Thu Nov 12, 2015 8:58 am

Thank you guys so much for all the advice. As a new business owner I am glad you guys are around. No I don't have $100k laying around...lol

The best thing I got from you guys is if I had $125K, why not put it into my own business? I would be where he is at in no time and with all new equipment.

The biggest mistake I did starting out is I borrowed enough money for my equipment but not enough to advertise much and get the word out. It's been a slow start but I am doing ok now and I know I can make it succeed.

I'll be sticking around here because I have lots of other questions too.

Thanks again!

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Re: Wanting to buy a new business

Post by milspec6 on Thu Nov 12, 2015 9:12 am

Most of us made those same mistakes starting out....we survived and you will too. You just have to focus on building up exposure and how you go about it depends on your market.

The biggest help for me was getting an anchor commercial contract. It doesn't have to be a big one, just one that you lock down for a couple of years in a visible area. It is much easier to budget when you have an income that you can count on each month.

My first anchor paid for all my monthly business costs, so all the other jobs were for profit. That made things a whole lot easier.
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Re: Wanting to buy a new business

Post by Devon07 on Thu Nov 12, 2015 9:56 am

The $100k is either laying around or needs to come from the bank....Im 100% sure a banker would tell you the same thing....its priced wrong! Ive sold a carpet cleaning company and know enough to tell you its a bad deal....He grosses a $100K a year and wants a $125k. ???? the math is wrong. That same $100k can easily have you doing twice that if you purchased good equipment ....took some classes and budgeted well for advertising. Your area has an advertising medium they are favorable to....you need to find out what that is. That is the way to get good returns on your money. Essentially the guy is selling you a ringing phone and equipment that will need replaced soon....give me $50k and I guarantee a ringing phone all year....now buy new equipment and you are better off.

Ive been back in for about 4 months and im on target to do well over the $125k for a year and I dont have the advertising budget like "you" would need because I did this here for many years!....Im covered up with work! What do you do now?

Everyone has valid points ...AC has good ones to but unless you are a very good businessman I would be careful about trying to negotiate a deal unless you understand buying/selling a business....asking the question you are asking concerns me in this area. You did come to the right place though. Wink

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Re: Wanting to buy a new business

Post by Freemind1 on Thu Nov 12, 2015 10:06 am

A one man show, or a business that is the owner and an employee, has little value over the value of the equipment.

Others have already said as much.

If a guy want to retire in a situation such as this, they should have been saving money for their retirement. Because the business is pretty much without any worth. Customers are buying YOU, not your brand.

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Re: Wanting to buy a new business

Post by milspec6 on Thu Nov 12, 2015 12:17 pm

Freemind1 wrote:A one man show, or a business that is the owner and an employee, has little value over the value of the equipment.

Others have already said as much.

If a guy want to retire in a situation such as this, they should have been saving money for their retirement. Because the business is pretty much without any worth. Customers are buying YOU, not your brand.

+1
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Re: Wanting to buy a new business

Post by ACpower1 on Thu Nov 12, 2015 8:24 pm

+1 as well and exactly why it makes a lot of sense to build your brand over time and get customers used to the service that your brand delivers.      

customers dont buy me,   half the time they dont even know Im the owner when Im on a job

and thats exactly how I want it to be
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