Growth Trough Acquisition

[Jeff Robison]

I have merged with another company successfully. Also, recently had my business evaluated for the possibility of selling it and was sorely disappointed in the total real world value. You REALLY have to have your stuff together to sell for much in this business.

 

[JBurd]

I must be missing something, but I don't understand why I would ever buy a local competitors business. I can understand acquiring contracts and/or equipment, but the business branding is of virtually no value because there are maybe 80 companies that do what I do in my market, if I buy 5 out, that still leaves 75 companies that prospective clients can call instead of me. I really don't think I would get 5 times as many leads, I doubt I'd even get 50% more by eliminating them from the market. But like I said, I must be missing something.

 

[Scott Stone]

I have merged with another company successfully. Also, recently had my business evaluated for the possibility of selling it and was sorely disappointed in the total real world value. You REALLY have to have your stuff together to sell for much in this business.

A lot of valuation come from how valuable the owner is to the day to day operations of the business. If a business is systematized properly, the business has way more value, because an experienced investor can easily come in and operate the business. If the technical expertise is all invested in the seller, it makes it a lot more difficult to transfer over to a new owner.
Also, if you are buying blue sky, or reputation, it is a lot harder to sell and has a lower value than solid, long term contracts. Face it, you could have a residential business that services 100,000 homes a year, but none of them will be under contract, and so, even though the original owner might see residual effects and service calls, in reality, they are all blue sky because there is so little guaranteed, even if it is psychologically.

I must be missing something, but I don't understand why I would ever buy a local competitors business. I can understand acquiring contracts and/or equipment, but the business branding is of virtually no value because there are maybe 80 companies that do what I do in my market, if I buy 5 out, that still leaves 75 companies that prospective clients can call instead of me. I really don't think I would get 5 times as many leads, I doubt I'd even get 50% more by eliminating them from the market. But like I said, I must be missing something.

Thus the hazards of residential and non recurring customers.

 

[DJ Carroll]

But what if those 5 companies are the only other companies on Google with you? It's about buying market share.

The other things is like Scott mentioned some companies I have looked at have huge upside potential if the owner was limited to certain task.

In my example - Alex my sub is an AWESOME tech that has a great grasp on his line of business. I'm going to lift his day to day burden of having to be in the field so much and allow him to make more money while in the end making the company alot more money.

 

[Paul Kassander]

I have bought out several they have all basically been asset purchase and the accounts were included. Worked out well for me for the most part it was about a 6 month return on my investment. all of them were going out of business though so the price was right. Some of them produced my biggest customers too.

As for merging, if it is to share purchasing power or working together to cover jobs in each others area where the work quality is the same I say it is worth a shot. But from my perspective partners suck...

 

[Kory]

Here is my take. If you do not have signed agreements on repeat work your business is worth equipment only. Larger than 10-12 employees is sellable. Most pressure washers are mom and pop type businesses. We are not regulated so buying a small co for anything other than contacts and equipment is pointless. The reason it is pointless is for everyone that goes out there is a plumber, roofer, brick layer, chef, McDonalds worker,landscaper, pool boy AND painter that will take his place. If we had lisence numbers like contractors that are registered by the state(not what I want) then yes it would be more valuable and a better reason to buy.

 

[DJ Carroll]

I think that is a 10 year ago mentality .... maybe I'm the only one that sees an angie's list account, a well ranked website, a data base of clients and market share as an asset.


The business books and the valuation formulas of the past are not relevant today - even in pressure washing .....


I bought Indy Power Wash for the website alone - sold off the equipment and didn't even ask for the client list. That website produces income in excess of 10 times what I bought it for EVERY YEAR!

 

[innovativewash]

James?

Yes we have acquired a few companies over the years, some were going out already, some were just a thorn in our sides and some just retiring. Never really wanted to acquire their equipment but for the contracts and areas they were servicing.

 

[innovativewash]

A lot of valuation come from how valuable the owner is to the day to day operations of the business. If a business is systematized properly, the business has way more value, because an experienced investor can easily come in and operate the business. If the technical expertise is all invested in the seller, it makes it a lot more difficult to transfer over to a new owner.
Also, if you are buying blue sky, or reputation, it is a lot harder to sell and has a lower value than solid, long term contracts. Face it, you could have a residential business that services 100,000 homes a year, but none of them will be under contract, and so, even though the original owner might see residual effects and service calls, in reality, they are all blue sky because there is so little guaranteed, even if it is psychologically.


Thus the hazards of residential and non recurring customers.

BINGO!! You need a tangible asset to sell not a cloud or google antalitics.

 

[junker1]

I think that is a 10 year ago mentality .... maybe I'm the only one that sees an angie's list account, a well ranked website, a data base of clients and market share as an asset.


The business books and the valuation formulas of the past are not relevant today - even in pressure washing .....


I bought Indy Power Wash for the website alone - sold off the equipment and didn't even ask for the client list. That website produces income in excess of 10 times what I bought it for EVERY YEAR!

So you paid what........ 8 maybe 10 grand , for a website? Got to do Whatever it takes to make the money.

 

[AZ PowerWash Pros]

I think that is a 10 year ago mentality .... maybe I'm the only one that sees an angie's list account, a well ranked website, a data base of clients and market share as an asset.


The business books and the valuation formulas of the past are not relevant today - even in pressure washing .....


I bought Indy Power Wash for the website alone - sold off the equipment and didn't even ask for the client list. That website produces income in excess of 10 times what I bought it for EVERY YEAR!

I agree with you DJ. A website is value in itself. If you get the right website its definitely worth the investment. But unfortunately, that is not how companies are valued by business brokers. But as a business decision I think its a smart idea.

 

[Johnson]

So you paid what........ 8 maybe 10 grand , for a website? Got to do Whatever it takes to make the money.

No where near that much actually.

 

[DJ Carroll]

I agree with you DJ. A website is value in itself. If you get the right website its definitely worth the investment. But unfortunately, that is not how companies are valued by business brokers. But as a business decision I think its a smart idea.

I have looked at business brokers and even been evaluated by them ... I would never buy through one due to it will cost 15-20% more than what the business is really worth.

I do small quick deals...

 

[DJ Carroll]

How about being worth 10 billion with no revenue????

I guess those investors are crazy???

http://www.forbes.com/sites/parmyol...wittersf&utm_source=twitter&utm_medium=social

 

[Ron Musgraves]

One of the most profitable acquisitions , GE buys monkey wards. Closes every location within 24 hours. Liquidates inventory, everyone thought they where nuts. Wards was in debt , stores loosing money. This one was on record books for GE , anyone know how they made out?


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[Ron Musgraves]

Sears is in the same position.

Both these companies share wal-mart revenue to this day.

I wonder if that's a hint


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[AZ PowerWash Pros]

I have looked at business brokers and even been evaluated by them ... I would never buy through one due to it will cost 15-20% more than what the business is really worth.

I do small quick deals...

I like that from a selling prospective! haha

We have our business evaluated every year from a business broker. Just to see what we are worth in their eyes. It's a great way to get a free evaluation outside of your CPA.

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[Scott D.]

So you paid what........ 8 maybe 10 grand , for a website? Got to do Whatever it takes to make the money.

I was paid significantly more than that for my website when I got out of the business.

 

[Juan Juarez]

STILL HANIGIN THERE RON

http://www.wards.com/

 

[DJ Carroll]

They are an online retailer now ....