365-Day Hassle Free Return Policy!  ·  AppliancePartsPros.com
Washer Parts  ·  Dryer Parts  ·  Refrigerator Parts  ·  Dishwasher Parts  ·  Range & Oven Parts  ·  All Appliance Parts 

Author Topic: Buying and excisting appliance bis  (Read 149 times)

Offline niobrara

  • Technician
  • Member Since: Sep 2009
  • Posts: 1228
Buying and excisting appliance bis
« on: October 08, 2012, 10:34:14 AM »
How do you price one , have a guy willing to sell his 11 year old bis this next spring and looked at his numbers ?? But how do I come up with price on a service company ?

Offline andersenappliance

  • Technician
  • Member Since: Feb 2012
  • Posts: 776
  • Country: us
Re: Buying and excisting appliance bis
« Reply #1 on: October 08, 2012, 12:01:49 PM »
I think there is a formula for this.  I'll look it up and get back to you in a day or so.  (I'm having computer problems). 

Often service businesses are difficult to price.  This is because they rarely have much in the way of property, plant, & equipment, the things that are tangible and for which a market rate can be derived. 

Revenues are very important, because that is all that can really be nailed down.  It is important to be sure that you are getting the reported revenue, from tax returns, not from his books, or worse, his "second set" of books.  Many small business owners play fast and loose with the money that comes in, and will tell you they make so much "cash."  If they cannot document it, then it does not exist - for the purposes of buying the business.

The real problem is that none of the customers are on contract.  So they might be used to calling him, and do.  Or they called him once, didn't like the service, and won't call him back - but remain on his records as his customer.  Many don't have loyalty to him, and of those that do, their loyalty is not necessarily transferable to you.  These customers may call someone else, if they don't know you.

Considering all of this, it may make more sense just to pay for the name (if you want to use it), and transferring the phone number to your business.  Depends upon his marketing set up.  Has he put out lots of Fridge magnets? Yellow page ads? Web listing?  Google the name of his business - does it get good reviews or bad?  Often when someone is considering getting out, they don't offer as good of service as when they were still going.  Service businesses are harder to renovate than a brick & mortar business

Offline Wedgeman55

  • Technician
  • Member Since: Aug 2008
  • Posts: 1022
  • Country: us
  • Man vs Appliance - Never give up, Never surrender
Re: Buying and excisting appliance bis
« Reply #2 on: October 10, 2012, 03:10:35 AM »
I had the opportunity to buy an existing business when I started mine almost 10 years ago.   After all considerations,  I started up from scratch.    The business I looked at did not have the greatest reputation,   but did have a helluva lot of existing customers.   But after consulting with a number of experts in business,  and looking at the numbers,  we figured I might be wasting my money.   
     The formula is something like 3 times yearly gross is what the business is worth.   That number is flexible somewhat.   So,  lets say  XXXXX appliance had a yearly average gross of 300, 000 a year,   business probably worth somewhere around 900,000 dollars.    If it is a very successful business,  they might want more.   However,  no guaratees that existing customers will call your new company.    As anderson says,  they might not have had a good experience with previous owners.   
      My opinion,   If you have alot of cash and extra money,  It might not be a bad way to go.   All of organization is in place,  and you have a database of existing customers.     Or,  you build it up like I have from the ground up,  and do things your own way from the start.   
Commercial Laundry repair Tech and Installer  1973 to 1980
Service Manager / Technician Commercial Laundry repair company 1980 to 2002
Refrigeration - HVAC - Boiler School 1974-1976
Electronic School 1978-1979
Self Employed Appliance Repair Company 2002 to present

Offline andersenappliance

  • Technician
  • Member Since: Feb 2012
  • Posts: 776
  • Country: us
Re: Buying and excisting appliance bis
« Reply #3 on: October 10, 2012, 11:46:59 AM »
If you have a lot of cash, get good training, tools, and truck.  Then hire someone to show you how to work the book keeping and keep track of customer accounts.  Go to the free "Gotta-pay-your-taxes" seminars so you don't get into trouble down the line, then spend some money on a marketing program (not a blitz) to get the customers coming in.  Ramp up your marketing when you are confident and in the groove.

Then send me a beer, 'cause I just saved you 800K! :2funny: :rofl:

Offline niobrara

  • Technician
  • Member Since: Sep 2009
  • Posts: 1228
Re: Buying and excisting appliance bis
« Reply #4 on: October 10, 2012, 10:37:57 PM »
You and my accountant would get along great. Truck,got it,tools got them,Training ??I think that is ongoing,I should be Ok.Normal formulas don't seem to fit small one men service company's.To many variables.

Offline andersenappliance

  • Technician
  • Member Since: Feb 2012
  • Posts: 776
  • Country: us
Re: Buying and excisting appliance bis
« Reply #5 on: October 11, 2012, 09:56:52 AM »
That was a general reply. :)

I think that you have been around long enough to have most of the requirements.  If the business that you are considering is in your normal area, then when he sells or closes you can do a marketing blitz and scoop up some customers in the transition time.

You are right.  Small one-man operations are sooo dependent upon the one man that it is hard to know what might happen. 

The 3X gross income is the formula that I've heard, although it can vary w/ EBITDA etc.  I'd never buy anything at that price though.

If he closes, get that phone number!  Then his old customers will get you when they call looking for him.

Offline Wedgeman55

  • Technician
  • Member Since: Aug 2008
  • Posts: 1022
  • Country: us
  • Man vs Appliance - Never give up, Never surrender
Re: Buying and excisting appliance bis
« Reply #6 on: October 12, 2012, 02:19:38 AM »
      True about the phone numbers.   I did that with a tech retiring from the business about 5 years ago,  and I got the calls he was getting.    It didn't cost me alot for the phone numbers,  I paid him 1,000 dollars.    He was a friend of mine and was leaving the state.   I also bought his existing parts inventory at about 50 cents on a dollar of what my cost would have been.  Heating elements, motors, couplers, just about everything.   I still have parts from him I haven't used yet.    One account I got from him,   a multiple property owner,  I have done over 40 jobs for.  I checked and over the last 5 years I have done over 6000 dollars worth of work for.     A lot cheaper than buying the existing business,  and a way to build a customer base quickly.   
     I talked to my friend the business man today,  and he told me 2 and a half to  3 times gross is reasonable.    I agree with that 3 times gross is high,  but that is probably the starting point they would use and you could negotiate from there.    You have to look at the value involved - is the business your thinking about buying a respected one or do they have a bad reputation?   What was they paying for their advertising?   How many existing customers do they have?   If no one else is interested,   Like anderson says,  maybe you can just get the phone numbers and maybe buy his parts inventory and tools if necessary.   
     Whatever you do,  let us know.   I know someone else who is thinking of moving,  and his numbers might be for sale.    However,   I already told him I was not interested.    He does not have a good reputation,   and I do.   I know he doesn't get many repeat customers,  and relies on spending 2200 a month in advertising.    And,  at this point,  I do not need his customers.    He'll find someone in town here to buy the numbers or the whole business.    Just use your better judgement and I'm sure you'll be fine. 
Commercial Laundry repair Tech and Installer  1973 to 1980
Service Manager / Technician Commercial Laundry repair company 1980 to 2002
Refrigeration - HVAC - Boiler School 1974-1976
Electronic School 1978-1979
Self Employed Appliance Repair Company 2002 to present

Offline andersenappliance

  • Technician
  • Member Since: Feb 2012
  • Posts: 776
  • Country: us
Re: Buying and excisting appliance bis
« Reply #7 on: October 12, 2012, 09:31:01 AM »
Wedgemann,

If he is putting out 2200/mo and it is working for him, those numbers might be valuable.  You could get residual calls for months, sometimes years, coming from that advertising.  And it wouldn't affect your reputation to take his old customers.  'Course, if he really sucks, you might get all his call-backs! :P

 

Wanted: Your appliance repair photos....

Started by AJ

Replies: 7
Views: 238
Last post November 08, 2013, 05:59:03 PM
by geebeegee
Weirdest thing you have ever found in an appliance?

Started by AJ

Replies: 46
Views: 747
Last post November 21, 2013, 10:02:11 AM
by ACEAPPLIANCE
Appliance Repair Resources

Started by AJ

Replies: 49
Views: 3789
Last post April 22, 2015, 08:49:43 AM
by tlzfixer
Appliance Jobs on Google Base

Started by AJ

Replies: 0
Views: 65
Last post June 28, 2009, 01:19:49 AM
by AJ
Appliance wiki

Started by jumptrout51

Replies: 6
Views: 85
Last post July 11, 2009, 11:54:57 AM
by JWWebster
Group Buy: Appliance Parts?

Started by AJ

Replies: 13
Views: 145
Last post December 23, 2009, 10:13:35 AM
by JWWebster