Determining company value

J.C.A.

Would be to ask the CUSTOMERS . They are the make/break of the whole schpiel. If the people who worked it treated them right, it's a gold mine. If they did things suspiciously and half ****, you will inherit that reputation. Think about it , and BEST OF LUCK! Chris

Tom_53

Iam condidering buying a plumbing and heating service company. Does anyone know how do you figure how much the company is worth? The company has been in business for 21 years. I can figure the value on trucks,tools,office supplies, ect. How do you put a value on "good will" and the phone number? There are no service contracts, it is c.o.d. sevice company.
Thanks, From Jack.

eleft_4

\"assume nothing\"

Save money and time ....have your accountant check it out!

al

john_29

Was owner charging customer enough?

Make sure your service rates are in line with what owner is charging otherwise customers will be haggling with you over price.

John@Reliable_2

Jack, thier are companys who do just what you are looking for,

and for the money spent I for one would never think of buying without having it looked at by a pro! Next week in Boston at the NEFI trade meet and show thier will be a few of the pros who do this there for sure. I checked into it and found that I was really buying only a phone number in my case, so I got my own number and saved the $50,000 + stock and equipment. John@Reliable

TGO_7

value

Jack,
I agree that you should have your accountant check over the books of the company, and you should be sure that it will be a good "fit". Maybe you could ask the current owners how they came up with an asking price - they may already have had the business appraised. Good Luck.


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Jackchips

What is your

intent, Jack. Are you already in business and looking to expand, do you work for someone else and looking to begin "large", do you work for the company and have an opportunity to purchase or are you an entrepreneur who is looking to get into this business by buying in.

They are all admiral steps but have their own set of responses. I agree with most post already, get some professional advice. Years ago (surprised the memory is this good) my wife and I looked at a painting store. Our accountant spent some time reviewing the financials and realized the gross would not cover the loan, never mind make a living. He didn't charge us but it would have been money well spent.

Good luck.

Al Letellier

business value

Look at the business' bottom line cash flow. (Net cash after expenses and taxes. Then add in expenses the business will no longer have if you buy it ( duplicated operating costs, owner's salary, etc.) the net cash flow without these expenses is the total cash flow you can expect when you purchase it. Then deduct your debt load added by the purchase. Any money left???
It's the only true way to determine it's worth in my book.

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John R. Hall

Just my opinion

The one red flag that goes up is that there are no service agreements and transactions are C.O.D. Therefore, there really isn't a true customer base. They can take their business elsewhere at any time.

Mad Dog

absolutely have a pro check it out..............

We've had several small and medium size companies that want to retire, approach us. I have found that in many cases, they really inflate and exaggerate their client base and loyalty. I looked into buying a one-man shop. The guy indeed had a very loyal following and the numbers were there. However, we covered calls for him several times when he was on vacation, and this experience told me everything I wanted to know. It really was an eye opener: Phone rings, I pick it up: "Hello Triple Crown.....The customer: ".....who this????????" Yes Ma'am, this is so and so, we are covering Vinny's calls while he is away. next question she asked: "...you plumb'??????" yes Ma'am, and we [sic] heat too! ( I had to have a little fun with her) The next thing she asked blew me away, but then again it wasn't such a surprise: She said : "...you 'talian??????" I laughed out loud, No ma'am, I'm Irish, we can be good plumbers too you know! Would you like us to come over????? Disgusted, she said, "....ahhh faaaaghet it!" This was one of many similar calls that came in over several weekends. The ones we did go on, we had other problems. "Vinny never charged me to change a toilet flapper, c'mon!!!!" Another old lady tried to pay me in cookies - I swear! When he came back the last time, we had a talk: Vinny: Hey Matt, what happened, mrs spinellio said you overcharged her,....blah blah. To make a long story short. Vinny and I had 2 very different philosophies about business and charging. All his customers were hand-fed by Vinny himsellf. I also found out that Vinny did not pay workman's comp, his wife covered the health benefits through her job, and that his business was heavily cash. Our rates were alomost double of his, and we looked like the crooks. To top it all off, Vinny's clientele base was very ethnic, and I was in the wrong group. Bottom line: Ride in the truck with this company for 2 weeks, you'll see what it's really all about. Mad Dog

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John R. Hall

Another source

Try Lon Cassel at www.contractorservices.net. Cassel specializes in preparing businesses for sale. He is a good man and can give straight answers.

B. Tice

Business buying

Excellent post, Mad Dog. I have been there more than once. I hate to say this, but most heating companies are not worth buying. It really depends on your market. In a heavily populated area where advertising has some value, you may want to just go out and start from nothing. In a rural area, it is worth buying for the simple reason that you get the "in" with the people by Old Joe who you bought out. This is invaluable. However, you will probably only retain 50 to 60% of the customers. The change will make people make the move to someone else as now they won't insult good old Joe. As far as the small operations, if you can make a deal to buy the inventory and work out a percentage deal for jobs got in the first year, that can be a low risk thing. The very best way to go as far as my experience has been, is if you are a long time employee of say an oil company with customer recognition, (the customers know you), if they sell out, go for it then. I've personally seen this happen and the 2 Guys who did it had a pretty large customer base overnight for nothing. Of course, they worked long and hard for the prev. company for many years to build up their rep. to the commmunity. People do remember the Guy who was out there at 2Am a couple of times over the years. Another thing to look out for is what did they sell? They may have put in 200 Ducane oil furnaces or something. The headaches you will get are incredible. maybe they were hackers. Remember, if you buy, you are just the new owner of the same outfit. You gotta do something for the people with the bad installs or equipment. For nothing.To keep the goodwill you are paying for every month for 5 years.So, be carefull.The idea of riding in a truck with them for a week is incredibly good.Excellent idea. Good luck.