The question: How can I sell my cleaning and restoration business?
Steve’s answer: Much depends on your ‘degree of urgency’ and systems in place.
I’m reaching out as a past graduate of your five day Strategies for Success program to ask for advice on selling my cleaning and restoration business here in San Diego. Since you know so many people in the industry I’d also like to see if you can spread the word. Thanks in advance!
Seeking to Sell in San Diego
Good to hear from you! Its been what… 12, 15 years? Time flies… Re: selling your business I hope it is motivated by good news and that you’re ‘moving forward’ in your life.
Seeking, I always feel compelled with emails like these to first ask you, “Are you absolutely positive you really want to sell?” The reason I ask is I see a lot of ‘Seller’s Remorse’ where after the sale the seller bitterly regrets letting their ‘baby’ go! Plus have you examined other options besides selling? Remember, Seeking, I know nothing about your current business or personal circumstances but for example have you thought about…
1) Possibly scaling back your business to find your ‘sweet spot’, keeping only the highest profit services of your company and doing the work with a smaller, trusted staff or even possibly just yourself? OR…
2) Hiring a manager, putting them on a profit sharing arrangement and stepping back? And you could always…
3) Dramatically raise your pricing and let the profits (with less work and pressure) roll in! Any of these options will probably over time give you a much better return than selling out. (Plus by postponing your sale and testing other strategies you can always sell your company later. The best of both worlds!)
Above all my most important question, Seeking, is what degree of urgency do you have in selling? Any service business can be a tough business to sell and a ‘desperate seller’ who has to sell out quickly is in a difficult position. (Too often I see cleaning and restoration contractors wait till they are desperate to sell. Things don’t fall into place so they eventually wind up doing a last-minute, hurried liquidation of a business they have spent a lifetime building. So sad!)
On the other hand, if you have the time and ’emotional resources’ to 1) prep and stage your company, 2) discreetly get the word out locally (this is essential) and 3) have an unhurried, ‘non-desperate’ courtship (negotiation) with one of more motivated and qualified buyers your chances of a successful sale go way up! Other questions…
To what degree, Seeking, have you developed a ‘Business Infrastructure’ (hopefully using some of the systems and procedures we shared with you in your five day SFS: Business Transformation) that let’s your company run successfully without you (the owner) being there 24-7? I call this a Critical Mass Business and a company like this will be MUCH more appealing to a savvy buyer.
Is all of your regular commercial work based on written contracts? Are you approved with insurance vendor programs? Do you have long-lasting relationships with insurance adjusters and/or insurance companies? Have you built up the pre-paid, residential maintenance ‘Stay Beautiful’ contracts I gave you in your SFS Training? (CLICK HERE to download a complete guide to implementing the Stay Beautiful program.) If you can give a resounding yes to all these questions then you’ll have prospective buyer lined up to take over your company!
How long have you been in business? Have you seen steadily increasing sales and net profits? (One great way to achieve this is with Additional Service Options!) Are your books in good shape?
And of course, Seeking, we come to the 600# gorilla sitting in our conversation! How much should you sell your business for? The cop-out answer is “Sell for as much as you can!” And technically, the ‘correct selling price’ is what a motivated and informed buyer is willing to pay for it!
Remember that your asking price must also be supported by Generally Accepted Accounting Principles. (GAAP) After all, your savvy buyer will have his or her professionals examining your business books and the price you are asking to sell at.
This is actually a good thing since your prospect’s people and your people can use these same GAAP to arrive at a non-emotional conclusion and with no egos involved. (This process is almost impossible to achieve with you negotiating one-on-one with a prospective buyer which is why the ‘buffer’ of representatives handing it on both sides is so important!)
WARNING: Seeking, Do NOT put a price on your business based on a ‘rule of thumb’ that other cleaning and restoration contractors give you! And do NOT use real estate agents or your friends to advise you on valuing your company! Instead…
Engage the services of a Certified Business Valuation expert who will deliver a comprehensive report explaining why your business should sell for xxx amount of dollars. Sound expensive? Yes! My certified business appraisal cost me over 10,000 bucks and it was the best money I ever spent! Why? Because the certified appraisal price came in at more than double what my real estate friend calculated my company was worth AND I sold it for almost full price!
My certified business appraisal also contained a 40 page report with spreadsheets, ‘comps’ of what other comparable industry business had sold for and page after page of GAAP calculations that supported the final sale price. So now when a buyer said “I think your asking price is too high” my business sale broker could simply reply, “Well, let’s see what the numbers say!” BINGO- instant respect and credibility!
NOTE #1: The Certified Business Valuation described above is a lengthy (and expensive) process. If you absolutely must at least have a ‘more or less’ approximate price then download my free ‘Step by step guide to put a price on your cleaning business’ HERE! (This is a great yearly exercise to run even if you have no intention of selling your company just to see if you are increasing your net worth. You should be!)
By the way, Seeking, you should also consider if you are willing to finance part of the purchase price? IF you sell to quality, stable buyer that has other assets to secure the loan you will be making to them financing part of the total price can be a good thing for you tax and investment wise. OR what more typically happens in our industry is a desperate seller finances most of the sale with an unsecured (no collateral) repayment plan to an unqualified buyer and disaster strikes. Get professional help here.
Finally, Seeking, we arrive at HOW you will sell the business and WHO you will sell it to? True, you can reach out to industry figures to spread the word. (If you don’t mind losing some confidentiality during the sale process you can post for buyers on our SFS Facebook Group HERE!)
But very likely you will sell for top dollar to someone who is A) local and B) outside our industry! Why? Because the odds of finding an existing cleaning and restoration contractor who wants to sell THEIR business AND move to take over YOUR business makes for pretty ‘slim pickings’! However, there are many qualified people (likely not in the cleaning or restoration industry) already in your area who would be interested in a Critical Mass Business that will supply them a great return on investment with positive cash flow.
NOTE #2: For a cleaning and restoration business to attract a ‘hands-off investor’ it must pretty much run itself with all systems and procedures in place. And I will tell you that (cough-cough) this is exactly what our five different SFS Training Options are all about- giving you a pre-done, turnkey ‘Business Infrastructure!
So I recommend engaging the services of a well-respected and active local Business Broker (ask for and check their references) that can tap into his or her local network of contacts. (Preferably this will be someone who specializes in selling service businesses.) Remember that just like in selling your house you’ll need to do a ‘beauty makeover’ of your business ahead of time for the best chance of success and top selling price.
Get back to me with any questions, Seeking! Your entire SFS Team wants to help!