View Full Version : Thinking about selling my business

07-23-2010, 02:55 AM
I have been tossing around the idea of selling my business and just curious if anyone else has dealt with this. I was going to sell it as a package deal 40 commercial accounts for mowing with contracts ending in Oct. I've had the same contacts since I started 3 years ago and just do a yearly contract every year. I also have 30 plowing accts locked in for this winter. I am going to include 60k worth of trucks and equipment. The company grosses about 150k per year and maybe nets 70k. I'm ready to get out because I already have a full time job and this was just going to be a part time gig that has grown every year just with word of mouth and no advertising. I have hired 2 full time guys because its too much for me to handle. I know it sounds crazy but money isn't the issue. I just want to be with my kids a bit and not put in a lot of hours per week. I was thinking of Asking 150k as a whole package deal. Am I out of line wanting that amount? Thanks for the help.

07-23-2010, 04:32 AM
Put your equipment and current contracts aside they are usually considered last. One of the most common ways to determine a small business value is to use the data on your most recent profit and Loss statement. If you are seriously considering selling you must have this current it will be scrutinized by any serious buyer. Sometimes valuation is also determined by a percentage of "Net" cash flow or a multiplier of it for example the buyers lawyer will take your last 3 years or possibly 5 years of your businesses tax records and determine the average net cash flow subtracting any debt and projected loss if any and offer a percentage on that figure for example 35% of that figure. Then the equipment, parts, material tools and stock is negotiated after the first figure is agreed upon then you can factor in your client lists current contracts that are written in the name of the business and your good will and name you have built over the years. That figure is naturally high and usually balked at during negotiations. all parties must be reasonable. their are many ways to determine actual value this is just one of the many. First task is to tighten up all your records then seek out a lawyer and a accountant to get those doc's air tight. Most likely your best bet is to contact by second party the major legitimate players in your area that most likely will be the ones absorbing that work load when your gone. Any lawyer will tell you the client lists are more of value that your commercial contracts that end in 3 months anyway. They are not a hard asset expiring in 3 months. At any-rate this is a pain in the but and can cost more than a few thousand dollars up front. The easy way is liquidation sell all equipment tools parts outright then sell client list and contacts and contracts to your competitors.

07-23-2010, 09:29 AM
Thats where I'm torn whether to sell it off in peices or as a whole. I have my accountant preparing all my financial info to make sure its current and no discrepancies. I guess I'll have to see exactly what she comes up with before I move foward. I might wait it out until spring and lock in my contracts for three years to make the company more attractive. I really appreciate all the good info.

Lawn Man Dave
07-23-2010, 12:40 PM
Do a search on here and see what others have said on this subject.. most will say you will get around 50% MAYBE MAYBE a little better of your NET. Buying a company for what it grosses in a year leaves a lot of risk for the buyer.

I know one guy that sold for NET and I think the buyer must have been crazy.

Id never consider any account or company that was not a good deal under net.

I am not trying to insult you or anything, just saying what I know and what many also say on this site on the subject.

08-05-2010, 11:53 PM
Check out bizbuysell.com - bizquest.com - businessesforsale.com.

These are the main three sites that business brokers and some owners use to list their businesses you can get some good info here if you want to sell or buy.

Generally, small businesses go for a Multiple of their Cash Flow, which is basically the Net. (Totals Owners Benefit is another way of putting it.)

This Multiple is typically 2-3 x's the Cash Flow. So if your cash flow is 70k, a reasonable assumption is it could be worth in the range of 140k - 210k.

Every industry has their nuances, but thats a general rule of thumb for most small businesses.

This is also assuming you're selling a business, and not a job. If you're the guy doing everything, chances are you'll get 1 x's your Cash Flow, tops.

But if you "manage" the business and have systems in place, crews that do most of the field work, you'll get a higher multiple.

Most importantly though - can you prove your numbers with Tax Returns... if you cannot, you better be willing to finance the deal, because no bank will.

08-05-2010, 11:55 PM
35% of a 5 year average of net

08-06-2010, 12:09 AM
the more I look at my books the more uninterested in selling I am. I deduct everything I can so thats killing my profit so I would have to finance it and I've seen nothing but problems from that. I just brought a long time friend on with far more experince then me to run all the day to day operations so hopefully will work out and really free me up a bit. Time will tell. Thanks for the input guys.

08-08-2010, 01:40 PM
[QUOTE=jrmyj;3669861] I deduct everything I can so thats killing my profit QUOTE]

If you're referring to personal deductions, that can be added back in to the Cash Flow. Ex: If you're deducting personal health insurance, that is a "discretionary expense" and is added back to the net. What you pay yourself as salary is added back in as well.

Good luck.