Originally Posted by 3238DPW
I have read a whole lot on this subject and talked to many people (some consultants) but I am by no means an expert. I looked into this so I know what I am talking about when it comes to buying businesses or accounts.
This is what I feel it really comes down to. Are you selling a business or a job. A true business is an investment. If you go out and mow every day yourself, manage employees yourself or the business would just stop without you, then you are selling a job. It is a management job but still it is a job. If your business has systems in place, employees, a management person or team and a person or people besides you selling your services and you can take a day off almost anytime you want then you are selling a business.
Which one do you think is more valuable? In my neck of the woods a business as described above is worth a multiple of the yearly income. 2 to 3 times. A job as described above is worth a multiple of gross weekly income plus equipment. About 2 to 4 times depending on the pricing and contracts(this for lawn mowing, landscaping I would think would work differently). Also if I was buying a route and you have quality accounts and I agreed to pay 4 times, I would pay a maximum of 3 times this year and pay for one cut of the accounts I still had the following year.
Take this advise for what it is worth. If I sold today I would be selling a job and not a business. I still have a ways to go but I will get there.
This is your best answer.
In terms of client lists or existing routes, contracts vs handshakes, vs service agreements. All are about equal. Very rare for many to have Binding contracts in this business. Some in the commercial world but they get tricky when selling the business to a new owner.
So for this instance we will leave them out because I don't believe you have these or are talking about them. (not a bad thing)
We have purchased 2 mowing routes from others and have sold our residential plowing route. Short answer is common price is 2-3 months of revenue for the services you are purchasing. Pay x amount (50%) up front and the rest based on customer retention. In almost all cases you will instantly loose some. You can be the best but some people don't like to be traded as a commodity.
There are still alot of factors but this is a basic start.
Like stated above a solo op or smaller company where when the owner is pulled out is not worth nearly as much as a business with systems in place to keep it running with out them.