Growth Trough Acquisition

What would be the way to come up with a valuation for this type of service based business?

Is the business worth 4x monthly net or a year of gross revenue? I have been in negotiation with a company that does 450k in gross yearly revenue. The business is a sweeping business and doesn't have any pressure washing accounts, the ask is 350k.

The equipment in my estimates is worth 100k, the top ten monthly accounts generate 40% of the monthly gross, and the monthly net after the owner pays himself 60k a year is about 5k a month. But what happens if 30% of the top 40% of monthly gross decides its time to shop numbers after there longtime service provider decides to sell there account?

I also own sweeping trucks so we would be adding service routes with overlap and consolidating routes to make a higher monthly gross. The accounts are all commercial, so we would have the opportunity to add pressure washing, porter service, window cleaning, graffiti removal, hauling etc.. to the base of accounts.

The problem I have with acquiring a service based business, especially for this price, would be customers would get the idea to go out to bid. Even if there are contracts in place, we all know the customers can and will terminate or ask might ask for a new price assessment. The contract is with the old company not my company, as I purchase the accounts I will be terminating the old business through acquisition and placing new contracts. If the work assumed through the acquisition was city,county,or state work- does the entity have a clause for termination? I don't know because I'm not privy to all that information even during the due diligence period.

Service industry purchasing, I believe is a crap shoot. Bottom line I buy debt, asset, and a customer base that may or may not stick around. I think putting 100k into two great sales men and bidding everything in the public domain related to pressure washing within 500 miles of my base of location will generate the same 450k a year in total revenue.
 
Freebie!

I normally wouldn't post things like this but I don't want you to make a terrible mistake. . . .here is my work sheet.

I take market value of the equipment x .60 = that what I'll pay for the equipment

I take the EBITDA + (above) THEN use judgement to factor websites and non tangibles


View attachment Valuation Work Sheet.pdf
 
DJ Carroll said:
Thing about GE is 30% of their business comes from credit cards/loans ...... which they pay little to no taxes on
Click to expand...

The greatest acquisition in my opinion of Ll time. You got 30% right

I just think the 30% number throws you off.

Anyone here know how large GE is?

30%

Hey old guys who remembers first credit card? This one was number 2 GE owns it.

Sears owns number 5

Number 1 doesn't matter!!

Number 5 grew nearly as large as the other because of technology an marketing.

Walmart doesn't own any

300 american companies take home more than Wally

In the 70s & 80s they handed them out like cotton candy!

GE capital

Sears financial : hint hint what did GE buy in the 80s from monkey wards that is now 30%

Does anyone realize how large this company is or subsidiary's they own?

2650ae801bd10d0669b3c36be5dbed54.jpg



Sent from my iPhone using Tapatalk
 
DJ Carroll said:
I normally wouldn't post things like this but I don't want you to make a terrible mistake. . . .here is my work sheet.

I take market value of the equipment x .60 = that what I'll pay for the equipment

I take the EBITDA + (above) THEN use judgement to factor websites and non tangibles


View attachment 28602
Click to expand...

Why no Blue Sky/Goodwill?
 
Rance said:
Hey DJ Carroll, You started this thread but haven't heard a word out of you since. What gives dude? How many companies have you acquired personally? I haven't bought any of my local comp out.....YET!
Click to expand...
I think DJ went out of business.
 
Most of my acquisitions were finalized on my gut feeling, after all my due diligence, and what I was wanting to pay. Worked out just fine but we are not talking huge numbers here compared to GE, Sears, Visa. We are talking small business logic's.
 
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