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Thread: Buy competitor's company or just wait?

  1. #1
    Hero Member
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    Buy competitor's company or just wait?

    I ran into one of my major competitors today. He's a great guy and he runs a solid business. He told me that he is tired. He's been going for 20 years and just doesn't want to keep going. He was hoping that one of his guys would buy the business, but for whatever reason, that isn't going to happen.

    I asked him how much longer he planned on going at it. He responded with "this year and maybe the next".

    I told him to email me with a number and he said one on the spot. It was way high, but he gave a number. I'm sure he thinks his business is worth a lot, because it's his baby. He has poured everything he has into it and I get it. Unfortunately, I value a service company at 85% of contracts, 60% of non contract net from the previous year and depreciated value of equipment.

    Any time a customer tells me that they are getting estimates from others, his company is always the first one they mention. There is one other major company, but they do mostly commercial.

    What would you do? Would you make an offer or just wait for him to go out? I respect him, but he is competition and he's in my way.

    And if you are reading this...I do respect you. I can't say that about many cleaning contractors in this area. You have a great company, you give great service and I can only hope my customers will be as loyal as yours!

  2. #2
    It's so hard to value a service business. Most are worth their URL, their equipment at fire sale, their phone number and a few extra bucks. I've looked to absorb a few landscape businesses and other services and 99% of the time you hit the nail-on-the head.. way overpriced after the accountant looks at their numbers. I would be the same way if someone offered to buy PP.

    To give you an idea of how grim valuations can be, take a look at this guy's listing. At least he is being realistic. https://philadelphia.craigslist.org/bfs/5008242964.html

  3. #3
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    Damn, Ken...if after 30 years in business, it's worth 7K...I have failed.

    I agree though, it's super hard to value a service company. Unless you are massive (10M+ annually) you don't have much to offer.

    I would be interested in his 3+ return client list, his phone number and most of all, his not being my competition anymore. This is a small market. My math says it can only support 3 of my trucks maximum.
    We are planning our second office in Richmond within 2 years.

  4. #4
    Prestige Member
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    Instead of buying him out, why not invest a fraction of what he's asking into your business and over dominate him?

    It's only worth what someone is willing to pay for it.
    Chad Johnson
    East Tennessee Power Washing
    Knoxville, Tn.
    865-368-0847
    www.easttnpowerwashing.com

  5. #5
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    Not sure what I would do here. My gut says I would pass on this unless he's pretty much willing to give his business away for pennies on the dollar.

    If you buy it just be prepared that at most the 2yr non compete would stick but nothing further then that. At the end of the 2nd year he could come back and dominate again.... I would pass and look to just beat him out with your own business.
    John Tornabene
    Clean County Powerwashing
    www.cleancounty.com
    PWNA/PWRA member

  6. #6
    Full Member gbran's Avatar
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    Ryan, would this be Hodges that you're speaking of?
    New Look Exterior Cleaning, LLC
    Christiansburg, VA 24073
    Greg Branscome - Owner Operator
    540-381-3405/540-230-5280
    www.newlookexteriorcleaning.com

  7. #7

  8. #8
    Prestige Member
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    If you like the guy and you're friends with him, make him a reasonable offer and explain your pricing, he has a season or two to think about it and he might take it

    FWIW Bryan is looking to buy out of state and he will most likely see this thread

  9. #9
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    Give me some numbers. But I need to focus more in my area. That may be a little to far.
    Just hired a new sales guy for commercial. Hope he can help us this year.
    Rolling Suds Inc.
    Brian Wendling
    Power washing in Pa.
    Roof Cleaning in Pa.
    http://Rollingsudsinc.com

  10. #10
    Prestige Member Guy B's Avatar
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    I'm sure if you don't buy it...........Someone else will.

    It all comes down to the numbers. If both of you are serious ask him if your CPA can look at the books. Personally I wouldn't dissolve it if you bought it, but ride the market recognition of the business and double or possibly triple your market presence.

    Just a thought.
    Pressure Kleen L.L.C.
    Power Washing Service
    Tar-Heel N.C. 28392
    Guy Blackmon 910-876-1594

    House Washing Fayetteville N.C.
    Pressure Washing Fayetteville N.C.
    Power Washing Fayetteville N.C.

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