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Thread: Establishing a value for your business.

  1. #1
    In the Trades kordts's Avatar
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    Default Establishing a value for your business.

    Has anyone bought or sold a service business lately? I am trying to find the value of my business and don't know where to start.

  2. #2
    Master Plumber master plumber mark's Avatar
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    Talking its all blue sky

    A plumbing business is rather iffey.....

    usually its worth about whatever your
    net income is x 3......

    people will pay you for your client list too....


    If you are wise you will keep a good client list
    with names, addresses and telephone numberson
    something like Quick books Pro....

    to prove the value of your business to someone
    wanting to buy it some-day....



    I have the opportunity to bid on the telephopne number
    of a business in town here that recently went under...

    they had 11,000 names .Probably half of them are dead or have
    moved on after the years...


    so what is it worth???

    what should I offer for it??
    ......

  3. #3
    Moderator & Master Plumber hj's Avatar
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    Default buy

    It is worth whatever you want to pay and they will accept. The client list is worthless if the customer calls someone else once they learn that "their plumber" is not the one who answers the phone. I had an "old" phone number that I kept active for 5 year, (so customers with the old number could still reach me without looking in the phone book to see if I was still in business), after I moved to a different prefix area. That number could have been purchased but no one did and it is now out of service.
    Last edited by hj; 07-28-2007 at 06:34 PM.

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    In the Trades kordts's Avatar
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    I have Quikbooks so every customer is in the system, with all their contact info. I like the 3x revenue formula. I had gross revenues of 262,000. That was my first full year of business, I showed a profit of 30,000. I would like to have 400,000 revenue.

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    Licensed Grump GrumpyPlumber's Avatar
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    I have to assume your net profit was minus your personal payroll.
    NOT probing for what that was (would rather not know here in the open either)...just checking.
    "The biggest regrets we have in life are the chances we never took."

  6. #6
    In the Trades kordts's Avatar
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    I didn't make scale, but I paid myself 50,000. Plus disbursements of 12,000.

  7. #7
    DIY Senior Member CHH's Avatar
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    Looks like you came close to perfect balance between payroll and profit. The ex-IRS lawyer I used for an incorporation advised that a 50/50 split between profit and payroll was ideal from the perspective of minimizing taxes.

  8. #8
    Licensed Grump GrumpyPlumber's Avatar
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    Quote Originally Posted by kordts
    I didn't make scale, but I paid myself 50,000. Plus disbursements of 12,000.
    I really didn't mean for you to post that...personal.
    But...
    Not knowing why you're selling, my guess is bus has slowed down (unless you're retiring)
    I'm wondering what your ad budget was...and if it's what was hurting you.
    "The biggest regrets we have in life are the chances we never took."

  9. #9
    Master Plumber Dunbar Plumbing's Avatar
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    Exclamation

    I spend a whole lot of money on advertising and it has very good results. I haven't had a shovel in my hands in 3 years and haven't done anything tied to a remodel in two years. My concrete saw, jackhammer and wheeler chain snap cutter look good collecting dust in my shop. Ahh the memories of slave labor.

    As for the community, it must talk because the requests to do this kind of work has greatly reduced over the years along with businesses asking me to do service work for them. Almost like my guidelines got blasted onto a billboard somewhere.

    And as for competing plumbers, a great deal of them know the name solely because of the truck, a select few know the person behind the name.

    If I lose any work from my customer base, it's solely on price, not quality and I don't mind losing them to someone working cheaper than me.

    I draw a minimal salary from the business for the first 7 years. At the 10 year anniversary I'll start paying myself a decent wage, I'm still in the structuring stage of the business and I surely don't want to grow too fast too quick.

    I don't buy water heaters either; the customer always purchases them so I can keep occupational license tax fees down for inflated figures created by large ticket plumbing materials. I do this for a slew of reasons and if anything goes wrong with that heater, the customer bought it, I didn't.
    Last edited by Dunbar Plumbing; 07-29-2007 at 07:06 PM.
    Read what the end of this sentence means.

  10. #10
    In the Trades kordts's Avatar
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    Business is actually picking up. I have a one line yellow page ad. It is producing results. A mechanical contractor would like me to buy into his shop, and then he can start getting a lot of plumbing work he is shut out of at his large accounts. I would like to find the value of my business to either sell it, or borrow against it and put another truck on the road. I am too busy for one man. I still am not making enough to buy a truck on credit and then get a guy out of the hall at 56.00 per hour. If I was able to borrow against the business, then I can buy a truck and get a plumber and not have to sweat, because we both probably wouldn't bill 40 a week for a couple months. Grumpy, nobody knows me here. So, posting my do-re-mi is cool.

  11. #11

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    I was just wondering how you know for sure the reason for losing a customer? Do you call them up? I am not so sure money is the number reason for losing a potential customer. From talking to many people, it seems to border on attitude. Not sure if this would be in your case.

    I have learned not to use the big advertisers for what I want. I now use only the church bulletins, the community flyers or talking to school moms ( I tutor) whose husbands are small businessman skilled in the trades. I seem to get better whatever's I need help in. In addition, one thing with advertising that I think helps are pictures. If you notice most occupations on TV or in the book has a picture of the lawyer or whatever in it. I don't know why but with your advertising maybe you guys should put a picture of yourself maybe one with your kids, etc. I don't think gimmicks work, like dressing up like Superman or Batman, but, presenting a look of a family man is nice and geniuine. It would promote a look of trust.
    Last edited by Cookie; 07-30-2007 at 12:23 PM.

  12. #12
    Plumber Cass's Avatar
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    Years ago I worked with a man that was employed by the now out of business Digital Corp.. He worked in the PR /Advertising end and he said basicly the same thing Cookie said he told me that responses to ads would double or triple by including a pic of a person in the ad. He said that it had something to do with visually identifying with a person and a bond of trust that was formed by the pic as opposed to just word ads.

  13. #13
    Master Plumber master plumber mark's Avatar
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    Talking the sign of a successful plumbing business

    rugged...I spend a whole lot of money on advertising and it has very good results. I haven't had a shovel in my hands in 3 years and haven't done anything tied to a remodel in two years. My concrete saw, jackhammer and wheeler chain snap cutter look good collecting dust in my shop. Ahh the memories of slave labor.


    That is about the best way to determine if you are doing good or not..

    .if your shovel and jack hammer are sitting in the shed collecting dust and you turn down work where you might end up having to use them ....

    .that means you have gotten yourself into "orbit"


    I turn down bath re-models becasue once I start the job , the phone rings off the wall and I end up loseing money

    I have to down 20 water heaters that I could have done and then usually get stuck beating up a concrete floor for two days...




    so that aspect of the business is priceless and you cant put a value on it....

    who wants to buy a business where you are digging ditches and breaking up concrete becasue you have to to stay afloat

    ......all day by yourself???






    t

  14. #14
    Master Plumber Dunbar Plumbing's Avatar
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    I don't know for sure if I'm losing a customer, I'm just figuring that since I'm not cheap, there's always someone cheaper. With attitude I'm a hit with women; I talk to them without any male complex *pig* and give them more knowledge than they can handle. Since you have access to AL mainframe, you'll see the majority of my reports are from women.

    My only time I give a bad attitude is when someone is trying to get something for nothing, or trying to pin me on a time frame when it's impossible to gauge, depending on the job. I treat every customer the same since you never know who you're dealing with....but you can usually snuff out the bad just over the phone most times.

    I run a 3H-S in the YP but I do internet linking with them, sponsor local events in town like the fireworks, ampitheatre for the children, bull ride and the local fair. Along with numerous small venues of advertising through a couple church bulletins and prescription bags at your local ********. In other words, I show up in a lot of places that reinforce hometown plumber which is intentional. I recently sponsored the local high school football team that has me on their scoreboard. That "give back" to the community and then having customers originate from those, then others talking about what I did for them starts a huge chain reaction that would allow me to pull some advertising. <<<< That doesn't make good business sense though.

    I'd have to photoshop 3 double chins and somehow hide the fact that jerry springer had to cut a wall down to remove me from my house to get to the doctors one day....to get a picture in print of me.
    Read what the end of this sentence means.

  15. #15
    Master Plumber Dunbar Plumbing's Avatar
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    Quote Originally Posted by master plumber mark
    the phone rings off the wall and I end up loseing money









    That's why I don't bother. I have to keep myself available between calls whenever possible for that person that has a plumbing emergency or desperately wants someone now. My first call-in this morning is a kitchen sink hookup, corian with undermount sink along with hooking up the dishwasher and insta-hot dispensor, less than 2 miles from the shop. The reason he called was because I have a outdoor projector that shows my logo onto a building at night, people call it a golfball because it's round but it's the only one in the area and that's why it works. The city can't get on me because the sign disappears when the sun comes up~!
    Last edited by Dunbar Plumbing; 07-30-2007 at 06:19 AM.
    Read what the end of this sentence means.

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