Selling a business

[bigbrowntree]

Hello folks,

 

I have been reading some old threads on this scenario but was hoping to pick some brains , and ask for some up to date advice regarding the selling of a business.

 

I am keen to know if other owners have packaged up and sold an Arb outfit, and really to get a handle on how realistic the idea is, or not - as the case may be....

 

My situation - The business has been running in the East of England for 6 years, there are 4 members of staff on books, and a subbie climber and bookeeper / admin person. 4 x Vehicles, 8 " chipper, AVANT loader, tipping trailer, 2 x Red diesel bowsers, Telehandler JCB 531 - 70, 3 x 40 ft shipping containers, 1 x 20 ft container, 1 x workshop, 22t log splitter, GRCS, rigging kits, climbing kits, 3 top handled saws, 4 ground saws assorted sizes, 3 climbing kits, 2 sets hedgecutters, 1 polesaw, backpack blower, handheld blower.

 

Logs and chip regularly sold for biomass.

 

Large customer base, but no contracts in place of any kind, numerous facebook and google 5 star reviews, professional website, and all advertising bases covered locally.

 

At time of writing, circa 18.5k worth of work booked into diary, diary remains busy year round with at least 3 - 4 weeks in at all times.

 

Turnover is looking to be in excess of 200 k this year. Last year profits before tax were approx 90k. 20k in business bank account at all times.

 

I have spent years and blood, sweat and tears building the business, but have reached a point at which I no longer want the pressure and would like to capitalise on the hard work invested. I feel that the business has some worth to somebody, but wonder quite how to go about extricating myself from the business model. At worst, I could dismantle and sell in component parts, which would generate some coin, BUT it would be a shame to see the company fizzle out. In an ideal world, I would sell the business as a going concern to an interested party - it strikes me that another tree surgeon looking to walk into a well oiled and fully running set up would be the way to go.

 

If any one has advice, or has been in a similar position and could share their experience, I would be appreciative.

 

Thanks in advance.....

[IronMike]

Could you not employ a manager of sorts, who took care of the majority of the day to day running? This leaving you with more spare time, but still a viable business running in the background perhaps?

[Mike Hill]

Kit value minus 20% if all bought at once.

Percentage of profit to be negotiated by purchaser is what sets the value.

 

Sounds like you are selling a job, not something " Suzy and Bill" could buy without intimate knowledge of the industry. Unfortunatly tree buisnesses without a manager and capable of offsite operation arnt worth alot, unless your compeditors are looking to increase market share.

 

If you just shut down, then your compeditors get a percentage of the market for free, if they want all of your share then they have to negotiate for it.

[GA Groundcare]

So tricky to value, so many variables. Do your clients book tree work in because of you personally? Are you the face of the company? what happens when they all find out you no longer have an interest in the business? Or do clients book your business and you are just the person that answers the phone / organises the diary? Will it run the same without you there?

 

I have seen many folk trying to sell running businesses in this industry, usually just end up selling off the assets and folding the company unfortunately. However to the right person you can save them a shed load of graft by stepping into a business with a good work load ahead which makes profit from day one. A client base can't be sold. But can be a good "perk" in the sale.

 

Question is, when you started 6 years ago why didn't you buy a business that was already operational?  

 

[Mick Dempsey]

2 hours ago, Mike Hill said:

 

If you just shut down, then your compeditors get a percentage of the market for free, if they want all of your share then they have to negotiate for it.

Therein lies the rub. If no one buys it they get it anyway.

[Craig Johnson]

six years isn't long enough really,  200k or 500k doesn't matter what's the bottom line? 3 to 4 years consistent top and bottom lines are better than rapidly expanding turnover. what percentage return customers do you maintain? i would think that you would be classed as 'key personal' so the only way is through a work out 1-3 years with targets and split payments  

[doobin]

4 vehicles and staff yet only one chipper? What's the story there?

 

If a business makes consitently 90k profit before tax, then a manager at 30k per year with perfomance related bonuses leaves around 50k cream each year. You'd be lucky to get 25k for the 'goodwill'. If it's really that profitable then a manager is the only real option, incentivise them, and if it all falls apart two years later then you've still ended up with more than you would have selling the 'goodwill'

[richy_B]

If I was looking to buy a business I'd look at:

1.Value of long term contracts - profit on these X duration remaining.

2. Realistic resale value of owned kit.

 

Staff, although a key part of a business can be a fiscal liability. Who ever buys the business buys the need to pay them/holiday/sick/COVID or make them redundant. 

 

Unless you are turning over millions there isn't really a brand etc.  Customers without contract can disappear overnight.  I'm afraid they are worth very little, a little sweetener for a potential buyer at best. 

 

Your best bet is selling the business to one (or more) the people who work for you as a going concern.  

 

Edited August 16, 2021 by richy_B

[GA Groundcare]

If your turnover is 200k and profit 90k, how do you run 4 employed staff, all that listed kit, fuel, deprecation, insurance, accounting costs etc for 110k per annum?

 

Any potential buyer will and should want to go through the numbers in the finest of detail. A proper balance sheet would be worthwhile to put with the sale advert

Edited August 17, 2021 by GA Groundcare

[jose]

I dont get it, if you have a business that has shown consistent profit year on year there has to be a value to that.

To say without contracts its not really worth anything surely is wrong. People dont have a contract with tesco's but year in year out they make massive profits and if you wanted to take over that you know you would be paying for it! Yes they have bigger assets but thats all proportional to the point.

Not one of the actual paying customers that walk through that door have to use them but instead choose to. Same as with all the repeat customers that the OP will have gained over the years but doesnt have a contract.

 

Obviously the OP needs to shown a potential buyer the books to prove the numbers.

I started from scratch and i know for sure it would have been a lot easier to take on a established business ( as long as its not a run down failing company). 

If i bought an established company with proven profit each year id have jumped a good few years of establishing a reputation while making ends meet, i probably wouldnt feel like a 90 yr old in a 40 yr old body!