Selling an Arb business

[Rhizomorph]

Hi

 

I have been offered a job with an arboricultural consultancy which is a great opportunity for me.

I have run a small arb contracting business for 10 years and would have to give this up to take the job.

 

I've spoken to the Federation of Small Businesses re Legal obligations of closing or selling the business but it would be interesting to see how anyone else has gone about valuing and marketing their businesses and how succesful they were in selling, how long it took etc

[Kev Stephenson]

Is it a ltd business or sole trader?

 

Is there any repeat custom / companies or councils you have contracts with?

 

Will you sell the kit with it and is there any staff involved

 

If it is sole trader subbing to other businesses and the main asset of the business is you then it is unlikely to be worth very much (if anything) as you are not selling the main asset just a bunch of saws and a list of phone numbers.

 

If you are a ltd company running 2 teams with a full order book, good reputation and a contract with the local housing association (for example) for the next x years, provided the HA will let the contract pass to another director then the company has a decent value.

 

We need more info

[Rhizomorph]

The business has been run as a sole trader.

We turn over about 100k and most of this is repeat custom from our mainly domestic client base. We also do some commercial works.

'Goodwill' would be the biggest asset but putting a figure on that is where I would need help.

At present there is only one employee on the books.

The intention is to sell the business and kit as a going concern.

[Kev Stephenson]

Usually you look at between 1 and 3 times the annual profit plus assets. Will you not being at the helm of the business be a real problem or could the employee plus the new owner be able to run the business the same, will a number of your customers leave with you so to speak?

 

If you can prove a run of repeat business e.g you have been doing this customers hedges for 5 years and they love it then you could be OK

[Gnarlyoak]

A location would also be handy. £100k turnover round a chav estate in Essex (though unlikely) would'nt have the same growth potential as £100k turnover in a Surrey stockbroker belt. A location will also help potential buyers get a rough idea of insurance costs, as well as growth potential.

 

Existing tree firms in neighbouring areas looking to expand may be tempted to pay a little bit more for a ready made customer base. However, if there is a lot of competition near you then this might have a negative impact on your valuation.

 

Does selling the business & kit, include vehicles/chipper and/or a yard with/without storage, security. Is there a yard full of years worth of logs that might be tempting to someone either looking to getting into wood fuel or compliment an existing business. Try to highlight as much as possible anything that could add value (not necessarily remunerative) or scope to grow and expand the existing business.

 

Without intending to appear to insult your employee you might also like to take into account their experience and abilities as a calculable asset to the business. Someone with years of experience and all the tickets plus an arb/forestry related qualification & a towable driving licence is going to be more of an asset than school leaver brash monkey whose been with you three months, has no tickets, no driving licence and is unable to spell their own name or pull start a chainsaw without supervision.

 

Just my two pennarth' worth mate. Hope this helps.

All the best, & good luck with your new opportunity.

[Rhizomorph]

Up until this year I've not been on site very often apart from providing advice and quoting so I would expect that the good will would continue for as long as the good service was provided.

As I would just be doing consultancy I would only take that portion of the customer base with me.

[b101uk]

Up until this year I've not been on site very often apart from providing advice and quoting so I would expect that the good will would continue for as long as the good service was provided.

 

As I would just be doing consultancy I would only take that portion of the customer base with me.

 

ergo the people who are more likely to be bigger with bigger jobs who may need a "consultant" would be going with you

 

thus you have devalued your "customer base" and as you are not in possession of work contracts then you can then take the same view as the tax man that nothing is guaranteed work wise ergo not worth a lot.

[Andy Collins]

A builder friend of mine was offered his bosses business when he retired, for a large sum. For the money he would get the client base, the contacts, the ongoing works, and company vehicles. He chose not to buy the business, went self-employed, bought a van and advertised. he gained the majority of the ongoing contracts, most of the client list moved over to him anyway as they knew him, and so on. He now employs (5 years on) more staff than the old company, and turns over more. Good will aint worth a lot IMO.

If things are going well for your company, I'd wonder why you'd wish to leave it all behind to become a consultant for someone else, and if I were to be interested in buying you out, it would raise some concerns for me.

[Kev Stephenson]

Good point Andy, if it's going that well employ a foreman or promote the employee and do the consulting as another part of your own business

[Stephen Blair]

You would need to sign a contract saying you would NOT do any ARB related business in the same area for a set amount of years.

All you are really doing is selling kit and taking the creamy customers:001_rolleyes: