Personally, if it's an owner operated business I would work out the turnover as best you can (you keep going on about it being valued at 'x' amount which I assume is it's turnover excluding VAT?)
Then work out the gross profit. The GP is the amount of money left out of the invoice value of doing the work when you have paid anything needed to do the contracts such as labour, Nic, transport, materials, equipment, hires etc. which is directly attributable to doing the work. NOT admin, finance and general overheads such as rent, phones etc which are overheads.
It should be in the range of 25 - 35%. If it's lots higher than this check that the owner has costed his time and energy into the direct costs if he is working on the jobs. Anyway this will give you a percentage. A starting point for negociations is to pay one years gross profit i.e. you get your money back in one year if you don't lose anything. I would suggest that approximately this is what the business is worth and this figure includes all bog standard equipment and working materials. Expect to have to pay extra for any special / new equipment and vehicles.
This is when the negociation comes in. If the current owner is an owner operator all you are buying is goodwill. Yes check agreements, contracts and quotes but the reality is the business could just walk out the window if they have a good personal relationship with their clients. So try to make your agreement that you pay a decent percentage of the price up front then monthly staged payments over the following 5-6 months. You have to have some street cred to do this as the seller has to trust you but that's also true the other way.
I would though be very cautious. I have done cracking deals (both buying and selling) but I have also felt as if I have just wasted my money, time and energy. Above all don't get excited about the deal. That's the quickest way to get carried away.
Because of that I would talk to an accountant. Outline the pointers I have given above so they can get their head around an industry way of valuing cleaning work then you do the initial negociations but always just say you have to refer to your accountant when things get sticky or you don't want to be put on the spot. Involve them, keep them in the picture and they will stop you getting buyers fever!
If you don't have an accountant that's another problem as you need someone used to buying businesses of a certain size and dealing with the foibles of the smaller operator. Try and get a personal recommendation from someone who knows your local area and whose opinion you trust.
Above all don't be rushed. There is always a sweeter deal around the corner. Best of luck. Remember it's not Monopoly money but stuff you have grafted to make. Phil D
