[In_Safe_Hands]

Hi All,

I have my own domestic cleaning company that I plan to sell.  However, I have no idea how to put a value to it!  Has anyone out there ever sold a business before?  If so, how did you work out it's value?  I heard somewhere that in the IT industry, the value of a company is calculated as 14 times the annual revenue.  This figure probably doesn't apply for cleaning companies but I'm wondering if there is another equation of some sort that someone out there might be aware of.

I hope someone has some advice for me.

Thanks in advance.
Kerry

[garyj]

For cleaning companies its usually around .5 of net turnover.

[bettakleen]

kerry, can you give more details about your business - time established, turnover, no of staff employed, and anything else which may be useful.

[In_Safe_Hands]

Hi,

Thanks for your responces.  Ok here goes.

The business is located in West Berkshire.  It has been established for just over a year.  Originally it was set up as a pet services business and that is where most of my focus has been.  The company name is In Safe Hands and I have tried to set up a bit of a corporate image (have to use that Uni education for something!).  I have set up a logo and standard formatting for leaflets and adverts etc. 

Initially the cleaning was just a side line to counteract the seasonality of the pet services side of the business but it has really began to spiral.  The current turnover is around £10-£12k per annum for the cleaning side.   For personal reasons I have to sell up - and this has come about before I have taken on any staff.  Most of the turnover is made up of regular, weekly cleans but I also have a list of people in and around the Reading area who are waiting to hear from me because they also want to use the service - with no staff, I obviously cannot service them.

I hope that helps and I really appreciate any advice you could give me. 

Regards
Kerry

[bettakleen]

kerry, can you contact me by e-mail bettakleen@hotmail.com

[CMS]

I am at a bit of a loss to understand how this works but very interested nevertheless.

When you sell a commercial cleaning company its value is based primarily on 'contracted turnover' i.e. if you have Clients that have signed an Agreement to have you as their contractor for the next year/two/three it has a value.

Can I assume then that domestic clients also sign a contract for a certain period of time? If they don't, what exactly are you selling? What's to stop every client cancelling the cleaning the day after the business is sold?

On another thread earlier this week someone asked what value they could put on their 'Car Valeting Business'...........with no contracts it turned out that what was for sale was an old tatty van (his own words) with some second hand equipment in it - £1500 tops!

I don't wish to dampen your enthusiasm but really, without 'contracted turnover' I can't see what there is to sell.


If I were to buy a domestic cleaning company I would calculate its value as follows...............

(Contracted turnover, per annum) X 25% i.e. if your £12,000 p.a. was 'contracted' I would pay you £3,000 for it but then only if the wage bill was no more than 55% of the charge.

If the £12,000 was not 'contracted' I would pay nothing for it.

[garyj]

Type of Business
 "Rule of Thumb" Valuation
 
Accounting Firms
 100% - 125% of annual revenues
 
Auto Dealers
 2-3 years net income + tangible assets
 
Book Stores
 15% of annual sales + inventory
 
Coffee Shops
 40% - 45% of annual sales + inventory
 
Courier Services
 70% of annual sales
 
Day Care Centres
 2-3 times annual cash flow
 
Dental Practices
 60% - 70% of annual revenues
 
Dry Cleaners
 70% - 100% of annual sales
 
Employment & Personnel Agencies
 50% - 100% of annual revenues
 
Engineering practices
 40% of annual revenues
 
Florists
 34% of annual sales + inventory
 
Food/Gourmet Shops
 20% of annual sales + inventory
 
Furniture & Appliance Stores
 15% - 25% of annual sales + inventory
 
Gas Stations
 15% - 25% of annual sales + equip/inventory
 
Gift & Card Shops
 32% - 40% of annual sales + inventory
 
Grocery Stores
 11% - 18% of annual sales + inventory
 
Insurance Agencies
 100% - 125% of annual commissions
 
Janitorial & Landscape Contractors
 40% - 50% of annual sales
 
Law Practices
 40% - 100% of annual fees
 
Liquor Stores
 25% of annual sales + inventory
 
Property Management Companies
 50% - 100% of annual revenues
 
Restaurants (non-franchised)
 30% - 45% of annual sales
 
Sporting Goods Stores
 30% of annual sales + inventory
 
Taverns
 55% of annual sales
 
Travel Agencies
 40% - 60% of annual commissions
 
Veterinary Practices
 60% - 125% of annual revenues
 

 
I think CMS has hit the nail on the head though.

Wherever you heard the 14X turnover for an IT company was very wrong, it wouldn't be worth buying would it, think how many years you'd have to work to et your money back, let alone make a profit.


 
 
 




 
       


 

[CompleatKleaningCo]

I run a domestic clean bus in Buckinghamshire and recently "bought out" a small one-man-band type business (est. two years) locally (approx turnover £20,000).  However, being that most domestic clean businesses contract their clients on the basis of no fixed tenure contracts, I was unwilling to offer much in the way of a lump sum, for the precise reasons that CMS lays down.  Any business investment is, of course, a risk, but I have to say that it doesnt get much riskier than this!  I was simply not prepared to pay a large lump sum for a customer base that could dwindle within months or even weeks (and, as I did not know the person I was "buying" from personally, how could I not be sure that they - or an accomplice - would not resort to dirty tricks and once the cash was pocketed, then attempt to re-gain the clients). I dont want to paint a black picture, but anyone buying or selling any business should be well aware ogf the potential risks and pitfalls.  I would advise any parties involved in a buy-out to have any agreement drawn up by a solicitor - could save many tears.  But back to the point, when I bought this operator out, I offered a lump sum equal to 2 weeks total turnover, and then a commission based royalty of 10% on earnings from the acquired clients (and any others passed on to me by the operator selling in the future) over a two year period.  To my surprise he accepted the offer, as he had no serious lump sum buy-out offers, due to the nature of the contracts.  This resulted in both the seller gaining the worth of the business - albeit over a longer period - and me acquiring some new contracts without any high risk financially.  In my mind, the only kind of domestic celaning business worth buying on a lump sum basis would be a long establihed, amply staffed organisation, witha proven trading history.  The domestic sector is just too "up and down" for anyone to seriously consider buying out a one-man-band with a short trading history.  No reflection on the operator, but a reality of the chosen industry.
Just my two penneth...

[lyn taylor]

hi Everyone very interesting replies to this subject, whilst I fully understand your concerns with regards to the non contract situation,  from the same situation, signed up contracts can be withdrawn through lack of service, I know because this has happened to me.  So whilst its better to have a contract, you still have to be very carefully, nothing is written in stone.............  But good luck with the sale.

[Phoenix]

I had my business priced up earlier this year just out of curiousity and the company that valued it quoted 4 - 6 times the NET profit.

[CompleatKleaningCo]

Pheonix,
what kind of sized business do you have?  4-6 times net profit sounds incredibly high and out of proporation with what others have said here.
I would imagine there is a big difference in valuation between, for example, a "one person and a vaccum cleaner" set-up, and a fully staffed liveried company.  Also I would guess that the lnegth of time trading would have some bearing on any valuation price.  This was the problem faced by the person who's work I took on (see earlier post) - short time of trading made it difficult to put any future worth on his business as he didnt have much of a track record to base a calculation on. 

[garyj]

They might have given this valuation to get the business, but it would NEVER sell, no-one is going to wait 4-6 years to see a return on there invested money this way. I wish my company was valued that high, but the reality is.....is not.

[Phoenix]

5 Fully equipped Vehicles, 20 Cleaning Operatives, 1 Operations Manager, 1 Sales & Account Person, fully equipped office and been in business 5 years. Annual turnover 250k approximatley.  I,m not going to tell you my profit margins though!!!!!

They were serious and I have had 8 serious enquiries in about 8 months, forecast in the portfolio was 350k for the 12 month period, although we are acually going to achieve better than that due to my new sales person who we took on 6 months ago.  This is the reason I'm no longer selling, however, I've not told the Company who are trying to sell my business.

[CompleatKleaningCo]

I think the size and level of turnover is the key to the valuation of Phoenix's business.  But there is surely no way similar profit multiples could be used to assess the value of a one man and his mop type business...is there?

[In_Safe_Hands]

Thank you everyone for your replies.  It has made interesting reading.