5 Star Johnny

Fellow Owners! I am in the process of refining our company's business plan, which includes a defined exit plan. I have combed through several of the previous threads discussing values of PW businesses for sale, but I believe I have a unique sales point that does not mirror other discussions. What I am ultimately looking for is some professional feedback on what I should ask for, in total, to sell my business if it happened today. I am actually in the process of discussing this with three (3) larger PW companies in my immediate market, on the assumption that they may have the opportunity to buy me out in the future, should I decide to exit. Here are the "rough" (but close) figures as of today: (numbers are consistent for the past three years.) Gross Annual Sales: $150K Gross Net Profit (before tax): $35K Secured/Unsecured Liabilities: $0 Equipment: (No value of sale is being attributed. For sale at market pricing) Annual Deck Maintenance Accts.: $65K Here's the wild card. We secure a four year, annual deck maintenance contract for each deck client we service after the initial restoration. We go back each spring and clean the deck, and apply a maintenance coat on the horizontals. We receive a fee for this service each season. The total number of decks at the end of this season will be over 200. The attrition rate each season is less than 10%. Clients that have reached the maturity of the contract this year are "clammering" to know how to continue the program. A program is in place for them to continue 1 - 3 or 5 years. Unlike some of the other threads I've seen that involve mostly commercial accounts for sale, I have a "guaranteed" continuing sales oppportunity for a potential buyer. My plan would be to commit to providing a transition strategy, ensuring the highest percentage of contracts transferred to the buyer. What I'm trying to convey is that I don't just have a large client list for sale. But rather, a sizeable list of "contracted", active clients over a period of years. I realize there are variables, but could really use some input as to what a realistic expectation of asking price for my business should be. I can fill in the blanks as the thread continues. I look forward to some intelligent and business professional's advice. Thanks in advance.

Yes, good points. The transition strategy would include having new contracts signed for the new owner. We have 6 years of bank statements. All accounting is above board. I didn't include equipment value, as this is usually subjective to current market value sale prices, and potential buyers may or may not need it. That being said, and assuming I can get 90% of contracts transferred that will guarantee income over the following 4 years, can anyone offer input as to the range of business value?

Ken, do you get much objection to this "moving fee"? I've thought of adding this to my proposals for those HO's that "forget" to clear the area. It obviously adds time, and liability if something gets broke. I am going to start putting a "disclaimer" in my proposals that states if we have to move something after sufficient notice that we were going to arrive, we are not responsible for damaged property. Last year one of my guys broke a glass top, patio end table and it cost me $95 to replace the glass & two trips to the glass store. We also overlook the extra work in moving for elderly or "last minute" scheduling.

I sense some cynicism here?! Sure, there is a certain amount of "extra" movement or work that's typical with any wash job, and may or may not be part of the "norm" for a particular contractor. Thus, they may not charge extra for that. I can only speak for our pricing structure. I take into account extreme or difficult grades & approaches to the structure which will slow me down. Heavily obstructed foliage areas, ladder work, equipment movement, etc. are also noted when I view the job. I have created seperate excel spreadsheets specific to the type of work we're bidding. Siding cleaning, flatwork and deck work. Dimensions are keyed in and the formulas figure out chems, labor, etc. If there are price add ons for ladder work, obstructions, etc., I estimate time involved and enter it as an added price. The customer never sees this, so it doesn't come up as an issue. I will, however, note the circumstance that is adding some additonal labor cost on our proposal, without actually disclosing the actual price impact. Works for us. Time is money. If it's going to create extra time that is out of your ordinary bidding process, you gotta' charge for it.

I know most of you guys have been in the business a lot longer than I have, and every market demands different approaches. However, business is business. Bills & payroll continue. Many of the states you operate in require home improvement licenses just to do deck refinishing. That makes you contractors. Why wouldn't you demand down payments to at least cover your material costs? Your cash flow has to suffer by not doing that. Especially at start up of the season. For those of you that don't ask for down payments, do you at least require contracts? IMO that is the least you would want to start a job! I can only speak for my market as to what might work and what won't. Perhaps certain markets are so convoluted with "less than professional" PW's that your clients are accustomed to "less than professional" approaches. My suggestion......dare to be better!! If you can survive the cash flow crunch at the start up of deck season by not asking for down payments, and waiting for payment 'til you're done with the work....more power to ya'. If it's biting you in the a**, rethink it! Have a GREAT Memorial Day weekend. Thanks to all Veterans!!!

Every job, no matter the price, is contracted. 15% deposit (minimum $50) with contract. 50% of balance due after restoration. Remaining balance due after finish coating. On siding cleaning, flatwork or other PW, balance due upon completion of job. Commercial work is 25% deposit with contract. If it's a large job $5K - $10K+, we usually work out partial payments through duration of job, with final payment net-10 days after completion. Have NEVER had anyone balk at deposits or contracts. Our terms allow for better cash flow management, which is one thing I like about residential work. Here's another cash flow plan we tried this season. We do annual deck maintenance on a 5-year contract with our deck clients, collecting a fee each spring when we perform the maintenance. We had roughly 200 clients set for this spring's maintenance. When we sent out notices in March, we informed we were raising the fee 5%, as allowed in our contract, to cover rising costs. We gave each client the option of pre-paying the annual fee, thus waiving the 5% increase and placing them on the "priority" schedule. We figured a "few" would take this option. 25% of the clients opted for pre-pay, giving us a HUGE cash flow boost through April. That helped greatly for early season purchases and repairs. Of course, there was a cash flow "hiccup" once we started doing the maintenance and putting out payroll. But we anticipated that and managed fine. CASH IS KING! Almost all contractors in other trades take deposits and payments during the work process. Why shouldn't PW contractors do the same?

Thanks Rick. Will look up at their site.

Ken or Rick, can you post a model # or description of the brush from ACR? We use to get good brushes from our local ACE made by Hoppy, but they've changed the style & vendor twice in the last two years and can't get the good brush we used to. Desperate for a new source as we're down to our last few. Thanks for your help. On occasion, we also use lamb's wool for tough to get in areas on complicated rail assemblies. Staining pads just do not work well on aged wood.

For siding cleaning of flatwork, we typically use the term "proper cleaning agent application", and include the instructions that all proper precautions will be taken to protect the home, foliage and surrounding, affected areas. Albeit, biodegradeable is a broad term, but this seems to quell their concerns as well. For deck work we use the term chemicals, and include the same "precautionary" language. Since we are on hundreds of properties annually, we use that example and pose the question, "would we ever be invited back, or be able to continue business if we were harming the property"? I don't know that I would recommend this particular action. Seems it could spark concern that doesn't need to be there. We keep a file folder of MSDS sheets for everything we use in our rigs, but have never had to pull one out to show a client. Might be more important in the states that have stricter eco-laws.?

Over the years I had kicked around doing on site pricing, but never felt it would be as productive. I spend, on average, 45 minutes with a residential prospect. I like to spend that face to face selling and educating the prospect. This is something my competition does not do, and gives me and edge when decision time comes. Detailed notes are always taken for reference. Aside from a more professional appearance when you send a formal bid, it allows me to incorporate more detail. Truth be told, I have a basic letter (proposal) for each service type, and it is personalized for that particular prospect. It allows me to re-detail the points I made at the site (specific process), and incorporate points that affect pricing (elevated deck, foliage obstruction, steep grading, etc.). I also include at least 5 - 6 local area residents we have as current clients for referral, and encourage them to call. I indicate I will phone them within a few days to follow up, and always do so. If our proposal is accepted, contracts are mailed and we provide a stamped envelope for them to return a contract copy & their 15% deposit. In sales theory, on site bids should give you a higher closing ratio if you ask for the sale and have strong closing techniques. My professional background & education is in sales & marketing, and my logic tells me this should work. However, it just doesn't seem the proper method for us, and our current process works. The most important element to our higher closing ratios is the face to face selling & education process while on site. Works for us. Closing ratios: Face to face; no competitive bid - 78% Face to face; competitive bids - 55% - 60% (our pricing is always higher) No face to face - 25% Your market will dictate what may possibly work in terms of sales & marketing techniques. Know what your strengths are and accentuate those. Know what your competition is doing, and differentiate. Hope that helps.

We have two enclosed trailer rigs (1 - 16'; 1 - 10'), both equipped with 3,800 psi, 5.5 GPM hot water skids. Each rig also has a 3,500 psi, 4.0 GPM cold water cart. The cold water carts are used the majority of the time for deck or siding work. Hot water skids for flatwork. If it's a large siding job & we go with 2 guys, we'll use each unit in the trailer for time efficiency. The one major benefit we see is that if something goes wrong with one of the rigs, there's a backup in the trailer. A pain if you have to switch over to the mounted skid in front of the house if doing the deck in back, but better than pulling off the job & having to go back. We started out with a hot water skid mounted in an E250, and a cold water cart packed in the van, but this didn't seem the best solution. If the van or the PW unit broke down, both were useless. And even if you pack a van carefully, there's still not enough room to avoid damage to equipment by stuff falling over and getting stepped on. We chose enclosed rigs partly because of our climate, but mostly to keep things covered & tidy. Also, having the ability to unhook the trailer if you have to run somewhere is a huge time saver. I will agree that trailers present a challenge getting into some areas, but you have to train properly for this. The longer the trailer, the easier to back up. We have a 10' trailer that we select for really tight, short clearance areas. As far as someone taking out intercoms in a drive thru (earlier post), that's just plain stupid! We will stick with enclosed trailer rigs. I'm actually watching out for a 20' trailer with a rear drop down door. More room to move around and pack a water tank if needed. Besides, the big trailers afford a nice rolling billboard.

Ken, excellent points as usual. You & I have spoke several times, and we have a similar business model & personality. I agree with the vehicle, advertising, equipment & inventory comments whole heartedly. One thing I would add is to try to negotiate better terms with your suppliers. We purchase much of our product from the local Sherwin Williams, and have negotiated good pricing structure and extended terms. Obviously this helps with cash flow, especially during season start up. To establish better pricing we gave them our yearly estimate of purchases, and they are making a bulk purchase and holding the inventory. This goes a long way in saving costs by avoiding in-house inventory levels. Plus, we know we don't have to wait for product when we need it. We have also raised our prices to offset fuel & material costs. Because our competitive pool is fairly small & there's no real "pricing standard", so most prospects don't know the difference. The one major concern I see in cost cutting is "free" estimates. While I have no intention of charging for an estimate, it still costs me a ton to drive my F250 diesel from house to house. While I'm usually proficient in "routing" my appointments, there's always the occasion where that's impossible. I am considering purchasing something more fuel efficient for this purpose. Equipment repairs & replacement are one of my biggest gripes. Last season we had few repair issues and our regular PM costs. This season, I'm already double last years' repair costs. My guys kinda' smirk at me when I bit*h about a $10 or $30 piece of equipment that gets wrecked due to negligence, or a $9 brush that's unusuable too soon because they didn't clean it properly. This is one area I'm determined to cut costs this season. We have a fairly dedicated staff, and we communicate our business goals with them (to a point), so they understand the complete vision. However, the cost of replacing tools & equipment still seems to escape them. I've considered payroll deducts for damage resulting from direct negligence. Beyond that, I'm not sure what to do. Creating efficiencies through improved process usually relates to direct cost savings. Like Ken, I too have a hard time turning over responsibilities to my staff, or taking advice from them. I have lately been inviting their suggestions about efficiencies, equipment, etc. more, and have had favorable results. It also gives them more ownership in the company and their tasks. We recently completed a large commercial interior cleaning, and things were going a bit slow. An employee offered a different process idea and things sped up greatly. What could have ended up as a 2 - 3 day run over in estimated manhours, resulted in just 1 day over the estimate. All in all, I don't see a large down turn in gross revenue for this year, and actually anticipate 30% growth. However, cost savings will be vital for acceptable profit levels. It doesnt' pay to increase sales 30% if there's no profit return. My .02 worth. Have a great year!

KC - That's a hoot! We use TWP almost exclusively, and Sherwin is our supplier. I'm always giving my S.W. rep a hard time about deckscapes, as I find it an inferior product compared to TWP. He just laughs and continues to send me my bills for the hundreds of gallons of TWP we consume each season. Here's an interesting point about TWP: When we had some issues with a different preservative we were using, I worked directly with the U.S. Forestry Lab & Research Dept. in Madison, WI who had completed extensive testing of different exterior wood finishes (preservatives, stains, oils, latex). Preservatives were the highest recommended finishes, with TWP being among the top recommended. The one thing about TWP is that it sometimes does not produce as rich a finish appearance unless you do a two coat, wet on wet application. You can't let it dry and reapply while performing the initial application. We do two coat for cedar siding, but only single coat for decks. As we have a five year program with an annual maintenance service for our deck clients, the single coat finish is not a problem. Participation of the annual maintenance is 97%, doing nearly 200 decks this spring. You never know what your competitors are going to say about you. Let your reputation speak for itself. I never get caught up in "bashing" my competition. I do, however, offer opinions on what seperates us from them, and may occasionally include bad experiences their past clients have had with them. Even with our pricing structure being higher than all our competition, we close a high percentage of prospects receiving multiple bids. We let our work and reputation do the selling. Good job on nailing the account KC!

While I don't buy into the "go green" credo that is pushed so heavily by the left wing liberals, I believe there's an advantage to using it in your marketing. Not they we pollute unneccesarily, but won't go out of our way to buy more expensive "green" product or equipment that doesn't add to my bottom line, or serve the customer as well. However, I think working in a line like "we'll un-green your property" (get rid of fungus) might get attention in an ad. Or simply "save some green" discount promotion. Either way, because everyone's so whacked out on going green, just mentioning "green" will get attention. We've been a completely "smoking allowed" company since our inception. But....we never leave a butt behind!

Absolutely!