Is it worth it?

[American_PW 14]

Hello everyone, my name is Jacob Sobotka, and I currently own a two machine pressure washing company name American Pressure Washing. I am looking to expand my company into the dairy industry washing milk barns (where they milk the cows) I was given the oppurtunity to buy an existing business that does strictly dairy industry. Now here is the part I need help with.

The possible business I am looking at buying comes with a 1999 F-250 4X4 Powerstroke single cab with a flatbed and an aluminum covering over the flatbed housing the equipment. On the flatbed is a pretty neatly designed unit, a 3 cylinder Kubota diesel with two general pumps that have two remote clutches on them. Two seperate coils, reels and guns. The pressure washing motor has 6000 hours on it and the pumps about half that. Now the current owner has 8-9 customers per month and he is making anywhere from $2500 to $3500 per month depending on amount of work of course. Everything seems to be in very nice shape, both the pickup and washer run great and have plenty of power. The truck alone Kelly Blue Book runs about $10,000 and the equipment, well I dont have a clue.

Now heres the catch, he wants $25,000 for the pickup, customers, and of course the pressure washer(s). Now my question, as men of expertise in the pressure washing industry, is this setup and customers worth the $25K? Thank you for all of your time and dedication,

Jacob Sobotka

American Pressure Washing

[PressurePros 249]

If you could answer some questions..

• Are the current customers under contract?

• Is the company owner operated?

• When you say the company "makes" $2500 to $3500 is that gross billing, gross profit or company net profit?

A company's net profit (also referred to as cash flow) on a $2500 billing is usually between $250-$750. (that does not include owner's salary). The equipment has a good amount of hours and to me is not worth much. If the company is owner operated, the value of its contracts falls even further.

[RPetry 564]

When it comes to $ and cents business, listen to Ken.

[American_PW 14]

If you could answer some questions..

• Are the current customers under contract?

• Is the company owner operated?

• When you say the company "makes" $2500 to $3500 is that gross billing, gross profit or company net profit?

A company's net profit (also referred to as cash flow) on a $2500 billing is usually between $250-$750. (that does not include owner's salary). The equipment has a good amount of hours and to me is not worth much. If the company is owner operated, the value of its contracts falls even further.

The current customers are bound to no contract what so ever, the company is owner operated, and the "makes" is gross profit

[PressurePros 249]

Here is how I would do a quick analysis of this company:

Gross profits of $25K per year.

Let's assume an annual net profit of 15% which is $3750.

With no contracts in place and allowing customer rescission for change of ownership its sketchy. I don't know the exact formula but I would subtract 50% of the net profit when making my calculation. Its hard to factor this stuff when a company is owner operated. The people may not like you as much as they did him, etc.

So now we have a number of $1900 per year in net profit. The formula I use when evaluating a business is to triple the net profit. So those accounts may be worth as much as $5700. That is even being a bit generous as again, no contracts, no guarantees.

Based upon everything you have written the truck is the company's one true asset. I don't know if I would go by the KBB for a value. You have to assess a value for quick sale. In other words what would a dealership give you to steal it from you. That's probably closer to ten thousand than it is fifteen.

25K seems a little ambitious but that is to be expected from an owner. If you could walk away with everything for $15K it may be a decent deal. Keep in mind a few things. I am not an accountant. I do not have access to his books to evaluate his true numbers. I don't know the true value of the truck. The machines are well worn and are not, in my opinion worth all that much.

Look for a multiple year history of this company doing the same numbers and achieving growth.

[RPetry 564]

Ken,

That is a real good analysis.

Jacob,

You may not want to take this tack, but it is possible. You state that you are already in the PW business. Do you currently have the equipment to service dairy barns? If so and there is downtime where the equipment is not being used, why purchase an additional PW and truck?

Maybe you could be a competitor instead of purchasing the operation.

[American_PW 14]

Ken,

That is a real good analysis.

Jacob,

You may not want to take this tack, but it is possible. You state that you are already in the PW business. Do you currently have the equipment to service dairy barns? If so and there is downtime where the equipment is not being used, why purchase an additional PW and truck?

Maybe you could be a competitor instead of purchasing the operation.

Rick,

I view this purchase as an open door into the dairy industry, I currently do only commercial and residential, and everyone knows APW for doing just that, not servicing the dairy industry. To me this is an oppurtunity to overtake one competitor and his name and slowly make it known that I run the operation.

Jacob

[RPetry 564]

Rick,

I view this purchase as an open door into the dairy industry, I currently do only commercial and residential, and everyone knows APW for doing just that, not servicing the dairy industry. To me this is an oppurtunity to overtake one competitor and his name and slowly make it known that I run the operation.

Jacob

Jacob,

No doubt purchasing the operation is a quicker and easier entry into a new market. Ken's figure of 15K seems somewhat reasonable, as long as you can keep servicing the existing customer base.

[American_PW 14]

Thank you for all of your advise and help guys, you're awesome, thanks again!