(What is the “cocktail party” risk factor question?)
When I do a business valuation, I perform an objective risk analysis. The higher the risk, the lower the value. One of the risk factors is this:
Does the company offer a “rough or unpleasant service?”
I call this the “cocktail party” question. That is, at a party would a buyer proudly say he/she just bought a septic service company, as if it were a Tiffany’s jewelry store? The nationally-recognized risk analysis procedure says No, and it dings the assumed market value.
But people who know business understand that a well-run septic service company can be one of the best businesses around. After all, there is always demand, no?
So my septic service company owners just chuckle at that one. I do too, because I value companies on their proven ability to make strong and repeatable cash flows, among other virtues. How they do it is, well, how they do it.
You’ll need to request an NDA to find out just how good this well-run company is. Here’s what I mean by “well-run”: how would it be if you could determine what you did on a job 17 years ago? Who was the owner, what was the scope of work, what was the revenue? Would that help you in follow-up marketing. Darn right it would.
How many companies can pull up records like that? As a broker I can assure you—not many. It tells you just how tightly managed the operation is, and why it generates repeatable cash flow every year.
It doesn’t hurt to build a great community reputation at the same time. This helps explain the rising revenue trend. That plus having an excellent online presence and great testimonials.
So why is this successful business even available? In a word, retirement. After so many years, about 20 in this case, the owners have earned the opportunity to enjoy life and family in a new way.
GROWTH AND EXPANSION
Sure, they could continue growing the company. Expansion potential is very real, in that they are keeping two plumbing companies busy with work they turn away.
Many businesses talk vaguely about growth potential, but this company is already getting that business; it just doesn’t show up on their bottom line because they haven’t wanted to expand to that level. And yes, they are retiring. But the buyer can do this, almost by flipping a switch.
COMPETITION, BARRIERS TO ENTRY
Are there competitors? Sure, it would be scary if there weren’t any; it could mean that the market is weak. But in this case, there are no competitors that even come close to the level of performance that this well-equipped company provides.
Did I say well-equipped? That goes right to the question of “barriers to entry.” Why would you pay to buy this company if you could just set one up yourself? Sort of like a coffee kiosk, right? Anyone can do it, no?
Well for starters, there is the item called specialty equipment. This company has acquired hundreds of thousands of dollars in vehicles and specialty equipment (for example, in-pipe cameras) that puts it head and shoulders above the competition, and that creates a tremendous barrier to entry by any aspiring new competitor.
Some septic service companies are single-service oriented, just doing pumping. This company offers an array of related services, so the client is able address causes and get them fixed. This is a big advantage over the limited-service companies.
Check into it and you will agree; it’s much better to buy an established company than to spend a great deal of money trying to build one. Not to mention spending years of time to generate the repeatable customer list and dominant market presence that this opportunity presents.
RETURN ON INVESTMENT
If you are looking for a reliable business, wouldn’t it be nice to see a proven historical cash flow that equates to a more than 20% ROI? And that is without financing leverage. With SBA financing to a qualified buyer the projected return would be even greater.
There are businesses for sale online that appear to offer even greater returns; but be sure and look under the covers. Few of them can match the stability and growth potential that this one offers.
In a word, yes. And plenty of it. This husband and wife team really means it when they say they will provide on-site, hands-on support for the first month, and telephone / e-mail support for 3 months, all at no charge. After that, if you wish, they are willing to talk about additional support under contract.
REAL ESTATE AVAILABLE
Many businesses pay rent to a landlord. The landlord ends up owning the building and the related real property. In those cases, the landlord just won’t sell the real estate, and the business buyer has no choice. They are paying for the real estate, but just not getting it.
Wouldn’t it be better to have the rent expense go to building equity and providing for building ownership instead? SBA lenders sure think so, and they are happy to provide favorable financing to a business purchase that includes the real estate. Like a 25-year amortization instead of a 10-year loan.
That is the case here, with real estate available (a well-located shop and a remarkable Oregon ranch.) They both have the benefit of the business expenses contributing to owning the real estate.
Request information from Oregon-licensed broker Gary Richards. You will get a quick reply and a non-disclosure form, then a ton of confidential detailed information and an objective risk analysis, along with the valuation calculations.
The business operates out of a 2400 SF shop owned by the business owner. In addition, there is an operating process connected to another property that is owned by the business owner. The buyer will have flexibility. They can lease, buy, or move.
Yes, there is some normal competition, because the market demand is legitimate. However, this company is head and shoulders above the local competition, and this is well-known.
Growth & Expansion:
The company is primarily a septic service company. However, there is always related plumbing work involved. The owner has purposely referred this work out (to 2 plumbing companies) because he didn’t want to expand that much. But all it would take is hiring plumbers and performing the work that is requested virtually every day.
Support & Training:
The owner will provide on-site, hands-on support for the first month, and telephone / e-mail support for 3 months, all at no charge. After that, additional support under contract if the buyer wishes.
Reason for Selling:
Retirement after 20 years plus.
Licensed in Oregon