Don’t Do Yourself a Disservice: Consider Buying a Service Company!
April 5th, 2009
Service companies are high on the list of businesses I like to sell. Some can be capital intensive, like a limousine company with many vehicles. Others may have very little hard assets, like a business coaching service. They can have recurring revenue like alarm monitoring services, exterminating services, landscaping services, home cleaning services, etc. And, some may use independent contractors or employees.
If you are looking to buy a service business, here is some useful information to consider when determining which type of service business would best suit you.
With a limousine service, you normally have 3 ways to acquire vehicles. You can pay all cash, which is highly unlikely. You can finance. Or you can lease. A limousine service can specialize or be a general provider. If it specializes, it might just provide airport service from hotels, businesses, residences or pickup/drop off points to the airport and back. If it is full service, it may handle weddings, proms, bachelor and bachelorette parties, executive service, etc.
The important thing to remember is that the use of a limousine service is very discretionary. People do not need limousines. They want limousines for special situations or occasions. If the economy changes to the downside, the revenues of limousine companies can decrease. With an exterminating company, the service is also discretionary because a consumer or business can provide the service for themselves. But typically, an outside service is used for convenience.
With an alarm monitoring service, the service is typically not discretionary because the consumer or business owner wants to be protected. But, because the industry is very competitive with many choices and plans, the business is very price sensitive. And, there are many kinds of service offerings within this one category. You can have passive monitoring using telephone lines, or you can have cellular, cable, voip or interactive monitoring.
With a landscaping business, there is a more equal combination of equipment and labor necessary to handle customer needs. The normal equipment would include lawnmowers, edgers, trimmers and one or more vehicles and carriers for the mowers. Manual labor is a very large component of this type of business and therefore, supervision is of great importance.
With a home cleaning service, you have cleaning supplies, vacuum cleaners, etc. and one or more vehicles. This business is also very labor intensive and requires a high level of quality control to retain customers. A painting company can either use employees or independent contractors or a combination of both. Here also, quality control is critical for customer referrals and repeat business.
With a business coaching service, it is critical that the owner is not the business. Since buyers want to feel confident and comfortable that customers will not leave when the business changes hands, the owner must create a full organization and not have the business dependent on just him or her. There are other things that must be done, but that will be the subject of another blog!
Author’s note: After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.
Tags: Buy a Business, Buying a Business
Service companies are high on the list of businesses I like to sell. Some can be capital intensive, like a limousine company with many vehicles. Others may have very little hard assets, like a business coaching service. They can have recurring revenue like alarm monitoring services, exterminating services, landscaping services, home cleaning services, etc. And, some may use independent contractors or employees.
If you are looking to buy a service business, here is some useful information to consider when determining which type of service business would best suit you.
With a limousine service, you normally have 3 ways to acquire vehicles. You can pay all cash, which is highly unlikely. You can finance. Or you can lease. A limousine service can specialize or be a general provider. If it specializes, it might just provide airport service from hotels, businesses, residences or pickup/drop off points to the airport and back. If it is full service, it may handle weddings, proms, bachelor and bachelorette parties, executive service, etc.
The important thing to remember is that the use of a limousine service is very discretionary. People do not need limousines. They want limousines for special situations or occasions. If the economy changes to the downside, the revenues of limousine companies can decrease. With an exterminating company, the service is also discretionary because a consumer or business can provide the service for themselves. But typically, an outside service is used for convenience.
With an alarm monitoring service, the service is typically not discretionary because the consumer or business owner wants to be protected. But, because the industry is very competitive with many choices and plans, the business is very price sensitive. And, there are many kinds of service offerings within this one category. You can have passive monitoring using telephone lines, or you can have cellular, cable, voip or interactive monitoring.
With a landscaping business, there is a more equal combination of equipment and labor necessary to handle customer needs. The normal equipment would include lawnmowers, edgers, trimmers and one or more vehicles and carriers for the mowers. Manual labor is a very large component of this type of business and therefore, supervision is of great importance.
With a home cleaning service, you have cleaning supplies, vacuum cleaners, etc. and one or more vehicles. This business is also very labor intensive and requires a high level of quality control to retain customers. A painting company can either use employees or independent contractors or a combination of both. Here also, quality control is critical for customer referrals and repeat business.
With a business coaching service, it is critical that the owner is not the business. Since buyers want to feel confident and comfortable that customers will not leave when the business changes hands, the owner must create a full organization and not have the business dependent on just him or her. There are other things that must be done, but that will be the subject of another blog!
Author’s note: After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.
Tags: Buy a Business, Buying a Business
