Advice on selling my business please

[DTLMTOT10]

Hi!

Newbie here so please bear with me if I've posted in the wrong place.

I've read the very useful guide on here about how to sell a business but would just like a bit more advice please.

Bit of background - I'm the joint owner of a Ltd cleaning business that's been operating for 10 years (it was incorporated in 2015). The other owner is my girlfriend, and we're relocating over 100 miles away at some point in the next 12 months so want to sell it asap (the sooner we sell, the sooner we move).

In addition, we are just exhausted - my partner works FT elsewhere (she does the invoices and wages for the business on evenings and weekends), and I'm dealing with the sudden loss of my mum and a daughter with mental health difficulties, so we've nothing much left in the tank. We even considered insolvency but after 10 years of hard graft we want to try and get at least something for our efforts.

It's got 11 part time staff at present (2 more soon to start).

It's got a catchy memorable name, well known in the local area, there's tons of scope to grow it as it's always operated on a word of mouth basis so far. We do have a website, FB and Instagram pages but they aren't updated often due to lack of time.

We want to sell it with the staff in place (they are mostly a good reliable bunch and I wouldn't want to make them redundant). We don't have a business premises so there's no overheads there, it's all run from home, but we do have lots of stock (value unsure) and a signwritten 63 plate van to include as well (worth about 3K apparently).

The problem?

We've never made a huge profit (if any) over the years, it's just kind of ticked over. We always intended to grow the client base but I personally am involved in the day to day cleaning as well as sorting the rotas, staff queries, client queries etc and just never found the time.
We charge £15ph (the going rate in the area) and the staff get £9 ph, so you can work out the small amount of profits once stock, holiday pay, insurance etc etc is taken into account.

But we had to take a BBL out to survive and there's about 17K left on there at present. However, since reopening after lockdown number 781 we've gained many new clients and do now have a small waiting list, so there is scope to make this very profitable and shift the debt quickly.

The turnover is around 75-80K (so we're not vat reg). But the annual wage bill is about 60-65K.

I know there are 2 possible options with selling it - either at a low price inc the debts, or a higher price and deduct the debt but we aren't very business minded (we have accountants for the main stuff and have just kind of winged the rest of it thanks to this page and others like it ?) so haven't a clue about what's best, or how much it's worth etc.

I just don't know where to start - I know we need professional advice but haven't a clue what to look for or what questions to ask the right person so we don't get ripped off. Of course I've googled, but it's such a minefield of possible rogues and bad advice!

Apologies in advance for any numpty questions or things I've asked or said! Thank you

 

[simon field]

Hi!

Newbie here so please bear with me if I've posted in the wrong place.

I've read the very useful guide on here about how to sell a business but would just like a bit more advice please.

Bit of background - I'm the joint owner of a Ltd cleaning business that's been operating for 10 years (it was incorporated in 2015). The other owner is my girlfriend, and we're relocating over 100 miles away at some point in the next 12 months so want to sell it asap (the sooner we sell, the sooner we move).

In addition, we are just exhausted - my partner works FT elsewhere (she does the invoices and wages for the business on evenings and weekends), and I'm dealing with the sudden loss of my mum and a daughter with mental health difficulties, so we've nothing much left in the tank. We even considered insolvency but after 10 years of hard graft we want to try and get at least something for our efforts.

It's got 11 part time staff at present (2 more soon to start).

It's got a catchy memorable name, well known in the local area, there's tons of scope to grow it as it's always operated on a word of mouth basis so far. We do have a website, FB and Instagram pages but they aren't updated often due to lack of time.

We want to sell it with the staff in place (they are mostly a good reliable bunch and I wouldn't want to make them redundant). We don't have a business premises so there's no overheads there, it's all run from home, but we do have lots of stock (value unsure) and a signwritten 63 plate van to include as well (worth about 3K apparently).

The problem?

We've never made a huge profit (if any) over the years, it's just kind of ticked over. We always intended to grow the client base but I personally am involved in the day to day cleaning as well as sorting the rotas, staff queries, client queries etc and just never found the time.
We charge £15ph (the going rate in the area) and the staff get £9 ph, so you can work out the small amount of profits once stock, holiday pay, insurance etc etc is taken into account.

But we had to take a BBL out to survive and there's about 17K left on there at present. However, since reopening after lockdown number 781 we've gained many new clients and do now have a small waiting list, so there is scope to make this very profitable and shift the debt quickly.

The turnover is around 75-80K (so we're not vat reg). But the annual wage bill is about 60-65K.

I know there are 2 possible options with selling it - either at a low price inc the debts, or a higher price and deduct the debt but we aren't very business minded (we have accountants for the main stuff and have just kind of winged the rest of it thanks to this page and others like it ?) so haven't a clue about what's best, or how much it's worth etc.

I just don't know where to start - I know we need professional advice but haven't a clue what to look for or what questions to ask the right person so we don't get ripped off. Of course I've googled, but it's such a minefield of possible rogues and bad advice!

Apologies in advance for any numpty questions or things I've asked or said! Thank you

Friend, I’m sorry to say but that’s not a business. It’s a job.
No offence - I’m sure others will have their say.

Good luck in any case.

 

[BusterBloodvessel]

Sorry to be blunt, and this isn’t what you want to hear, but….you’ve nothing to sell.

Potential and the “opportunity to turn it around” are worth next to nothing. If it’s so easy to do, why haven’t you done it? Or why don’t you do that now over the next 6 months?

If you’re still cleaning day to day, then you’re selling somebody a job. Does the 60k wage bill include your own wage? If not, it’s even worse. Don’t forget all the unpaid work that your wife is doing.

I’d offer it to one of the people that works for you and see if they want to take it over. You might get them to give you 5 grand for the van and whatever cleaning stock you have.

Sorry if this isn’t what you want to hear but I just don’t feel there is any value in what you have to sell.

 

[iconic]

Hi!

Newbie here so please bear with me if I've posted in the wrong place.

I've read the very useful guide on here about how to sell a business but would just like a bit more advice please.

Bit of background - I'm the joint owner of a Ltd cleaning business that's been operating for 10 years (it was incorporated in 2015). The other owner is my girlfriend, and we're relocating over 100 miles away at some point in the next 12 months so want to sell it asap (the sooner we sell, the sooner we move).

In addition, we are just exhausted - my partner works FT elsewhere (she does the invoices and wages for the business on evenings and weekends), and I'm dealing with the sudden loss of my mum and a daughter with mental health difficulties, so we've nothing much left in the tank. We even considered insolvency but after 10 years of hard graft we want to try and get at least something for our efforts.

It's got 11 part time staff at present (2 more soon to start).

It's got a catchy memorable name, well known in the local area, there's tons of scope to grow it as it's always operated on a word of mouth basis so far. We do have a website, FB and Instagram pages but they aren't updated often due to lack of time.

We want to sell it with the staff in place (they are mostly a good reliable bunch and I wouldn't want to make them redundant). We don't have a business premises so there's no overheads there, it's all run from home, but we do have lots of stock (value unsure) and a signwritten 63 plate van to include as well (worth about 3K apparently).

The problem?

We've never made a huge profit (if any) over the years, it's just kind of ticked over. We always intended to grow the client base but I personally am involved in the day to day cleaning as well as sorting the rotas, staff queries, client queries etc and just never found the time.
We charge £15ph (the going rate in the area) and the staff get £9 ph, so you can work out the small amount of profits once stock, holiday pay, insurance etc etc is taken into account.

But we had to take a BBL out to survive and there's about 17K left on there at present. However, since reopening after lockdown number 781 we've gained many new clients and do now have a small waiting list, so there is scope to make this very profitable and shift the debt quickly.

The turnover is around 75-80K (so we're not vat reg). But the annual wage bill is about 60-65K.

I know there are 2 possible options with selling it - either at a low price inc the debts, or a higher price and deduct the debt but we aren't very business minded (we have accountants for the main stuff and have just kind of winged the rest of it thanks to this page and others like it ?) so haven't a clue about what's best, or how much it's worth etc.

I just don't know where to start - I know we need professional advice but haven't a clue what to look for or what questions to ask the right person so we don't get ripped off. Of course I've googled, but it's such a minefield of possible rogues and bad advice!

Apologies in advance for any numpty questions or things I've asked or said! Thank you

Hi. Whereabouts is the business located?

 

[simon field]

Hi. Whereabouts is the business located?

What difference does that make?

As above - it’s a job, not a well paid one at that, and a load of hassle.

 

[louisaposh]

When we were in your position in 2011, we sold the customer base to a competitor. That has far more worth in it than the whole company actually, I know it sounds crazy. We worked out a deal and transitioned the clients. Keeping the staff on would have to be the decision of the other company but it would make complete sense to them.

 

[pentel]

Keeping the staff on would have to be the decision of the other company but it would make complete sense to them.

TUPE

 

[Ian PES]

You have come to the wrong place to expect a sympathetic ear I'm afraid!

But that's a good thing because it will challenge you.

It seems to me that most of what has been said is probably correct but I am sympathetic to 15+ years of effort and I think the problem is that you just haven't enough business. It's the same business model for care workers basically: very low margins so you need loads of clients and carers and you have to watch costs. But you are not pushing at all and you just rely on word of mouth.

I think it's the wrong time to sell because you are on the back-foot. It would be much better to sell, say in a couple of years with a thriving enterprise (if possible).

I think its worth taking a gamble though. You aren't business minded you say, so employ someone who is. You have £17,000 capital: I would suggest that you employ a person in a sales role: someone who is very social-media savvy and very good at bringing in new work. Tell them they can have a 6 month contract and their job is to bring in at least enough work to cover the cost of employing them in 6 months. Your gross profit is £6 per hour of business so you need to have 2833 extra hours to cover £17,000. I work that out to be 109 hours a week which is 5.4 extra clients / staff if the staff are doing 20 hours a week. (You'd better check those numbers but can you see what i'm getting at?).

You will have to allocate a reasonable sum for advertising too. So you might have to borrow a bit.

If it works then the business could theoretically keep growing and then you could employ an office manager to relieve you both of the day to day admin and hassle.

Also if you had some full time workers might that make the admin more efficient? That is, its probably the same admin required for a full timer or part timer so more efficient to have 10 full timers than 20 part timers?

Hope that is helpful

 

[MBE2017]

Best of luck selling the business. Like others, I doubt it would fetch very much, but, there are plenty of people looking for a lifestyle type job business who like yourself are not necessarily business savvy.

The biggest problem IMO is the outstanding debt, and how much drawings you and your partner are taking. If you have both been paying yourselves reasonably, someone might be interested in buying a turnkey business rather than say a “franchise” and starting a fresh.

An established ten year old company might appeal to someone, but do not expect too much, or as a previous poster mentioned, selling your client list to a local competitor might be an even easier solution. Most companies would expect to have to outlay a minimum of say £50 per new client, possibly more, and you have the company name if you feel it is valuable.

 

[Ian PES]

Just to add...

Please don't be offended by the people here who say things like: "..Friend, I’m sorry to say but that’s not a business. It’s a job..." and "...Sorry to be blunt, and this isn’t what you want to hear, but….you’ve nothing to sell..." (they just love the opportunity to do that -its always been like that on this forum. I have been coming here occasionally since 2008 and am always shocked by the rough treatment of newcomers).

I think you have not made money because you did not understand the business model well. I have made the same error myself. Word of mouth and a small 'stable' of clients works for high margin businesses: accountants, garages, plumbers. For low margin operations you need a much higher number of customers. The maths is not too difficult: workout how many clients you would need to make this viable and then try and get those (as explained above).

I think that has been your error and you have just plodded on for a decade. But you do have a business it just needs to be fanned into life. And granted, right now you haven't got much to sell but the groundwork is there to build upon.

 

[simon field]

Just to add...

Please don't be offended by the people here who say things like: "..Friend, I’m sorry to say but that’s not a business. It’s a job..." and "...Sorry to be blunt, and this isn’t what you want to hear, but….you’ve nothing to sell..." (they just love the opportunity to do that -its always been like that on this forum. I have been coming here occasionally since 2008 and am always shocked by the rough treatment of newcomers).

I think you have not made money because you did not understand the business model well. I have made the same error myself. Word of mouth and a small 'stable' of clients works for high margin businesses: accountants, garages, plumbers. For low margin operations you need a much higher number of customers. The maths is not too difficult: workout how many clients you would need to make this viable and then try and get those (as explained above).

I think that has been your error and you have just plodded on for a decade. But you do have a business it just needs to be fanned into life. And granted, right now you haven't got much to sell but the groundwork is there to build upon.

The OP hasn’t been back since the initial injection of realism…

 

[Paul Kelly ICHYB]

Whatever you sell the business for probably wouldn't event service the BBL.

Why can't you move and manage the business remotely? 100 miles isn't physically that far and, as an owner you don't need to be there every day.

You say you have a waiting list, so get more cleaners. However, this will probably put you over the VAT threshold, so you will need to boost your sales by circa 15-20% to stand still if you chose not to raise your prices.

As you have staff, are they on PAYE and have you gone through the pensions procedures for them?

Does the wage bill include you and your wife? Based on your pricing, I would hope yes, but it wouldn't be a lot!

As a business, £80k turnover with £65k costs isn't that bad, however, due to your liabilities, the selling price would not be a lot!

BTW, where are you based?

 

[DTLMTOT10]

The OP is here, I was away last week, hence the lack of replies, nothing to do with the "injection of realism" as one of you said ?

I haven't the time to reply to all, but want to thank those of you for the useful advice, whether it be what I wanted to hear or not, and we will be meeting with someone Thursday next week to discuss matters in better detail.

 

[The Byre]

The turnover is around 75-80K (so we're not vat reg). But the annual wage bill is about 60-65K.

So £10k gross profit and £17k in debts.

Now let's imagine I buy this company and take it under the wing of my company. So now it has to be VAT registered and charge 20% more. Then I have to add accountancy fees and insurance and a wage for a manager/bookkeeper.

Friend, I’m sorry to say but that’s not a business. It’s a job.

I disagree profoundly - he's running himself and his GF ragged for next-to-nothing and now has that BBL to clear before anyone gets anything! If that's a job, then I am the Emperor of Abyssinia. I seem to remember vaguely having jobs in my distant past (sometime around 49BC, maybe earlier) and they always involved getting paid.

The people who work here at Byre Towers get paid. It's an arrangement that we have going and helps with getting stuff done!

 

[The Byre]

we will be meeting with someone Thursday next week to discuss matters in better detail.

Have a good read through these pages BEFORE any meeting - http://ukbusinessbrokers.com/gallery/

 

[BusterBloodvessel]

Just to add...

Please don't be offended by the people here who say things like: "..Friend, I’m sorry to say but that’s not a business. It’s a job..." and "...Sorry to be blunt, and this isn’t what you want to hear, but….you’ve nothing to sell..." (they just love the opportunity to do that -its always been like that on this forum. I have been coming here occasionally since 2008 and am always shocked by the rough treatment of newcomers).

I think you have not made money because you did not understand the business model well. I have made the same error myself. Word of mouth and a small 'stable' of clients works for high margin businesses: accountants, garages, plumbers. For low margin operations you need a much higher number of customers. The maths is not too difficult: workout how many clients you would need to make this viable and then try and get those (as explained above).

I think that has been your error and you have just plodded on for a decade. But you do have a business it just needs to be fanned into life. And granted, right now you haven't got much to sell but the groundwork is there to build upon.

I don't think it's so much "love the opportunity"...more that we have seen this scenario and question countless times and you very often have to be blunt to try and get people to understand - otherwise they just brush off any hint of a negative or even constructive criticism and will fixate on any minor positive they can find, or tell you why you're wrong and they're definitely right. Often because they've had a valuation from a business "broker" (which is probably who the OP has a meeting with next Thursday, incidentally).

 

[simon field]

The OP is here, I was away last week, hence the lack of replies, nothing to do with the "injection of realism" as one of you said ?

I haven't the time to reply to all, but want to thank those of you for the useful advice, whether it be what I wanted to hear or not, and we will be meeting with someone Thursday next week to discuss matters in better detail.

Ok, sorry if I’ve caused any offence. Many people come on here, ask one question and never return.

Let us know how much you get for it. Feedback is always good ?

 

[pentel]

Have a good read through these pages BEFORE any meeting - http://ukbusinessbrokers.com/gallery/

Definitely do this.

At your size your best bet is to approach potential buyers directly.

 

[Financial-Modeller]

A couple of thoughts...

You don't mention your other commitments, which suggests you're working full-time on this? If so, you're earning significantly less than your staff.

If doing one hour per week for each client, you have c.100 clients. If doing 10 hours per week per client, you have c.10 clients. It seems a shame if that level of invoicing is occupying your girlfriend for evenings and weekends? (plural)

I'm also confused - and any potential buyer would also ask - that there is a disconnect between:

...there's tons of scope to grow...

...We always intended to grow the client base...

...there is scope to make this very profitable...

but

...been operating for 10 years...

and haven't done any of the above. You will have a hard job convincing a buyer that they can make your business valuable but you haven't!

Without evidence of all that, nobody is going to pay anything for your business, so you have three options:

1. keep it and ask one of the staff to manage the others and hope that there are some future profits for you as full or partial owner
2. as @louisaposh and @BusterBloodvessel suggested, offer the company (or more likely customer list and stock) to staff and/or competitors and hope to realise some cash now
3. realise some of that potential and build the business into something valuable over the next year

If you decide to go for the third option, I'm sure many here could offer advice and guidance to help you grow.

 

[thetiger2015]

I don't think it's that complicated. I would just approach a competitor and sound out the value of the client list, stock/vehicle and pre-trained staff etc. Obviously, things like TUPE would come in to it but that's an issue either way you cut the cake.

It won't suit a one man band. No money in it but for expanding competitors, it may cost them less to buy your setup now than spend 6 months adding 11 part time staff individually.

Not everyone is a dragons den style investor. Some just like the idea of reducing local competition and nabbing their customers. It increases their turnover and gives them a warm fuzzy feeling.

What's the worst they can say? No. I guess.

 

[Talay]

The main problem is "the going rate" because if you're legitimate and they are PAYE, then you are making nothing. If they are disguised employees pretending to be self employed then you are operating illegally.

There is no business here. There isn't a job which pays a decent salary.

You need to get off the £15 per hour and start pricing per job which brings in about £20/25 per hour.

The only sale now is to a competitor or one of your staff for peanuts.

 

[The Byre]

The main problem is "the going rate" because if you're legitimate and they are PAYE, then you are making nothing. If they are disguised employees pretending to be self employed then you are operating illegally.

There was a time when housewives, students, the unemployed and other loose bodies could pick up some pin money by getting these types of jobs. All sorts of funny little borderline tasks like cleaning houses and pumping petrol and picking fruit and working in the Kentish hop fields and in the Lincolnshire wolds planting pigs - but for good or evil, them days is over!

Governments have made much casual labour more or less illegal. We can have long discussions about the socioeconomic effects of such labour laws as the minimum wage and conditions of employment, but them's the apples we have to bite into. Acting otherwise is definitely what Seven-of-Nine would describe as futile.

As for the company - it does not appear (judging by what has been written) to be in effect earning anything and has never done so. It also has liabilities of £17,000 so the net worth of the company is minus £17,000.

I fear that proving all those BBL to small companies was not a good idea as they now are saddled with debts that can never be repaid if staff and owners are to also be paid properly. My 30 cents worth would be to declare the company insolvent and close it.

And if the OP feels that running a business is his thing, then once he has moved house, he can start something else, but this time something profitable.

TIP - whatever that something is, the secret to running a successful business is to provide something to customers at a profit to yourself that is of great benefit to them.

Or as billionaire trader Rick Rule says "People will buy from you if the utility of the goods or services you provide is greater than the price they have to pay."

 

[WayneFoxuk]

Hi,
As with everything online you always get the armchair critics.

First, don't do what most people do and go to a business broker. They are a scam.

Second, with that amount of debt (BBL), you probably wont find a buyer willing to pay you any money at all. The 'value multiple' of a business that size, is no more than 1 times adjusted net profit, minus any debt.

Another couple of options, to free yourself from it:
1. Sell the contracts to another cleaning company. You could arrange the buyer pays you say 15% of order value for the next 12 months. The buyer would have to transfer the staff over via TUPE. You need to engage a HR consultant to do this on your side, it's your responsibility to make sure it's done properly, not the buyers.

2. Sell it / give it to your current staff. Again, you could work out some deal to pay you over something over the next 12 months. Bare in mind though, it's not actually worth anything with that debt on the balance sheet, so anything is a bonus.

3. Liquidation / Insolvency caution. If you choose to sell the contracts, if the business cannot repay the debt's, it would be considered insolvent, & taking any actions on your part such as selling the van, would leave you personally liable for that BBL debt. There is a strict process to go through with this.

4. Where is the business? and what sector are the clients? I know quite a few cleaning companies that would take it on like this, depending on location & sectors. Please email me your details & details of the business, and I'll put it out to my network [email protected]. Someone can help you get it done, though as I said, it will be removing the handcuffs, rather than giving you the key to the mansion.

 

[DTLMTOT10]

Again, thanks for the useful advice. I'll have more time to read everything and reply properly over the weekend.

 

[SillyBill]

A BBL loan of presumably £20k+ got offered here? The entire gross profit of the business is about £10k. Absolutely crazy situation. Wish OP good luck with it, just getting shot with low hassle is a good result.