Buying an Existing Business

[medicalguy]

Hello. I am looking into buying an existing cleaning business and am wondering what the best way to finance this would be. I don't want to have to put the house up for collateral but have no other choice. Also the only real issue with this business is that the owner wants to retire but has a partner. I would have to pay him off and then also keep both he and his partner on for a few years paying them a salary and benefits. Its a good business but will be tight for a few years. Does anyone have any advice. I appreciate any and all information. Thank you.

[logan5127]

I personally would never buy a business that came with a partner, little lone keep this guy on the payroll. My advice is start your own with no strings attached. Start small and work your way up. That way you will not have to mortgage the house. You will be in 100% control. If your not happy with it you can give it up without loosing everything. There is plenty on help here that can guide you into starting your own business. All you have to do is read and post questions. The rest is up to you.
I have had offers from people wanting to buy part of my business and be a partner. I say no way. I can see it now. Me out working while my so called partner is out playing golf saying he is doing PR work.

[rhapsodyvf]

I bought a Janitorial Service and Supply Company from someone several months ago and take it from someone who knows:

1) They are never ready to get out of the business no matter how much they say they are.

We bought the business from a 70 year old man that wanted to retire. When we were looking at the business he seemed like a sweet old man and made promises to help, teach, do whatever it took to make us successful. Then we signed the paperwork. Now he is just a money hungry pain in my ass that I wish would just go away but I can’t risk offending him because he is too well known in the community. Things have gotten better recently but I think he just had to learn that I wasn’t going to let him push me around. But hey I guess that’s just the kind of risk you take when you buy an established business.

2) The clients *don’t* like change.

They really don’t. When the supply clients that came in after we bought the business found out that the business had been sold 9 times out of 10 they turned around and walked out. We have just in the last couple of weeks done a ton of advertising and gotten some of the business back. However the majority of it has been new business. The clients in the buildings that we service were not happy either but they were easier to please because we to a top job. However we had just gotten them settled back into a routine and made ourselves known when the old owner went around stirring up trouble again. He really is a pain in my ass. I can’t imagine what would happen if I was paying him salary or had a partner. If I were you I would be running so far away from that situation you would never find me. It might not be that bad of a deal if they didn’t want to stay on but this way….you’re looking at a worse nightmare then I was.

3) The business is never doing as well as you think it is.

That’s why they call it due diligence. Do it. And remember: THE BUSINESS IS NEVER DOING AS WELL AS YOU THINK IT IS!!! Its really easy to fudge numbers to make things look better but the more digging you do the better off you are. Don’t try to rush to closing either should you decide to buy it. The faster you close the faster the headaches start. Do your research, do your checking, and get an awesome lawyer. I am serious about that: get an awesome lawyer. If you can’t afford to come up with enough money to totally run the business for the first 3 months on top of the money you are coming up with to buy the business then you need to walk away. Because remember The business is never doing as well as you think it is. Oh, yeah: get an awesome lawyer.


4) Buying a name isn’t always a good thing. You get the good and the bad, but mostly just the pain in the butt.

People call the name. However if your not the name then people don’t want to talk to you. Sad but true.



If you have any questions I would be happy to keep answering them. I just went through this like I said and I can walk you thought pretty much all the steps and tell you what to expect. In this case however my best advice is to run fast and hard the other way.

If I were you I would take the money that you would have used to buy into this business and start your own. But that’s just me looking back.

[Stephan]

Wow, great information. Very nice of you to honestly share your experience!

[rhapsodyvf]

oh trust me, i could write a book about my experiences! If anyone has any questions ask....I will do my best to answer.

[medicalguy]

Hello and Thank you. The deal fell through. After lengthy negotiations the $400 k revenue that he was grossing per year and netting about $180k would have gone to him and his partner for the next three years and until I built up the business more I would not have been able to make a salary other than the 15k for my monthly note payments. The accountant set up a sheet and all of the money would be going to him and his partner. I will start from scratch and build it up as you all have. Thank you again.

[Mike R.]

While we are on this subject...... Has anyone just sold 1 account or a couple of accounts? How does this work? How does it work with the client? I mean does the client have to APPROVE first or do they not even have to be notified? How is the account transfered? I have heard of this before but I do not know how it is done OR even if it really can be done... Any help would be great.

[medicalguy]

Hello. Thank you for all of your great advice. I need to update everyone on my progress or lack of progress. It has been a tremendous learning experience and I truly admire all of you that have started, worked hard and built successful businesses. I started going through brokers several months ago which yielded zip. The 4 existing companies that I looked at all had fatal flaws. They all thought that they were holding gold and once you really dove into their true financials this was not the case. Initially I thought to purchase an existing business to be able to have a ready made company and then I could do the sales portion of the business and grow it more. I did see however that none of these owners did any marketing. They sat on their butts and relied on existing business. This has prompted me to start up my own business and I would ask for any information that could be helpful regarding accounts and start up information. Paige had some great information which is appreciated. Thank you.

[americleanpro-kc]

I wish I would have found this site before hand. I closed a deal and purchased an existing commercial and residential cleaning business last week.

I hope that those issues don't happen to me. Part of our contract is a transitional introduction phase. The original owner has it set up where he and I go to a client's facility or home and I'm introduced as a new partner. He says it will help when he steps away the end of April and I take full control of everything. I thought about loosing clients when I considered this purchase, however I thought the offer by the seller was enough. Obviously, as I've purchased the business.

The existing structure has some really awesome policies that I think set it apart, the name recognition is well known - company name is trademarked. ( But it does have the word clean in it...still considering what do be done about that considering other information found on this board) They have a beautiful and professional brochure and flyer as well as doorknob hangers and other marketing materials.

Also, I know for a fact that this owner is ready to move on. Still....
this thread has tickled the worry wart in me... WOW! I guess I can only hope some of thees topics will not be so drastic with my situation.

Now I know to come to this board first ;D