How can you value a small plumbing and heating business?

[jase158]

I would love to sell my business, live too far away though, I would sell for last years turnover, would get me debt clear would work for someone for a year and get ready to start again!! so much I would do different

 

[woodsy]

I think a close look at the books for possibly upto 5 years would be essential.I think I heard a quote that Turnover was vanity,Profit (Net ) was sanity.

I agree with the quote but i think most of us are hanging on to the first as the second one, profit is a myth and only in Fairy stories.

 

[A1P]

I live on the edge of Bradford , Leeds & Kirklees - 1/2 mile either way and i'm in one or the other. I think you are very optimistic if you believe there is only 20 plumbers within a 2 mile area round here. I agree with many of the comments that i personally wouldn't buy a one man business as the majority of there customers will be affiliated to the particular person of the business and you would basically be buying goodwill, of which there is little about. In my opinion its just a case of keeping his head down and building his own customers, not expecting it overnite.

We live in Bradford 6 and I am going on the number who advertise in the local area free magazine so probably a few more.It is not a matter of wanting anything overnight,7 years is hardly that.The point is advertising is expensive and far too many competitors.We have tried all the suggestions on the Forum but basically it has been from scratch via referrals.Our local Free Paper had a feature advert this week for The Inexpensive Plumber-Hourly rates from £5 no wonder things can get desperate.I still believe there is some mileage in adding another business or forming a partnership but as you can see from my posts I am not going to be throwing money around and whether a seller would accept all my 'safeguards'mentioned in posts above, I am not sure.

 

[Ray Stafford]

A wise old gent once told me "There is no such thing as a customer list. What you have in your hand is a list of people who bought stuff off you LAST month."

I would be very wary of buying a domestic plumbing business for all the reasons other posters have listed.

A commercial business with existing contracts, or even a service company with a large number of boiler services on the books might be worth something, but in the latter case, be sure to check how many actual services were generated by the database. Its one thing to know when a boiler needs servicing, its another matter entirely to persuade the householder to pay for it.

 

[nicro3]

I agree with Thompson on this one, a good business man will do well in any field. A good plumber is good at plumbing..

 

[A1P]

A wise old gent once told me "There is no such thing as a customer list. What you have in your hand is a list of people who bought stuff off you LAST month."

I would be very wary of buying a domestic plumbing business for all the reasons other posters have listed.

A commercial business with existing contracts, or even a service company with a large number of boiler services on the books might be worth something, but in the latter case, be sure to check how many actual services were generated by the database. Its one thing to know when a boiler needs servicing, its another matter entirely to persuade the householder to pay for it.

Excellent quote Ray which somes up the warnings about value of customers/goodwill.Your comments re-boiler services are also spot on.We have customers who have chosen boilers with 5 year guarantees where it was explained that annual services were required to maintain the guarantee.They still have to be persuaded to have them done.
I rang a very well known business seller who have been around 50+ years Ernest Wilson.I posed the question 'What is a 1 man plumbing business with a good turnover of at least 50k worth?'The reply, nothing more than the value of van and tools.In the best case scenario it might make enough on the goodwill to cover our costs.Basically the owner is the business.The only way that both sides might make something would be for the owner to remain involved to some extent and in return receive a percentage of profits over 1 or more years.The only firms that have value are on a larger scale,employees,large contracts,premises etc.

 

[Plum Bob 66]

I think a close look at the books for possibly upto 5 years would be essential.I think I heard a quote that Turnover was vanity,Profit (Net ) was sanity.

I agree with the quote but i think most of us are hanging on to the first as the second one, profit is a myth and only in Fairy stories.

Profit = reality , and yes we probably are !