Build Value in Your Business

R

rit

New member
Hey guys, I'm not in the detailing business, but I thought I'd chime in. Have you ever thought about how to build more value in your businesses? In other words, how to move beyond just making an income to building a business that you can sell for a lot of money someday? The way to do that is through recurring ("annuity") revenue. You're in a unique position to do that, given that cars get dirty and need work over and over again.



I bet most of you have regular customers that call on you every two or three weeks for service. Some customers probably even ask you to come out on certain days each month. That's great and it's a terrific start, but what if you could turn that into some kind of written agreement? Offer, say, a "SuperDuraShine" service for xx dollars per month, and cover a certain number of washes or a maintain a certain level of detail for that fixed monthly price. Now you've got a documented revenue stream that you can literally take to the bank to help pay for tools, supplies, employees, expansion, whatever. And if you ever get tired of being in the detail business, you can sell your business for some multiple of your "contract" revenues. That annuity revenue stream is worth a TON more than a customer list when it comes time to sell.



Anyway, just a thought. I'm in the services business, and this is what I'm always working towards in my own company. My goal is to have all my monthly expenses covered by contracts / agreements each month, so anything extra (special projects, product sales, etc.) is just icing on the cake. And if I get tired of it and want out, I've got something tangible that I can sell.
 
I completely agree. I always try to give quality work my customers cannot do without. I think that is the key, to make your services indispensible to your customers. Not only is it good for repeat business but down the road when you retire and sell the business.
 
Scottwax said:
I completely agree. I always try to give quality work my customers cannot do without. I think that is the key, to make your services indispensible to your customers. Not only is it good for repeat business but down the road when you retire and sell the business.
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Agreed. If you can't be replaced then you're doing it right!
 
Contracts and agreements are nice but they aren’t where the value is, they’re structures for organizing the value stream. The value is in the services you provide to your customers. The “annuity revenue� is only as extensive as your customers are willing to continue supporting, which should be plenty if you (or whoever you sell the biz to) continue to provide exceptional value to them.



A detailing contract is hardly like a mortgage or some other secured annuity. If your hypothetical buyer starts giving bad service the customers will stop paying regardless of the contract. Is a detailer really going to take a client to court to force them to continue to pay for crappy service? Will they hand it over to a collection agency to repossess the shine on the car?



Any business that has a proven, ongoing value stream is saleable, all the more so if the structure is efficient and clear enough to be handed over to a new owner. If you really want to sell your business for "a lot of money someday" it needs to grow to a high value or at least have a demonstrated growth mechanism.



As a craftsman your growth is limited by the number of hours in a day. Your business can become quite successful and I’m sure it would sell for a reasonable price. To grow huge you’d need move beyond what a single human being can accomplish. That means bringing on employees, training them to service your customers and organizing the business in a way that’s sustainable and scaleable.





PC.
 
Another way to create recurring revenue is to give your customers an opportunity to buy yearly maintenance plans. Imagine having that kind of revenue streaming in at the beginning of each calendar year. That would also add more net worth to your customer list.



rit, thanks for taking the time to post your thoughts. It is always good to see things from a different point of view. Makes a person stop and think about the way they operate their business. Thanks again!
 
mirrorfinishman said:
Another way to create recurring revenue is to give your customers an opportunity to buy yearly maintenance plans. Imagine having that kind of revenue streaming in at the beginning of each calendar year. That would also add more net worth to your customer list.
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How has this worked for you? What percentage of your customer base buys a yearly maintenance plan?
 
Michael,



The yearly maintenance plans would be priced at about 50% above your usual hourly rate. For example, if your hourly rate for regular retail customers is based on making $50 per hour, then you would add another $25 per hour on top of that so that all contract work ends up bringing in $75 per hour.



Most detailers would probably go with offering discount pricing simply because the customers are signing on for mulitple detailings. By going with lower prices per detail, you would be leaving money on the table. Rather than offering discounts for yearly maintenance plans, you would be much smarter to offer the contracts at a premium.
 
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