Weed-Smoking "Detailer"

G

GTFreddy

New member
So, there's this guy down the street from my mechanic that has a "detailing place." I'm interested in starting up a formal detailing business, so I thought I'd drop down and see if he'd be willing to sell his business.



I get in there and the guy's clearly smoking weed while he's washing a rusted civic with the crummiest looking yellow peanut sponge I've ever seen. I go up to him and we start talking about his business and he says that he wants $50,000 for it. MINIMUM.



Now he gives me the price break-down and this has got to be the funniest thing I've ever heard.



HOIST = $10,000 (that's ok with me, it's a nice one).

1 yr. of RENT = $12,000 (He pays rent not collect it, why he thinks an expense is an asset is beyond me; like I mentioned he was smoking weed).

Assortment of PEANUT SPONGES, OTC products, and $10 dollar carwash clientel = $28,000?!?!?!



So, then I say to him (just for ***** and giggles) so if I handed you a cheque for $35,000 dollars and took over your business you wouldn't take it? He says no. Ah well, more power to him. He's one of those low-level handwash places with those $40 dollar full details and the $10 dollar handwashes.



I guess I'll continue looking for another place and start up my own business once I find a suitable location.



Wish me luck.
 
Oh and another thing, I was thinking of having someone with me to do tints, alarms, rust-proofing and such, do any professional detailers here incorporate that into their businesses?
 
im glad you can differentiate between an asset and expense. Lots of people cant. The only thing i could think of is if its a prepaid expense. Meaning he pays a years rent at the start of the year (some places will make you do this). The rent then becomes a prepaid expense moving it to the asset sextion.. but hey you just never know
 
There is a formula to buy a business.



6% of his documented yearly sales is a generous point to start at. I am sure this clown has no documentation nor can prove a client list. I am slo sure this fool isnt competent enough to understand what a non-compete is and why he will have to sign one before you pay him.



Wait for him to go under, then rent the spot if you think it is in such a KEY location that it will drive your business.
 
I'd pass on that location even if he goes under all on his own, he probably has a terrrible reputation and you don't want to be associated with that by virture of the same location.
 
From what I can tell, it isn't prepaid rent. My mechanic is in the same type of building - owned by the same company and he pays monthly. What surprised me the most was the fact that even if I were to offer say $45,000 dollars (which is way over what I think the true value of the business is, he still wouldn't take it).



Part of his rationale was that he had a certain amount of revenues in a year, so he should therefore make more than this. He kept on saying "I can make that in a year, why would I sell for that amount." Yet he doesn't realize that he isn't doing any of the work, and he shouldn't be expecting me to pay a years worth of revenues when the true value of the business is much less.



From the times that I have passed there, I have never seen anyone in there for more than a $10 wash, so I don't see where these high revenues are coming from. This guy is literally low budget. The place is dirty as hell, and he washes cars without a shirt and with a joint in his ear. I have no idea how he's been able to stay in business for this long.



If I went into business in the area though I don't think I'd compete with him as I'd be targetting higher-end work as 99.9% of the people on this site do.



Thanks for the input guys, anymore tips?
 
That's true, his business name is associated with "cheap", but if he is able to pay rent, he has enough clientel to support this, with me being new, I'd have to establish this first.



Unlike you ScottWax, I can't do home details in the winter because I live in Canada and we all know how cold it gets here. So I'm trying to find a way to balance both having a rental location, creating a clientel base - (or purchasing an existing one, the original idea), and having a good reputation, but I guess the reputation comes with time.
 
qballjr13 said:
Maybe he has a side business in the back that you dont know about???
Click to expand...



OHHHHH ! You beat me to it :hmph:



Shoulda let him light a few more, and then made him "sign a contract". Could have turned into a real bargain ;)
 
GTFreddy said:
Unlike you ScottWax, I can't do home details in the winter because I live in Canada and we all know how cold it gets here. So I'm trying to find a way to balance both having a rental location, creating a clientel base - (or purchasing an existing one, the original idea), and having a good reputation, but I guess the reputation comes with time.
Click to expand...



I understand but I'd still look elsewhere for a shop. Odds are his level of clientel isn't what you'd want to take on. He was washing a rusted out Civic, is that really the type of business you want to attract or retain?



Obviously, you need a shop that you can afford while you build your reputation but I'd keep looking in this case.
 
qballjr13 said:
Maybe he has a side business in the back that you dont know about???
Click to expand...



Once or twice a year, fixed location detail shops get busted for drugs in the Dallas area. The detailing is just a front for their real business but it gives an excuse to have cars coming and going all the time.
 
GTFreddy said:
Part of his rationale was that he had a certain amount of revenues in a year, so he should therefore make more than this. He kept on saying "I can make that in a year, why would I sell for that amount." Yet he doesn't realize that he isn't doing any of the work, and he shouldn't be expecting me to pay a years worth of revenues when the true value of the business is much less.
Click to expand...



Actually, Freddy, he may have a point. I'm not in the detail business, but I do work in mergers an acquisitions. A company is valued on future earnings, not just the stuff in the building. Mind you, it's PROFIT, not just revenue. If he's pulling in $50K a year in profits, and he wants to sell it to you for $50K, I'd say it's actually a steal.



That said, I agreed that you wouldn't want his crappy clients, and the value of those clients is what you're paying a premium on, right? I mean that's really the main difference between buying a place and starting it from scratch.
 
Scottwax said:
Once or twice a year, fixed location detail shops get busted for drugs in the Dallas area. The detailing is just a front for their real business but it gives an excuse to have cars coming and going all the time.
Click to expand...



Damn-that's a good idea! :)
 
jsatek said:
There is a formula to buy a business.



6% of his documented yearly sales is a generous point to start at.
Click to expand...



You're way off on your calculations. 6% would be an insult to even start from.
 
clipperfan said:
A company is valued on future earnings, not just the stuff in the building. Mind you, it's PROFIT, not just revenue. If he's pulling in $50K a year in profits, and he wants to sell it to you for $50K, I'd say it's actually a steal.



That said, I agreed that you wouldn't want his crappy clients, and the value of those clients is what you're paying a premium on, right? I mean that's really the main difference between buying a place and starting it from scratch.
Click to expand...



If a detail business has equipment, tools and supplies, that does add value to the sales price of the business. I also agree that $50,000 is a good price to start from. You need to look at the books, watch the operations of the business and decide if it's right for you. If this place is doing well with the current image and clientel, it will only improve. You really have to sit down and forecast the costs and risk of starting up a detail business from scratch. It's alot harder than you may think. If you already have a steady flow of income and decent employees that more than 1/2 the battle. I bought my business this way from a person that didn't know what he was doing and increased it's sales 400% after 6 years and then sold it for 5 times what I paid for it. I don't think I could have been that sucessful starting from scratch. Go for it!!!
 
clipperfan said:
Actually, Freddy, he may have a point. I'm not in the detail business, but I do work in mergers an acquisitions. A company is valued on future earnings, not just the stuff in the building. Mind you, it's PROFIT, not just revenue. If he's pulling in $50K a year in profits, and he wants to sell it to you for $50K, I'd say it's actually a steal.



That said, I agreed that you wouldn't want his crappy clients, and the value of those clients is what you're paying a premium on, right? I mean that's really the main difference between buying a place and starting it from scratch.
Click to expand...



I understand what you're saying here, the clients do indeed have a value, however, in this case his revenues we can say come up to $50,000 dollars, not $50,000 profit. So he's clientel brings him $50,000 let's say (although I'd wager this is an inflated number on his behalf), that's really the only thing of value in his business.



The detailing supplies he has are substandard to say the least and the only thing of interest is the hoist. So given this, I don't think the business is worth that amount because of the $50,000 revenue, he still has to pay for rent and for various other things such as products and overhead.



Essentially it comes down to this, I want to open up a shop, but I need a client base to support the costs. That's the only reason I'd be interested in purchasing an existing business, starting for scratch seems like a daunting task and being 23 with lack of experience doesn't help either.:o
 
I know that I would be able to supply a better service to the customers than he currently does, but I think its a moot point as his client is, as I've mentioned very low budget, and I'd want to offer better services.
 
GTFreddy said:
in this case his revenues we can say come up to $50,000 dollars, not $50,000 profit. So he's clientel brings him $50,000 let's say (although I'd wager this is an inflated number on his behalf), that's really the only thing of value in his business.
Click to expand...



How sure are you that he only grosses $50K a year? That's only $1000 per week! Is he a one man show? It's not a smart purchase if the business only has sales of $50K. It's a really smart purchase if it profits anywhere close to $50K. You could have your debt paid back really in a quick time frame.
 
You must log in or register to reply here.
Back
Top