Help me brainstorm buying a business...

Paul_VR6 said:

Robbie said:

With smart thermostats becoming ubiquitous, the house could just follow the occupants around and prioritize HVAC on that space only.

The thermostat is the easy part, it's the rest of the HVAC that's hard. It would need to be setup like a commercial building with a damper on every vent and a variable fan to deal with it. A little spendy for most for modest savings (likely)

SVRex I have a million questions about your intentions and goals, but the big things are:

Do you want to make THINGS or MONEY?

Do you want employees or are people a burden?

Do you want to work twice as much for a little now and maybe a big payout later?

You have a product/customer segment in mind? 

Retail sales, online only, mix?

How do you get customers? 

What do you have now (in your mind or assets) that are valuable to kickstart things?

I like your questions...

- I want to meet a need. I would be discontent with a money machine that produced nothing of value to the consumers, but I also have no interest in making stuff I don't earn decent profits from. 
- I love people, but too many are a burden. A team. Small group- perhaps a dozen employees (or partners).

- Don't mind working hard now for a bigger payout later. 

- I'm a fan of middle class hard working people- they are the kinda of customers I respect. I have also spent most of my life providing goods and services to wealthier people. I know how to handle them.  I also like businesses as customers.
- Definitely not online only, but must be able to grow to include an online component.  Healthy mix of retail and wholesale would be good. 
- I have always gotten customers through word of mouth. I want to buy a business with an existing customer base I can build on. 
- I have enough money and credit to get started. Creative vision, not afraid to take risks. 
 

Make more sense?
 

I'm reviving this thread because I've been looking at a different business, and value your feedback (both good and bad).

To update... the chrome plating business, and the cabinet door business did not pan out.  I've still been looking...

OK, so this one has been on my radar for a couple months.  I'm going to do a site visit this week.

The company is technically a cleaning company.  Started as a crime scene cleanup franchise.  That sounds weird- crime scene cleanup is an industry that cleans up locations after someone has died.  Not necessarily crimes.  But it means the company is trained and certified in various more technical cleaning aspects- mold remediation, bio cleanup, air and water quality testing, disinfecting, etc.  They are more than janitorial.

This company realized after a short while that the franchise fees were killing any opportunity for profits.  At the same time, they had an opportunity to begin doing cleanup and odd jobs on sets for the film industry in the ATL area.  They gave up crime scene cleanup, switched to film industry cleanup and odd jobs, and the profits went through the roof.  About $800K gross volume, $230K net cash flow.

They got entrenched in the film industry, and became a 24/7 odd jobs company for the film industry- set demo, set construction, deep cleaning sets before A-list actors show up, furniture moving and storage, light construction and painting, restoring locations after the shoot is complete- whatever odd jobs the production managers need to subcontract, they do it.  Small staff of trusted crew leaders, balance of the labor is subcontracted.  

The owner's wife got transferred to the Midwest, and his family moved.  He is running the company as an absentee owner and traveling back and forth.  They spent about a year positioning the company for a sale and maximizing all of it's assets and processes.  Sale price- $699K.

Then COVID happened.  Film industry shut down.  Income stream dropped to zero overnight. Owner cut to the bare bones, and has been burning through his cash reserves to keep it alive, waiting for things to "get back to normal" (whatever THAT means).

He's been sitting for 2 months with no revenue, but still needs to relocate.  No one is making offers on a business with no revenue (but I doubt he'd drop the price below about $500K).  Creative financing approaches and partnership options are ALL on the table.

Some film industry folks are predicting a log jam- when film industry businesses begin to reopen there will be a glut of backed up work.  Smaller studios are starting to open up now, and this has brought $150K worth of revenue to this cleaning company this month (perhaps a confirmation of the log jam beginning to break loose).

It occurs to me that the special trainings and certifications may make this company have an additional opportunity in COVID cleanup, or they could consider adding back more crime scene cleanup independently (without the franchise).  So, there are probably opportunities to grow... 

I have the cash to do this (I would borrow about 80%).  I need to put this money to work.  I will either buy a business, put it in traditional investment accounts,  or use it for a real estate investment purchase.  I also have a background in theatre and film (but no current contacts), and family in very significant positions in the film industry (though I won't ask them for favors).  I know how to work with subcontractors, and my family is in the ATL area, so I will probably retire there in the next 5-10 years.  GA is the state with the largest footprint in the film industry (including CA), and I don't think the entertainment industry is gonna go away (although no one knows what the new normal is)

Is this an opportunity, or do I need to get my head checked?

I think it's a fantastic opportunity !
 

I also have family in Alpharetta who runs a medium sized business (health sector) 

since you are borrowing 80%, thats 400$k? 
 

what tangible things does this owner have to command the $500k? Or is he selling the book of business and contacts ? How long has he been in business ? 
 

I would say you put 100k

a partner puts 100k 

finance 300k for 60 months. 
 

if net is $20,000 a month. Payment of $5,000

15k take home sounds like a winner to me 

In reply to mr2s2000elise :

The hard assets are probably about $150K.  Trucks, equipment, supplies, etc.  The balance of the evaluation had more to do with the soft assets- processes, certifications, contacts, revenue generation capability, good will, etc.

Business has only existed for 4 years.

If I considered a partnership in some form, I'd probably try to keep the current owner connected to it in some manner.  Delayed sale, consulting salary, ongoing ownership stake, etc.  I think some of the value may be tied to his personal contacts, and I'd like to figure out how to capture that and transfer it.

In reply to mr2s2000elise :

...and yes, the net is theoretically $20K per month.  But right now it is near zero.  That's the risk.

The film industry is not gonna come back in full force until insurance companies can write policies on film production.  That probably won't happen fully until there is a COVID vaccine, which could take a year or more.

But there will be a lot more buyers (and less chance to buy this business) when that happens.

I wouldn't do it at his $500k price.  There's no income right now and when/if/how much comes back is incredibly variable

most of the talk out here from the Film community is that things are not coming back for a long time , 

and a complete re-think  will need to be made to have 6ft clearance between everyone , 

Offer him $100K real money and 10-20% of the profits for a number of years .....

Or can you make your own clean-up company and hire a few of his guys ?

And talk with some of the local film guys and see what they think about this and if they have heard of this company .

Is he still paying the franchise. fee ?

I think the Covid cleanup is the booming business , not the film business.....

People want their business " cleaned up" ASAP so they can reopen  and make the customers feel safe , 

the add on is a big window sticker saying  ( cleaned weekly by SVreX ) and make it a once a week service......

Plan for the worst , hope for the best !

No.  Franchise is done.

I did say there is no current income.  However, that's technically not true.

For the coming month, he has $150K in revenue.  That's more than double the monthly revenue of the best months he has ever had in the past.

So, unpredictable...

That's without adding ANY COVID business to the mix.

In reply to californiamilleghia :

I hear you.  Your numbers would be fantastic.  But he's definitely not selling for that.

He'd rather keep it, and earn his $500K in 2 years worth of revenue generation (by his calculations).

SVreX (Forum Supporter) said:

I did say there is no current income.  However, that's technically not true.

For the coming month, he has $150K in revenue.  That's more than double the monthly revenue of the best months he has ever had in the past.

So, unpredictable...

That's without adding ANY COVID business to the mix.

$150 k revenue but how much profit ?

Here is how I see the Covid cleaning business , 

You have 24/7 service to put out the "fires" and get them back in business , 

And go full "Ghostbusters" with Hazmat suits etc , its really 90% for show  but it makes the customers look like you care about them and are doing everything to protect them , 

Then supply and service hand sanitizers and wiper etc  with a container to drop the wipes in that you exchange daily / weekly ,of course with the company name  , 

And give them a weekly / monthly cleaning service like the Pest control companies do.

This is going to be a big problem all across the country , what happens when  a workers gets sick ?  do you close the business or "Nuke" the area to kill off the virus , what will the other workers  and customers expect ?

"He'd rather keep it, and earn his $500K in 2 years worth of revenue generation (by his calculations)."   those numbers were in the past and  are  not valid now,,,,,,

I am just not sure what you are buying for $500k  if the film business is not there .....

Also how many of "His" workers will stay on in the hard times.....

Good Luck , lots of things to think about....

SVreX (Forum Supporter) said:

In reply to mr2s2000elise :

The hard assets are probably about $150K.  Trucks, equipment, supplies, etc.  The balance of the evaluation had more to do with the soft assets- processes, certifications, contacts, revenue generation capability, good will, etc.

Business has only existed for 4 years.

If I considered a partnership in some form, I'd probably try to keep the current owner connected to it in some manner.  Delayed sale, consulting salary, ongoing ownership stake, etc.  I think some of the value may be tied to his personal contacts, and I'd like to figure out how to capture that and transfer it.

The last 3 business we owned were all running business. Buy the business, build it, grow it. I prefer running business due to income stream. I don't want to start something from zero. 
 

reading your previous replies, especially to Pail above, I agree 100%. The client facing, dealing with wealthy people etc. 

thr last few business I have kept the old owner on for about 3-4 months. That was always helped. 
 

recently I have looked at some medical supply business as well - pretty good margins. 
 

if you could go on a partnership with this owner- May be good. Let him keep 20%. You/your partner take 80%. Run operations - he gets nice income for doing almost nothing. 
 

agree with your vaccine timeline. That said - as you mentioned - he is still getting some contracts from small studios now. 
 

maybe good idea to keep him in equity 

p.s. my cousin is a big studio CFO. I sent him a little info about this - to pick his brain. When he responds will forward 

In reply to californiamilleghia :

All good thoughts.  Thanks!

In reply to mr2s2000elise :

Excellent!

Let's keep talking...

Please call the business "The Wolf"

I can't advise on the financial/business aspect of things but I can spitball a name.

You can't count on the covid business. As soon as a vaccine shows up, it's gone. The money to be made in anything Covid related is now and the next few months. His numbers are based on revenue that is gone, he needs to reevaluate. If the $150k for the next month is all that's on the horizon, then it's really $150k for the next 6 months...

Your best bet is a graduated buyout, that way he has skin in the game as well. His current problem is the back to Atlanta travel, be the person that solves that part. 

Email from my cousin: 

"Very interesting but a few things to consider or dig into. I called a colleague today who works in production for his point of view too. Right now some things seem to be slowly opening up but no one knows when production will really ramp back up. And a lot of talent probably won’t want to travel anytime soon so the business might be running on low cash flow for a while. 

Has he shared any details on how much of his work is on exclusive contracts? So much of the business is based on relationships so would be helpful to get a sense of how many different studios or production companies he works with. 

Atlanta is an interesting market. They’ve had the tax credit for a while which is what really caused the industry there to grow. Probably a very low risk that the state repeals the production tax credit (like New Jersey did a few years ago) but something to factor in. Also every few years there are political flare ups with anti-LGBTQ or anti-abortion bills in Georgia and people in Hollywood threaten to boycott. 

Depending on how big the company gets and how much you get into other areas like lighting and set construction, you might have unionization risk too. 

Overall definitely intriguing. But as the last few years have been a boom for the production business I’d worry about how long a downturn could last."

In reply to mr2s2000elise :

Good stuff. Thanks. 

IMO, we are just starting to experience the need for/awareness of extreme cleaning measures.  I think that businesses with expertise in this area have a fantastic opportunity, one which will not diminish when a vaccine for this particular threat arrives.

As an example, I heard yesterday about the current extreme access-control protocols at a head office a friend consults for.  Basically, nobody goes in any more.  If you need something from your office, you phone ahead, get buzzed into an enclosed vestibule, show your ID through the glass, and somebody goes and gets what you need.  They track every movement the inside person makes beyond the lobby, and they test him or her every day.  I said this sounded a bit like overkill, and my friend said, "Yeah, but don't forget, there's a multi-million-dollar art collection in there.  When three people tested positive back when this all started, the facilities guys couldn't exactly walk around with a wetvac and some Lysol.  It was serious money to do that cleaning, and they don't want anybody to make them do it twice."

FWIW, that company, which operates globally, is thinking in terms of seeing normal business again in the third quarter of 2022.

In reply to Stealthtercel :

I very much agree with you. Things have changed permanently and irreversibly. 
 

We have no idea what the new protocols and procedures will be. But it's not going away. 

In reply to Stealthtercel :

And on the flip side of that is healthcare, which isn't tracking people's movements or testing people everyday.  I'm a dentist and there's no way for me to accomplish anything like that, which is also not mandated or even recommended by the CDC, ADA, OSHA, etc, etc.

That's an extreme example of what one company is doing...

In reply to docwyte :

I agree it's an extreme example, but everyone is gonna change in some way. 
 

Prior to 9/11, there was no Homeland Security. We didn't have TSA, or full body scans in airports. Now, it's normal.   And there are people on this board who have no memories of when we travelled "freely".

Will your business have an extreme response like that?  Probably not.  But your business WILL change too.  
 

We need to be looking for the "new normal".

Robot delivery service is the Next Big Thing  :)

This seems like a great opportunity. What help do you need? 

Healthcare has their own cleaning capabilities (unless they are really sketchy), but things like retail, commercial offices, strip malls, convention centers, sports, movie, and music venues, etc would probably be interested in some sort of post-covid "deep clean" before "returning to normal". As you know, it can be incredible how quickly an unused space falls into disrepair when it is empty and not being used. I bet there is a large opportunity in those spaces. 

It wouldn't be necessary of course, but rather a "luxury" thing for those who can afford it and think it is a worthwile value add to their customers/employees. 

In reply to Robbie (Forum Supporter) :

I'm not sure I agree about whether it's necessary or not...

There are gonna be businesses that say, "That's a luxury- we can't afford that". I suggest that they can't afford NOT to.

Winning back the confidence of consumers and customers is gonna take a LOT of effort. Businesses are gonna have to work at it, and spend money at it.  Those that don't will not survive.

There will be a 2nd wave of COVID 19.  When there is, regulatory overseers are gonna step in and begin REQUIRING businesses to have assurances of their cleanliness.  It won't be optional.

I don't think COVID response and cleaning will be a luxury.  It will be a business necessity.

Having said that, I also don't think COVID response is a business unto itself, and it's not a business I want to be in.  It's a path through this mess for a company like this, and COVID response will continue to be a part of the fabric of what this company will have to do from here forward.

COVID jobs can help cash flow now.  Later when film industry work does start coming back, COVID deep cleaning and disinfecting will be part of what this company has to do on every movie set as a part of routine protocol.