Buying a cleaning business

dmo73av

Hi all,

A local cleaning business is for sale. The bulk of the business is commerical cleaning, offices, pubs etc.

They are asking £25k. The turnover is c.£70k. The costs look to be £30k a year, so i estimate £33k a year profit, £26.5k after corp tax.

Does anyone know of things to look out for?

Are there certain pieces of legislation or industry bodies to contact for more information?

Anyone have any experience of running such a company?

Does anyone have any information on the industry itself? Future market growth predictions?

Thanks
Dmo

superfly_2

Yo u need to mention what you are getting for the 25k, I assume transport of some sort, any machinary ?, tools?, are there staff involved? With regards to turnover, How many customers are contracted and how many goodwill.
There is a lot of competition in this market, with costs at 30k I would assume that staff are employed, what are the contracts like? does the company have a good reputation? Therre is a steady market for these services with many companies opting for outsourced cleaners as opposed to the costly inhouse option. If the books make good reading then go for it, speak to your buisnesslink or small business gateway for ideas on how to get it to take off
Good Luck
HTH

babiebeany

Hi - try this website:

https://www.cleanitup.co.uk

dmo73av

cheers folks

there is machinery, a van with carpet cleaner, but the carpet cleaner is rarely used.

the work is goodwill, with many officies been with the company for around 2 years or more. but no contracts.

there are 8 staff and they do bulk of the work.

from what i can tell the figures are:

sales: £82,000 incl vat
after vat: £74,000 (10% scheme)

costs: staff are £3,200 a month
equipment: £500 a month

so £30k profit a year before tax. £24k a year after corp tax

joggyb

I'd be wary of investing in a company that doesn't have any contracts in place, frankly. Goodwill is all very well - but meaningless if the current clients decide they don't want to work with you for any reason.

Are the employees on proper contracts? If not, you could find yourself liable to pay them more than they're currently being paid, and provide them with additional benefits, etc. All depends on whether what they're on provides them with the statutory minimum (or more). You may also have a problem with staff retention if they're not on contracts.

What about its liabilities - creditors, any loans, etc? Have you checked/asked about those?

In short, get it properly checked out by an accountant and a solicitor. Yes, it's an initial cost - but it might save you from making a vastly more expensive and ruinous mistake!

At least you'll be able to make an informed decision then.

Good luck!

Astaroth

If they are making £30k pre tax profits but are only asking £25k as the initial asking price (and therefore most likely will accept less) I would get very suspicious that not everything is either as it should be or they are aware of something that will significantly impact turnover/ profit and so are selling whilst times are still relatively good.

WHA

Don't forget to properly estimate and value YOUR time in running the business. If it is making £30k, but you need to be working full time running it, then it isn't making 30K, is it making £30k minus your wage, which may only be £10k so leaving little room for fluctuations.

If you are taking on their staff, you take over the liabilities, for things like redundancy pay, holiday pay, sick pay, mat/pat ernity pay, etc, not from the date you buy it, but the date each employee started working for the seller, which may add up to quite a lot of liability.

Are you buying the business or the limited company? There is a massive difference and it is usually better for you to form your own limited company and buy the equipment/goodwill, rather than buying the shares in the existing limited company in which case you'd take everything on, warts and all, such as tax liabilities if the sellers had not done their accounts properly - not recommended.

Ask yourself, Could I create the business myself far cheaper? All you'd need is a van, basic equipment and some staff and you could find your own clients and start without having to find the £25k. After all, if the existing clients are not on contracts, you'll have to be constantly touting for work anyway to keep the business going as it is inevitable some clients will go elsewhere (they always do - that's the nature of business).

lifecoach_2

I agree that you need to look into the strength of the contracts you would have with these customers. And also whether he is in effect the business, that they use him because he is a mate. What is to stop the seller simply phoning up these customers the day after he sold and offering his services again.

How much would it cost you to set up a similar business with £70,000 turnover? If you can do it for less than £25,000 than thats an alternative.

mike1976_2

hi all

thanks for your responses.

you have bought up a lot of questions for me to ask them.

i will be back on here, as i intend to look into buying or starting up such a business, and your thoughts have been useful.

will keep you posted.

thanks again
mike

richt71

mike1976 wrote:

hi all

thanks for your responses.

you have bought up a lot of questions for me to ask them.

i will be back on here, as i intend to look into buying or starting up such a business, and your thoughts have been useful.

will keep you posted.

thanks again
mike

I notice theres a few cleaning franchises advertised in franchise magazine and also there's a highly rated seller on ebay that is selling like a franchise of their cleaning business. I've no idea if any of these are any good but alternatives for you that if I remember rightly were well under £25k