Should I buy into Window Cleaning business

stephenbalmer

Hi folks,

I have been asked to buy into a long established window cleaning business and wanted to seek some opinions or ideally informed advice.

There are a few questions which I have been advised to clarify but the one on which I’m looking for your help is the investment and return situation.

The company has been in business for over 30 years and provides window cleaning to the majority of residential and a number of commercial properties in the area.

The company has 4 regular staff and they operate on regular weekly schedules covering the whole area every 4 weeks.

After all taxes, employee salaries and equipment is covered, the post tax annual profit is £39,000.

The offer to buy into the business is a 50% share of the business for a 50% share of the profit.

Therefore, I buy 50% of the business and get an annual post tax return of £19,500, paid on weekly basis.

The owner is asking £75,000 for this 50% share of the business, meaning I have my investment returned in around 4 years, including the interest I would have made simply saving with mainstream banks.

After that 4 year period, where I am in deficit on the purchase, I then start to benefit from my investment for as long as the business continues at the rate of £19,500 per annum plus whatever annual increments are applied.

Clearly there is also the associated risk of the volatility of this business - a 30 year history is a sound reputation, and hopefully no reason it will not continue, but nothing is guaranteed.

I’d appreciate your thoughts on this and any experience you may be able to give me.

Many thanks.

MalMonroe

I think £75,000 is a lot of money and I wouldn't do it! Bearing in mind my 2 window cleaners charge me £3 every four weeks and only own one van and a couple of ladders between them. You could set up your own business in another area and you'd not have to spend £75k. That's a really large outlay for a very small annual return, in my opinion. Save your money and invest it elsewhere, wisely, after taking some financial advice.

Mistral001

The capital sum to set up a window cleaning company could be as little as it costs to buy a bucket, squeegee, ladder and car roof rack. So anybody with a few hundred pound to spare could set to undercut you.

Try to establish the value of the assets. Subtract that value from the £75k and all you have left is good will. You have to assess how much that good will is worth to you.

[Deleted User]

Hi,


if operating well for 30 years, why do they need £75k now, are they going to expand and need a fleet of vans now?

stephenbalmer

MalMonroe wrote: »

I think £75,000 is a lot of money and I wouldn't do it! Bearing in mind my 2 window cleaners charge me £3 every four weeks and only own one van and a couple of ladders between them. You could set up your own business in another area and you'd not have to spend £75k. That's a really large outlay for a very small annual return, in my opinion. Save your money and invest it elsewhere, wisely, after taking some financial advice.

Thank you MalMonroe, very useful perspective and very clear opinion on your thoughts and advice.


I have no intention of setting up any window cleanng business in this or any other area, the element of interest was only that of buying into an established, ongoing business who have a team of salaried windowcleaners and an established longstanding customer base.


You mention that it is a large outlay for a small return, what would you advise is a reasonable return rate?


Thanks, Steve

stephenbalmer

Mistral001 wrote: »

The capital sum to set up a window cleaning company could be as little as it costs to buy a bucket, squeegee, ladder and car roof rack. So anybody with a few hundred pound to spare could set to undercut you.

Try to establish the value of the assets. Subtract that value from the £75k and all you have left is good will. You have to assess how much that good will is worth to you.

Thank you Mistral for your reply and advice on this.


The bottom line is my assessent of how much the goodwill is worth and how long that will continue beyond my return point of 4 years.


Thans, Steve

stephenbalmer

[Deleted User] wrote:

Hi,


if operating well for 30 years, why do they need £75k now, are they going to expand and need a fleet of vans now?

Thanks for your reply FrugalMacDugal.


Not sure how relevant, but the owner has also been providing home improvements of new windows, new kitchens, home maintenance etc as an extra activity within the Window Cleaning business, and is using this investment of my time to half his time in managing the whole Window Cleaning side and the funds to invest in salaried fitters and vehicles/equipment to formalise the home improvements business.


Thanks, Steve

Boohoo

stephenbalmer wrote: »

Hi folks,

I have been asked to buy into a long established window cleaning business and wanted to seek some opinions or ideally informed advice.

There are a few questions which I have been advised to clarify but the one on which I’m looking for your help is the investment and return situation.

The company has been in business for over 30 years and provides window cleaning to the majority of residential and a number of commercial properties in the area.

The company has 4 regular staff and they operate on regular weekly schedules covering the whole area every 4 weeks.

After all taxes, employee salaries and equipment is covered, the post tax annual profit is £39,000.

The offer to buy into the business is a 50% share of the business for a 50% share of the profit.

Therefore, I buy 50% of the business and get an annual post tax return of £19,500, paid on weekly basis.

The owner is asking £75,000 for this 50% share of the business, meaning I have my investment returned in around 4 years, including the interest I would have made simply saving with mainstream banks.

After that 4 year period, where I am in deficit on the purchase, I then start to benefit from my investment for as long as the business continues at the rate of £19,500 per annum plus whatever annual increments are applied.

Clearly there is also the associated risk of the volatility of this business - a 30 year history is a sound reputation, and hopefully no reason it will not continue, but nothing is guaranteed.

I’d appreciate your thoughts on this and any experience you may be able to give me.

Many thanks.

I am looking forward to seeing this pitched on Dragon's Den in a few weeks.


To me the return on your investment doesn't seem realistic and what if they go belly up and you end up with nothing.


Also if it's such a good investment why have the 4 employees not invested in the business?

lincroft1710

So you are not investing in a window cleaning business, but in an as yet barely established home improvement company. I think Peter Jones, Deborah Meaden and the others would say "I'm out!"

stephenbalmer

Boohoo wrote: »

I am looking forward to seeing this pitched on Dragon's Den in a few weeks.


To me the return on your investment doesn't seem realistic and what if they go belly up and you end up with nothing.


Also if it's such a good investment why have the 4 employees not invested in the business?

Thanks Boohoo for your advice and input here.


The element of potential loss is absolutely key in my mind should things go wrong, there is nothing to sell to recoup my funds, so i am absolutely clear on that, it is just the element of the input versus return that i was seeking experienced guidance.


As to why the current windowcleaners do not wish to invest themselves, I cannot tell you. Perhaps they don;t have any money to invest?


Thanks, Steve

stephenbalmer

lincroft1710 wrote: »

So you are not investing in a window cleaning business, but in an as yet barely established home improvement company. I think Peter Jones, Deborah Meaden and the others would say "I'm out!"

Thanks for your advice Lincroft. My apologies if i have not been clear in my description of the situation here.


Ultimately there is a longstandng, wellknown business in my location say, ACME Window Cleaning for arguement sake. The offer/proposal is for me to buy 50% of ACME Window Cleaning.



With that investment, the current owner is going to formally setup ACME Home Improvements and manage that as a separate line of the business.


I will have half of the geographical Window Cleaning area as financially described in original post, if it grows in clients I make more, if it shrinks in clients, I make less, but i will have no part nor responsibility in the other activities of the current owner.


Thanks, Steve