Service companies are number three on my list of businesses I like to sell. They can be capital intensive like a limousine company with many vehicles or have very little hard assets like a business coaching service(with more than just the owner providing services.) They can have recurring revenue like alarm monitoring services, exterminating services, landscaping services, home cleaning services, etc. They can use independent contractors like painting companies or employees like office cleaning services.
With a limousine service, you normally have 3 ways to acquire vehicles. You can pay all cash which is highly unlikely. You can finance. Or you can lease. A limousine service can specialize or be a general provider. If it specializes, it might just provide airport service from hotels, businesses, residences or pickup/drop off points to the airport and back. If it is full service, it may handle weddings, proms, bachelor and bachelorette parties, executive service, etc.
The important thing to remember is that the use of a limousine service is very discretionary. People do not need limousines. They want limousines for special situations or occasions. If the economy changes to the downside, the revenues of limousine companies can decrease. With an exterminating company, the service is also discretionary because a consumer or business can provide the service for themselves. But typically, an outside service is used for convenience.
With an alarm monitoring service, the service is typically not discretionary because the consumer or business owner wants to be protected. But because the industry is very competitive with many choices and plans, the business is very price sensitive. You can have passive monitoring using telephone lines, but a burglar can deactivate the system by cutting the phone lines. You can have cellular, cable or voip monitoring where even if phone lines are cut, you are protected. You can also have interactive monitoring where a live person calls the home after an alarm is triggered for any reason.
With a landscaping business, there is a more equal combination of equipment and labor necessary to handle customer needs. The normal equipment would include lawnmowers, edgers, trimmers and one or more vehicles and carriers for the mowers. Manual labor is a very large component of this type of business and therefore, supervision is of great importance.
With a home cleaning service, you have cleaning supplies, vacuum cleaners, etc. and one or more vehicles. This business is also very labor intensive and requires a high level of quality control to retain customers. A painting company can either use employees or independent contractors or a combination of both. Here also quality control is critical for customer referrals and repeat business.
With a business coaching service, it is critical that the owner is not the business. Since buyers want to feel confident and comfortable that customers will not leave when the business changes hands, the owner must create an organization and not have the business dependent on just him or her. There are other things that must be done, but that will be the subject of another blog.
Author’s note. After helping sellers and buyers for more than 20 years, I have found that honesty, integrity, full disclosure, patience and a willingness to consider various alternatives makes the probability of success for all parties very high.
Loren Marc Schmerler, CPC, APC is the former business advice columnist for Sam's Club. He has been a business broker since 1986 and works with business owners and business buyers in every state of the country. If you need assistance selling or buying a business anywhere in the United States, you can reach Loren at 404-550-1417, 24/7/365.
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