From Zero to Six Figures in 8 Months
How a business buyer purchased a commercial cleaning company at a fraction of its asking price, fixed it, and sold it for a considerable profit.
On the day he met the young owner of a commercial cleaning company that was up for sale, prospective buyer, Akram, was sure of one thing: he didn't want to pay the full asking price.
Twelve months prior to the sale, the owner had placed the sale in the hands of a broker who had convinced her that she should ask for £180,000. Unsurprisingly, for such a small business, there had been little interest from potential buyers.
Meanwhile, Akram had been on the hunt for a new business. He and his business partner had recently sold an insurance brokerage they had grown from scratch over nine years.
"We'd had enough. It was successful; it was profitable. We just didn't really enjoy it anymore. If somebody had offered to buy it off of us, I would have said, 'Here are the keys. Take it.' It was a good business, but it needed somebody fresh to come in who had the enthusiasm and excitement to take it further."
— Akram
The pair had sold the business relatively quickly using deferred consideration. It was then that Akram began to look for a new business opportunity, hopefully, one that didn't involve starting from scratch.
His transition from a business owner to a business buyer was aided by the podcasts on Business Buying Strategies of the Dealmaker's Academy and a Discovery Day seminar.
"I was sure that starting a business from scratch wasn't really what I wanted to do. After all, he had done that with his insurance business and a financial services company. I didn't really fancy doing it again. It made a lot of sense to buy something that had been running for at least five or six years."
— Akram
"The obvious advantage with buying an existing company is that it has an infrastructure, cash flow, and a customer base."
He began to think about what type of business he would be interested in. "I wanted a business with recurring revenue. With the businesses I had prior to this, you were only as good as your last month or last day, and that becomes quite tiring."
Finally, he decided that an established commercial cleaning operation would meet his new criteria. It would be easy to understand and could benefit from recurring revenue.
"Ideally, I wanted to acquire one business and bolt others onto it. I was looking for a platform." He set out to find owners who wanted to sell their businesses.
"I registered with all the business brokers out there. Even before I went on the Discovery Day, I realised that most businesses were really overpriced. I was speaking to the sellers, and their expectations were extremely high."
Undaunted, he sent about 200 letters to the owners of commercial cleaning companies. "I got about 14 responses. Of which, I had four meetings that were quite positive."
While all this was going on in the background, one of the brokers that he registered with contacted him to inform him that a business he was interested in had a reduced price.
Akram called back and spoke with a junior member of staff who let slip that the business owner was hoping for a quick sale due to "personal circumstances".
His interest piqued, Akram asked for the company's financial details and, if possible, a meeting with the business owner. The owner agreed to meet the very same day, which to Akram implied that she was a motivated seller.
Initially, the business had been advertised for about £180,000, but that had been reduced to about £120,000. Having looked at the accounts prior to the meeting, Akram decided that he would pay no more than £80,000 for the business.
During the meeting, the stressed-looking seller explained why she was so keen to sell. "She had two powerful reasons to sell."
Her passion for the business had dwindled. Running the business was not the future she saw for herself. Her passion was teaching.
She was six months pregnant and planned to take a year off to travel around Europe with her husband and child.
The talk naturally turned to price. The owner said that she wanted not £120,000, but £80,000 for the business.
As an avid listener of the Business Buying Strategies podcasts, Akram knew that it was important to hide his excitement about the price drop.
"I expressed mild shock and replied, 'Look, if I knew that you were going to ask for as much as that, I wouldn't have had this meeting. I wouldn't have wasted your time or my time.' I admitted that a couple of other deals I was working on were more attractive because the opportunities were bigger. I continued, 'If I'm honest with you, your business is quite small, and it isn't that attractive.'"
"She thought for a while, and then replied, 'Well, make me an offer.'"
Akram knew from what he'd learnt that it would be a mistake to make an offer at that stage. "I explained to her that that's not how we work and reiterated that the business was small, and she just needed to give me a price."
She thought about it and said, "Okay, I'll take £40,000 for it."
Once again, Akram managed to hide his surprise.
"I was quiet because I was surprised that she dropped by half just like that. I think she misunderstood the reason for my silence. She thought I still considered the price to be too high."
In fact, Akram was just wondering whether to accept her offer. But before he could say anything, she blurted out:
"Right, the lowest I can go is £25,000. I can't go any lower than that."
How did she reach that figure? Turned out that it was the amount she needed to pay off the broker and outstanding loans. The remaining amount would go towards a camper van for the European tour.
Bought for £25,000
Fixed, improved, and sold for Six Figures
In just 8 months
You really can buy a profitable, established business with no money down – if you know how. We show you a proven process developed by Jonathan Jay and used by thousands of dealmakers to successfully buy their first – or next – business.
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