Is buying a service business safe?

Acquiring a service business for sale can have doubts, can you just take the word of the person selling the service-based business, and hope that everything will work out? 

Take, for example, if you found a person selling his or her plumbing business, the existing owner had it for 14 years and now they are ready to retire…and no the plumber doesn't come with the business! So what are you buying exactly? Let’s dig deeper

1. What is a service-based business?

A serviced-based business is a person or organization that provides a professional service, this can be anything from handyman jobs to landscaping to even electrical work…A person looking to sell their business can be retiring or looking to start something new a lot of buyers pass these up as risky businesses to buy and I can understand why but if you keep reading you will have a better outlook and maybe might even want to buy a service business for sale! 

2. How to value a service business for sale?

Now let us get into what you are buying, what to consider valuable, and to spot these The lifetime of the service is what you are going to buy not the person who is selling it, The first step to look at is if the company has had a great reputation doing its work then that is a good sign, The power of the internet can make or break a business, especially service-based businesses, they are local so when a person in need of a plumber type in plumbers near me and ( ex.Mike the plumber) appears with all negative review, then they will find the next plumber underneath them,  Here is my 4 step checklist when figuring out of how to value a service business for sale:

The business number is included:

If you are going to buy a serviced  business for sale, a business number must be included, These business numbers can be from apps like grasshopper or ring central, or even a landline, bottom line numbers need to be included, and here are some questions to ask about the existing business number:

Example 1: How long have you had this business line? 

Example 2: Can I see the dashboard to review the history of calls?

Example 3:  Do you have customers calling your direct number? 

Checking reviews and positions on advertising sites:

Is the business listed on sites like Angie’s list, handy, or home advisor, and what are the approval rates, business with great reviews and higher rankings is a plus this will pass over to you when you take over the business If the business doesn't have these in place find out why?

The business name:

The business name is crucial when it comes to buying a service business, The business name will tell you if the company has had any problems, or lawsuits and most importantly the business credit score, if the name has a good reputation and no legal problems you go to step 2…

Businesses website: 

Does the business have a website and how old is it if they do, Make sure the website is not brand new you can check it on this link https://www.whatsmydns.net/domain-age 

If the age is good, you will need to inspect ALL the reviews, check for patterns, and if they look suspicious, Are the reviews mentioning the owner's name or the business? It should be a good mix of both.

Example 1: Qassem was great I can always count on him 

Example 2: They came as soon as we called and got the job done!

3. How much is a service business worth?

When buying a service-based business, there's a lot to look for, you can't just take the person's word or even his financials… No, that's not enough to determine whether or not you should buy it.

Unlike other businesses with a service business you need to be a little more careful, take for example I am in the market to purchase a vending machine business for sale and you are looking to buy a service-based business now let's compare these 2 what I will look for vs what you will for after you reviewed the financials…

Vending machine businesses: 

If I was in the market to purchase a vending machine route, after reviewing the financials I will want to ask these below to secure my investment.

Q1. How many vending machines come with the route?

Q2. How much does each vending machine bring in?

Q3. Are they owned or leased? 

Q4. How long are the account contracts for? 

Service-based business: 

Now if you were in the market to buy a service  business, The existing customers may or may not be in contract,  so after reviewing the numbers here is what you should ask the business broker or private seller to get the most value out of the service business you are buying:

Q1. Are there any service contracts?

Q2. What equipment will come with the business?

Q3. Do any vehicles come with the business? 

Q4. A list of all of the customer’s serviced

4. Examples of serviced-based businesses: 

Now there are plenty of different types of service-based businesses, and not all conduct the same nature of business, Here are 10 types of businesses: 

5 serviced-based businesses to buy that usually come with customer agreements: 

 Landscaping Business 

There are many reasons why people want to buy an established landscaping business. Some people want to be their boss and have the freedom of working on their own time while others may want to buy it to merge it into their business

Benefits of buying a landscaping business: When buying a landscaping business you can take over a business’s existing customers 

Window cleaning business

 Buying an existing window cleaning business is an excellent way of getting into the industry without the need for having to invest in equipment and hiring staff.

 Benefits of buying a window cleaning business: A window cleaner does their daily or weekly routine of cleaning windows for businesses.

 Pest control business

A pest control business is a company that specializes in removing pests from the home or business through various methods such as pesticides, traps, and exclusion. You can buy an existing pest control business and then start generating revenue.

Benefits of buying a pest control business: Taking over a pest control business is pretty much both you can have one-time calls and monthly service contracts.

Pool route cleaning business

Buying an existing pool cleaning business is a good way to get started in the industry.

The first step is to do research on the market and find out which company is for sale. You can find this information by talking to the business broker representing it by signing an NDA.

Benefits of buying a pool cleaning business: People love their pools cleaned and this requires a weekly or bi-weekly service

Knife sharpening business

Mobile knife sharpening services are a great way to help your customer keep their knives in top shape. Knives are regularly used and need to be sharpened regularly. If a knife is not razor-sharp, it could result in poor cuts and injuries, this makes a great example of a service-based business to buy.

Benefits of buying a knife sharpening business: Chefs around the nation have one thing in common…A well-sharpened knife! And this can be done by a service-based business like a mobile knife sharpener service may be required weekly, bi-weekly, or even monthly. 

5 service businesses that are called based 

Plumbing business

Plumbers and plumbing service companies are a dime a dozen, this business requires a history of great service to be considered a good buyout.

Benefits of buying a plumbing service business: The majority of the time you have your normal customers and other times you get new customers online or referrals especially when the customers have a clog or plumbing issue.

Electrician

Electrical Service Experts specialize in a wide range of electrical services to ensure that your home or business is completely safe and functional. Services include lamp and chandelier repair, small appliance repair, wiring, breaker installation, and more.

Benefits of buying an electrician service business: Same as a plumber you can have both types of customers, and you can also have a lot of business customers.

Tree-cutting business

Buying a tree-cutting service business is an excellent way to realize your dream of owning and operating your own business. A tree-cutting service is a great choice for someone who enjoys outdoor work, is experienced in the field, and has the knowledge and expertise to run a small business.

Benefits of buying a tree-cutting service business: Tree cutting is usually a one-time call and the rest can be referrals if previous customers have other jobs for you, the business requires you to either remove a large tree or stump.

Drain cleaning business

Drain service businesses are in charge of taking care of clogs, roots, and other blockages in the pipes that are causing a backup. They use a variety of techniques to clear these blockages, including using high-pressure water jets and hand tools, this business can go both ways, one time or service or a scheduled set-up for bigger establishments like hotels and supermarkets. 

Benefits of buying a drain service business: This business is also call-based and also can be an agreement-based business if you are dealing with restaurants, restaurants pipes build up with grease and may need them jetted every 3-4 months.  

Spray foam insulation business

Spray foam is a type of insulation that expands to fill all of the small spaces in a building or home. It helps stop air leakage, block pests, and insulate against extreme temperatures, which means it keeps you warm in the winter and cools in the summer, This can also be considered both but not by getting scheduled contracts but prior good service will have contractors using that company again.

Benefits of buying a spray form service business: This business is built on good, fast, and quality service. It consists of spray-foaming inner walls of homes and a lot of other stuff but aloof it has to do with construction.    

Conclusion: So as you read buying a service business for sale may just not be a bad idea at all, if you take some of these key components and gather more information that I may have missed you might end up buying a hidden treasure…please share if you enjoyed this article! 

To the best of our knowledge, the information provided on this website is not intended to be taken as professional financial advice. Consult a professional financial or tax expert if you require this advice.