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I'm thinking about buying a HI business?


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I have the opportunity to buy a 1 man home inspection business that has been in business for a little over 10 years. Can anyone share their experience or opinion on the value of such a business. Since the business is a 1 man operation I fear that his clients may not have any loyalty to me when I take over or even like the way I inspect. The name of the inspection company is also his name "First name Last Name Home inspections".

Because the business is "his name home inspections" I feel that it is even worth less because I am (obviously) not him.

Also any feedback on the challenges of starting a HI business like how long it takes to get going etc. I pretty good at marketing and networking and know that this will be a large part of getting my name out there.

I have been in construction for over ten years and have owned a construction business for the last 6 years. So I will not be immediately dependent on the revenue form the HI business but I am eager to switch trades.

Your thoughts please?

Regards

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Just for a price idea, I am currently selling my one man inspection business after 11 years and have priced it at $3K (not in your area so not trying to lure you :) ) with no equipment and full corporation and website transfer. It is also A+ rated with my local BBB and gets a number of inquiries a month just from those finding me on the internet. I am very low on sale price compared with many I've seen but have just decided to be done with it. Mine isn't named after my name.

Might inquire how many cold calls he gets, find out price structure, and determine what type of reporting and what process you will use for your inspections.

Good luck!

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It could be fine, if the guy's name is well known and respected. Any transfer or transaction should include the guy hanging around for at least a year, integrating you into his website, introducing you to folks, etc.

10 years isn't particularly long for a good home inspection business; lots of guys started gangbusters in the boom, and their businesses trailed off to the present. That's why they're selling.

If it was 20+, there was some intellectual property, and the guy had a name recognized metro wide as a gold standard, that's something else.

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Kevin,

Thanks for the reply. We share an office that's how this all came to be and I know his phone rings a lot and he does 4-8 inspections a week and has even been steady during the recession.

He is not retiring for a year which would give me time to go with him and learn his process and reporting style. Although I do not want to completely adopt his style since it might not be what everyone likes. At this point I'm trying to figure out a way to monazite the value of him teaching me the business and perhaps coming up with some way to pay him based on leads/referrals he gives me when he is done. He does very little advertisement if any at all.

I am planning to start my own new business entity and name for the business as well as buy my own tools and software.

Maybe a better question is what is a far price for him to mentor me for 6-12 months and how to structure the process?

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Since you are buying his business you need to make it yours and that takes time.

Step 1: Make the deal and take him on as a consultant until you go solo.

Step 2: Transfer the company name to you.

Step 3: Set a target date for you to go solo - make it at least a year out.

Step 4: Start doing inspections with him. Have him do the introductions and do the contract with the client. He is primary inspector - you follow and observe and contribute to the give and take to establish that you aren't just a pimple on his ass but actually know what you're doing.

Step 5: A couple of months into the shared time, have him announce a name change for the company by sending out post cards and emails to everyone in his data base - past clients, selling and listing agents, bankers, insurance companies, contractors - anyone who has done business with him. (Make sure it covers everyone. Those who have used him as an inspector need to be kept up to date on what's going on with him so that they'll know about the changes as they evolve.)

Step 6: Six months in, switch who is the lead inspector. You be the primary and have him shadow you and chime in where necessary to keep you on track and out of trouble.

Step 7: Nine months in, have him announce his retirement to the list telling them his last day will be the day before your planned solo date.

Step 8: Ten months in, you announce to the list that you've bought the company and will be continuing in the same tradition and providing the same service they've come to expect from the firm over the past 11 years.

Step 9: 11-1/2 months in, throw a retirement party for the guy. Invite any past clients that want to attend and those who field him the most referrals. Knock elbows and make sure that he assures everyone that you'll carry on with his tradition.

Step 9: Go solo. If you don't plan on making any changes, drive on. If he plan on making changes, start making them very gradually in increments so that you don't shock anyone with the difference.

Step 10: By year two you should be going strong using your own system and will have established two years worth of confidence in your ability.

ONE TEAM - ONE FIGHT!!!

Mike

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Kevin,

Thanks for the reply. We share an office that's how this all came to be and I know his phone rings a lot and he does 4-8 inspections a week and has even been steady during the recession.

He is not retiring for a year which would give me time to go with him and learn his process and reporting style. Although I do not want to completely adopt his style since it might not be what everyone likes. At this point I'm trying to figure out a way to monazite the value of him teaching me the business and perhaps coming up with some way to pay him based on leads/referrals he gives me when he is done. He does very little advertisement if any at all.

I am planning to start my own new business entity and name for the business as well as buy my own tools and software.

Maybe a better question is what is a far price for him to mentor me for 6-12 months and how to structure the process?

I sold my first inspection company in 2001 for 65K. If there'd been an agreement for me to hang around as a consultant, I would have wanted about 50% of the profits for a year. After all, I'd need to pay my bills, just like you, and you'd be netting more than most new guys getting into the business cold would make on their own.

ONE TEAM - ONE FIGHT!!!

Mike

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Since you are buying his business you need to make it yours and that takes time.

Step 1: Make the deal and take him on as a consultant until you go solo.

Step 2: Transfer the company name to you.

Step 3: Set a target date for you to go solo - make it at least a year out.

Step 4: Start doing inspections with him. Have him do the introductions and do the contract with the client. He is primary inspector - you follow and observe and contribute to the give and take to establish that you aren't just a pimple on his ass but actually know what you're doing.

Step 5: A couple of months into the shared time, have him announce a name change for the company by sending out post cards and emails to everyone in his data base - past clients, selling and listing agents, bankers, insurance companies, contractors - anyone who has done business with him. (Make sure it covers everyone. Those who have used him as an inspector need to be kept up to date on what's going on with him so that they'll know about the changes as they evolve.)

Step 6: Six months in, switch who is the lead inspector. You be the primary and have him shadow you and chime in where necessary to keep you on track and out of trouble.

Step 7: Nine months in, have him announce his retirement to the list telling them his last day will be the day before your planned solo date.

Step 8: Ten months in, you announce to the list that you've bought the company and will be continuing in the same tradition and providing the same service they've come to expect from the firm over the past 11 years.

Step 9: 11-1/2 months in, throw a retirement party for the guy. Invite any past clients that want to attend and those who field him the most referrals. Knock elbows and make sure that he assures everyone that you'll carry on with his tradition.

Step 9: Go solo. If you don't plan on making any changes, drive on. If he plan on making changes, start making them very gradually in increments so that you don't shock anyone with the difference.

Step 10: By year two you should be going strong using your own system and will have established two years worth of confidence in your ability.

ONE TEAM - ONE FIGHT!!!

Mike

What he said. This is a great business plan for a one man operation.

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I don't have to ask...

Because then it would be an 11 step plan, instead of the handily outlined 10 step plan.

That way, you can keep track with your fingers.

[:-thumbu]

Or, maybe O' didn't have his 11th cup of high test coffee today.

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Kevin,

Thanks for the reply. We share an office that's how this all came to be and I know his phone rings a lot and he does 4-8 inspections a week and has even been steady during the recession.

He is not retiring for a year which would give me time to go with him and learn his process and reporting style. Although I do not want to completely adopt his style since it might not be what everyone likes. At this point I'm trying to figure out a way to monazite the value of him teaching me the business and perhaps coming up with some way to pay him based on leads/referrals he gives me when he is done. He does very little advertisement if any at all.

I am planning to start my own new business entity and name for the business as well as buy my own tools and software.

Maybe a better question is what is a far price for him to mentor me for 6-12 months and how to structure the process?

I sold my first inspection company in 2001 for 65K. If there'd been an agreement for me to hang around as a consultant, I would have wanted about 50% of the profits for a year. After all, I'd need to pay my bills, just like you, and you'd be netting more than most new guys getting into the business cold would make on their own.

ONE TEAM - ONE FIGHT!!!

Mike

No disrespect Mike - but isn't the main reason it sold for $65k is because it was one of the big franchises? I don't think a one man independent operation would be worth any where near $65k.

That is a great plan, that could be a full chapter in your book.

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Mike, with your plan, does the buyer expect to get paid during the first year? Seems like the seller is going to want to continue being paid if he's a daily part of the work.

Any deal like this needs a pretty solid contract. What if the seller bails out after a few months, or something else unforeseen happens? The possibilities are endless.

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It has to be managed. The seller has to be aware of the risks and make appropriate accommodations. They also need to qualify buyers and go through a series of structured vetting interviews.

Any of our single operator businesses that are grossing over $120,000 for a couple decades is worth something. With the right structure, someone could enter the biz, pay back the entire nut in a couple years, and be on their own with minimal hassle. Mike's transition plan is pretty good; follow that, a person is in business.

If someone wants to dispute value, let them start their own HI gig and see where it takes them in a couple years. I guarantee that it won't be anywhere near $120,000 for a long time.

Of course, there's someone out there that will say they did it. More power to 'em.

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Bear in mind that if you buy his company, you will want the sale agreement holding you harmless from any legal actions against the seller for his past inspections. Because if you buy the company you could be taking on responsibility for all those past inspections.

I like the plan but don't see how two inspectors can work the same jobs for that length of time, splitting the cash or otherwise.

The seller could stay on part time for a year or more, but if you are not ready to go alone after a couple of months, you are a slow learner, IMO.

How about keeping in touch with him by cellphone while you can be inspecting different houses, or he can be sitting at home, retired?

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Bear in mind that if you buy his company, you will want the sale agreement holding you harmless from any legal actions against the seller for his past inspections. Because if you buy the company you could be taking on responsibility for all those past inspections.

I like the plan but don't see how two inspectors can work the same jobs for that length of time, splitting the cash or otherwise.

The seller could stay on part time for a year or more, but if you are not ready to go alone after a couple of months, you are a slow learner, IMO.

How about keeping in touch with him by cellphone while you can be inspecting different houses, or he can be sitting at home, retired?

All things to manage. Go in blind, you're dead.

Most folks would be ready to inspect after 2 or 3 months. The seller hangs around to make sure there's a transition, not to train the guy for 2 years.

What we sell is good will, which is ephemeral. If I'm gone, no one knows who the guy is. If I hang around, folks are reassured.

Selling a business is a pain in the ass, always. No way around it. Just like running a business.

It's just stuff to manage.

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Mark,

I don't agree. Even being a member of a franchise can't build the business for you; you've got to do it yourself. Unlike Mickey D's and Subway etc., the franchises don't do any national advertising for brand awareness that benefits the franchisees. Every franchise was (and still is) doing it on his own.

The guy who bought my company could have bought one of the franchise territories for under 30K and spent a couple of years getting into the black. He wanted my established business and my client list and my phone number and a 1-year non-compete. For that, he had to pay.

If my company hadn't been crippled nine-months before the sale by my fall off that roof, I think I could have easily gotten twice that for it.I could have stuck around another year, built it back up again and then sold out; but at the time I was just fed up with the raft of crap that came along with being a franchisee and I wanted out.

My current company is in a better position than when I was a franchise. During the down time of the past few years when other inspectors who relied on 'zoid largess to keep them busy were struggling, and many closed their doors, I was constantly busy because I'd found a niche. If I sold out now, it would definitely have to be a higher price than the last time I sold.

David,

Yes, the buyer gets paid. He's taking in half the net and the seller the other half. Believe me, half the net of an established business is better than 100% of the net if you are starting cold turkey on your own. There are advantages. If the seller is doing $Xk a year on his own and the seller comes on and is diligent, with two guys they can significantly increase case load and revenue - even expand that client list - because work that the single guy was turning away that he couldn't handle on his own can now be taken on and they go from $XK to $XXK. Based on my experience, and the experiences of countless others who've passed through here over the years, I'm certain the buyer would be doing better than if he went solo.

You're right. It requires a solid contract and if the buyer bails the company has to revert back to the seller; it's repossessed so-to-speak.

John,

I've worked with a second person for over twelve years. Once you get it down it goes like clockwork. Remember, it's only for a year. The problem the buyer faces though is allowing himself to get accustomed to having two guys. If he gets too comfortable he'll find himself struggling when he eventually goes solo.

ONE TEAM - ONE FIGHT!!!

Mike

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One years gross is not out of line at all. More depending on a lot of other variables. There is no formula; it's a crapshoot, but a calculable one.

If one goes into selling the gig like most folks get into this profession, then it'll be worth about twelve bucks. If one structures a transition, it has value.

This is a real gig. 20+ years of P&L's showing a real gig means something. It's not just a phone number.

Mike's transition plan is smart.

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  • 3 months later...
  • 3 years later...

It is always hard to value a business. Like stated 10 years isn't a long time. Does the business come with email lists? What business processes has he put into place (ie. monthly newsletter, referral programs etc.). Since much of the home inspection business is your clients and your knowledge, there isn't a lot of capital expenditures. You have to ask yourself how much business are you getting on day one... any repeats? Just a few of my thoughts.

TJ

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