ProsCons selling license/business

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bwise863

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Sacramento area
I've been approached by a large HVAC company I have worked with for 20+ years as their electrical contractor. The owner is interested in buying my business mainly for adding an electrical license. I've never had employees, I have no inventory or contracts that would be of value. In addition to my license, they want to bring me on as their electrician and train one of their employees. What I don't know is how to value this transaction going into negotiations. I have about 12 more years before I can retire. What things should I consider if I were to sell and work for them? Anyone have similar experience? How did it go?

Many thanks
 
You can retire anytime you can afford to do so.

I Don't see your business being much more than a job. Maybe you can get 10 or 20 grand out of it and a salary comparable to what you're making now. My guess is the guy isn't going to want to pay that much, unless you're only making 50 grand a year.
 
Can you really "sell" your license, like a cabby can with their placard, in California? I always thought the license is YOURS alone and can't simply be transferred.
Obviously they think they see an untapped profit for themselves by getting rid of you as competition and make you an employee that can be dismissed at will, especially after you have trained their guy. You also loose ability to control of your personal profit that you have as a business.
Advise? Look at your current annual income and that of the last several yrs looking at highest revenue yrs and look at trends to see your potential earnings forward looking in setting up annual compensation package for yourself up until your retirement. Also get an attorney involved to ensure your ability to earn a living is protected. Most likely the hvac company will demand some form of noncompete clause, such could really impact your ability to support self, if as likely they will terminate after you get their guy trained. I could see something that limits their side of the noncompete that if they end the relationship you can still make a living as a licensed electrician and not have to work at the local wallyworld at minimum wage.
 
Fred B said:
Can you really "sell" your license, like a cabby can with their placard, in California? I always thought the license is YOURS alone and can't simply be transferred.
Obviously they think they see an untapped profit for themselves by getting rid of you as competition and make you an employee that can be dismissed at will, especially after you have trained their guy. You also loose ability to control of your personal profit that you have as a business.
Advise? Look at your current annual income and that of the last several yrs looking at highest revenue yrs and look at trends to see your potential earnings forward looking in setting up annual compensation package for yourself up until your retirement. Also get an attorney involved to ensure your ability to earn a living is protected. Most likely the hvac company will demand some form of noncompete clause, such could really impact your ability to support self, if as likely they will terminate after you get their guy trained. I could see something that limits their side of the noncompete that if they end the relationship you can still make a living as a licensed electrician and not have to work at the local wallyworld at minimum wage.
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I don’t know how that works in other jurisdictions, but here in NC you can put your license in the company name and you are the qualifier.
If the company decides to fire you afterwards your license goes out of the company name and goes with the qualifier, leaving the company with no license.

You can’t just “sell” your license here.
 
bwise863 said:
In addition to my license, they want to bring me on as their electrician and train one of their employees.
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Big Red Flag in my opinion, think of your Contractors License as you would your Social Security Number, very sacred and you are the only one that legally owns it.

Sell your contacts, your phone that keeps ringing and your internet placements. That's it, If you have steady volume sell it for 2-3 years worth of revenue, that's what I'd like to do.

My book of business is well over 1000 many repeat customers, my internet visibility is typically page 1 with several basic search phrases pops it up.

I'm not bragging because I'm still small potato's compared to many other outfits local to me but 1 thing for certain I fortunately have more than I alone can handle with volume. I would except 250-300k, not sure if that's reality but I'd probably sell it next week if someone offered
 
Another C10 said:
My book of business is well over 1000 many repeat customers, ..would except 250-300k, ..probably sell it next week if someone offered
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One of my clients believes he got a fair price for selling a pool service, since revenue was based on regular-weekly customers, not random services.

He believed the revenue of a fixed billable service was easy to value, especially if customers won't notice the new pool boy.

When trying to sell a more complicated maintenance service, there may be less desire to become a dear in the headlights of customers, who demand someone familiar with their issues & supplier sources.

Never heard of anyone on this forum selling their random book of uncertain clients, much less selling it for a small-retirement nest egg.
 
Another C10 said:
I'd like to hear how you come up with that projected value . Do you own a business .. if so great, I'd like to hear this explanation.
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I don't own a business. But reading what the guy wrote originally he doesn't really have anything that's worth much to another business other than he has a license.

There are a ton of small businesses out there. Very few of them are worth all that much for the business itself.
 
Another C10 said:
I'm not bragging because I'm still small potato's compared to many other outfits local to me but 1 thing for certain I fortunately have more than I alone can handle with volume. I would except 250-300k, not sure if that's reality but I'd probably sell it next week if someone offered
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If you were on the outside looking in how much is your business worth?
 
petersonra said:
If you were on the outside looking in how much is your business worth?
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That is a good question, To a small company like myself I'd probably laugh and say I cant afford that.
To a larger company lets say with a dozen vehicles and itching to hire more technicians, they may consider the investment, not sure they'd pay what Id like but they very well could invest 100-200k.

The research I've found from a number of sources mentions there are large companies that buy specific smaller companies all the time, maybe not every day but it does happen.

Just as an example, I used a great outfit for many years which repaired appliances, they'd come to your home spend less than an hour and boom made 200-300.00. They did this locally for decades, well I called one day and the person on the phone said so and so company partnered with us would you like to schedule an appointment, I figured well .. ok. They did a great job and now I will call them back which was the number of the older company.

So right there, the momentum doesn't necessarily stop when the company ends because as long as someone answers that phone and mentions the prior company, I believe most people will continue with the partnered outfit.

Same thing goes with website placement, someone searches for their favorite electrician with all the 4-5 star reviews clicks on a appointment button, boom, they automatically get directed to an office rep that knows the recent partnership and will do their best to win over the unknowing customer. Once the customer decides whether or not their favorite electrician and the number affiliated with them does quality work, they will keep going back, why bother looking for others when your happy with the one you have.

So for a large company to gain a steady potential for large volumes of service and remodel clients by simple answering the phone once and mention, oh your electrician and us have partnered , would you like us to stop by today.

For the investor, its all about acknowledging the incoming call from their newly purchased phone number. Now I believe if selling ones credentials and client stream one would have to set it up through a contract to assure their email address, their phone number, their webpage status all stay up and functional during whatever time frame is required giving the transition plenty of time to take root.

Well it all sounds good on paper, all I know is .. the day I'm done or am just too old I'd hate to just close the doors and have to tell the clients for years to come .. the news of me retiring. There must be a market for incoming calls based on decades of referral, internet advertising and good reviews.

sorry for the long post, I just wanted to share my thought.
 
Another C10 said:
That is a good question, To a small company like myself I'd probably laugh and say I cant afford that.
To a larger company lets say with a dozen vehicles and itching to hire more technicians, they may consider the investment, not sure they'd pay what Id like but they very well could invest 100-200k.

The research I've found from a number of sources mentions there are large companies that buy specific smaller companies all the time, maybe not every day but it does happen.

Just as an example, I used a great outfit for many years which repaired appliances, they'd come to your home spend less than an hour and boom made 200-300.00. They did this locally for decades, well I called one day and the person on the phone said so and so company partnered with us would you like to schedule an appointment, I figured well .. ok. They did a great job and now I will call them back which was the number of the older company.

So right there, the momentum doesn't necessarily stop when the company ends because as long as someone answers that phone and mentions the prior company, I believe most people will continue with the partnered outfit.

Same thing goes with website placement, someone searches for their favorite electrician with all the 4-5 star reviews clicks on a appointment button, boom, they automatically get directed to an office rep that knows the recent partnership and will do their best to win over the unknowing customer. Once the customer decides whether or not their favorite electrician and the number affiliated with them does quality work, they will keep going back, why bother looking for others when your happy with the one you have.

So for a large company to gain a steady potential for large volumes of service and remodel clients by simple answering the phone once and mention, oh your electrician and us have partnered , would you like us to stop by today.

For the investor, its all about acknowledging the incoming call from their newly purchased phone number. Now I believe if selling ones credentials and client stream one would have to set it up through a contract to assure their email address, their phone number, their webpage status all stay up and functional during whatever time frame is required giving the transition plenty of time to take root.

Well it all sounds good on paper, all I know is .. the day I'm done or am just too old I'd hate to just close the doors and have to tell the clients for years to come .. the news of me retiring. There must be a market for incoming calls based on decades of referral, internet advertising and good reviews.

sorry for the long post, I just wanted to share my thought.
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Customer valuation is an intangible asset that is one (if not the) hardest assets to put a number on.
you have to have a few models with numbers such as customer acquisition, customer retention, customer purchase frequency(monthly, yearly, twice a decade), and customer basket size, which is how much will the spend at every purchase.

Where is the bulk of your number coming from? Is it tangible or intangible assets?
 
Hv&Lv said:
Where is the bulk of your number coming from? Is it tangible or intangible assets?
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That's a good question, Like other small companies I have virtually no over head, no lawsuits, no outstanding credit obligations.

Basically I have written financials for roughly the last 5 years showing a steady flow of revenue in my case 125-150k sales, not a lot but substantial enough for an investor considering adding that volume onto their own normal flow. Keep in mind being 1 person unfortunately I've had to deny 1/2 the opportunities brought to my attention, these aren't bidding jobs these are clients wanting something simple ranging from a flickering light to a panel upgrade or kitchen remodel, then there's the business clients that want to retrofit their warehouse lighting or add station circuits ect..

One other thing I created and add to every year is an actual list of every address and name of 98% of my clients, I suppose they could get flyers acknowledging a partnership.

Just saying there must be worth in what I have. My number is off the hip and basically is 1 to 2 years of steady documented sales.
 
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