Selling your business is a life-changing decision. If you're thinking about taking the plunge, it's crucial to learn more about your options for selling and which factors affect how much your appliance repair business is worth.
Small business owners are putting their businesses on the market for a wide range of reasons.
The average retirement age is 64 in the U.S. Fixing appliances is a physical job, and you might find that running your business becomes increasingly challenging with age.
Selling your business is a great way to get a lump sum of money you can use to retire comfortably. If things are going well, consider an early retirement to take advantage of your business momentum to get a higher sale price.
It's not uncommon for business owners to work 50 hours a week or more. It can be difficult to make time for your family.
Welcoming a new addition to the family or moving for your spouse's career can be valid reasons to sell your business.
You should also think about selling your business if you're experiencing burnout or health challenges or find that you've lost your drive and passion. New business creation is currently down by about 3%, but there are exciting opportunities to explore in the freight trucking, restaurant and food, hospitality, landscaping, or automotive repair industry.
And with a monthly job growth that exceeds 400,000, there are some interesting opportunities to explore outside of entrepreneurship.
With inflation cutting into profits and increased competition from major chains like Home Depot or Lowe's, the appliance repair market can be challenging.
You might find that selling your business so you can focus on a new career is a decision that makes sense for your long-term financial goals.
If you keep telling yourself, "I want to sell my appliance service business," it's time to consider your different exit options.
With an internal sale, employees or managers purchase your business. It's a great option if you want to ensure business continuity, and it's a common solution for family businesses since you can have a child or another relative take over your business.
Internal selling protects your employees' jobs and preserves the company culture and work ethic you developed over the years.
Besides ensuring a smooth transition, selling your business to key employees shows how much you value their experience and dedication. It's often the best way to ensure your customers will continue receiving a quality appliance repair service.
Plus, the sales process can be faster since you already have selected a few potential buyers.
There are a few things to keep in mind if you want to sell to an employee:
If you feel that selling your appliance repair business to your employees is your best option, there are a few different deal structures to discuss with potential buyers:
Selling your appliance repair company to a third-party buyer can be more challenging, but there are some benefits to consider:
The downside of selling to a third-party buyer is that the transition might not be smooth. The new owner might have a drastically different vision of your company. The sale will affect employees, and your customers will notice a difference.
Do you want to sell your commercial appliance service business to a third-party buyer? Here's what this process typically looks like:
The value of a business is the sum of its assets minus its liabilities. However, this valuation method makes it difficult to account for intangible assets like customer loyalty or the potential for future growth.
As a rule of thumb, buyers typically pay two to three times the annual earnings of a small business. Remember that it's a general rule and that several factors can affect what a buyer is willing to pay for your business.
You keep telling yourself, "I want to sell my service commercial appliance service business," but how much can you get for your business?
Let's take a closer look at the main factors that can influence what your business is worth.
Your purchase agreement will state the purchase price and the manner of payment. The buyer might make an initial deposit, pay a lump sum at closing, or make installment payments.
The flexibility of financing the business and making monthly payments can add value for the buyer and justify a higher purchase price.
The new owner will take possession of the physical assets employees use when they fix a broken appliance.
These assets typically include tools, your spare part inventory, company vehicles, computers, office furniture, and more.
The quantity and condition of these physical assets can have a significant impact on the sale price. For instance, a business with a fleet of brand-new vehicles and a large inventory of parts from brands like GE appliances or Whirlpool will be worth more.
Not all assets are physical. Your purchase agreement can outline the transfer of digital assets, such as a portfolio of vetted vendors or a customer list. A customer base with several long-standing accounts will boost the value of your appliance repair business.
If you advertise your services online, your website, social media profiles, and other marketing assets can be part of the sale. In addition, factors like positive online reviews and good search engine rankings for important keywords can also add value. Both are a key part of an essential online marketing strategy that adds value and will appeal to a new potential business owner who may be looking to acquire your business.
You'll also transfer leases and utility accounts to the new owner. The sale might include your liability insurance policy, the domain name for your official website, or the lease for the building you use.
Lastly, if you offer appliance service contracts to your customers, you can include these agreements in the sale.
Did you know small businesses have an average of $195,000 in debt?
If you operate a sole proprietorship, you're personally responsible for debts unless the creditor agrees to release you. You should plan on settling any debts before the sale or using a portion of the proceeds to pay off business loans and credit lines.
If your business is an LLC, the new owner will take over existing debts unless you sign a personal guarantee. Therefore, a business with a high level of debt will be worth less.
Whether they're working on an old appliance or a new appliance, repairs have no secrets for your key employees. There is tremendous value in an appliance repair technician who is able to easily repair any kitchen appliance or other household appliances like a washing machine or dryer.
Employees who have excellent rapport and communicate easily and effectively with customers on a service call are essential. These employees can provide you with a steady stream of positive reviews that can help you stand out from the competition - this can raise the value of your business to a prospective buyer.
Taking steps to ensure your employees will stay can increase the value of your business. For example, a common practice is to offer a stay bonus to encourage employees to stick with the new owner. Offering to pay these bonuses can justify a higher sale price.
You can also add value by signing a non-compete agreement or staying on as an advisor to help the new owner for a few months.
Buyers will look at the growth potential when making an offer. The size of your market, your existing customer base, and your growth potential can affect the value of your business.
Factors like limited competition in your service area or excellent customer loyalty scores can result in a higher sale price.
If possible, present data that shows how the local population is increasing or how more people are buying homes and starting families. These trends can help predict an increased demand for appliance repairs.
Historical data from your business can also support the valuation. Show how your sales have increased over the past few years and highlight the strategies you use to achieve sustainable growth, such as educating customers about maintenance, selling service packages, and branching out to fix a wider range of appliances or working with commercial customers.
Taxation doesn't directly affect the sale price, but it significantly impacts how much you get from the sale.
You'll have to pay a long-term capital gains tax on the proceeds of the sale. You can calculate this amount by deducting your original investment in the business from the sale price.
This amount represents your capital gains. You'll have to pay a 20% federal tax as well as a state tax if applicable.