- THE MAGAZINE
I always loved the physical act of cleaning carpets. The power of the machine, the almost sensuous glide of the wand over the carpet and the gratification of putting on a show for the homeowner were all incredible, and it didn't hurt that I was making more money than I had ever believed possible. Carpet cleaning was my "dream job" and I lived, breathed, ate and slept it for 20 years.
But then one day, shortly after I turned 38, things shifted a little bit in my universe. I came to realize that while carpet cleaning had been very good to me, I just did not want to do it the rest of my life (my daughter labeled this an "early onset mid-life crisis"). How about you? My guess is you have loved this great business. But still, sooner or later, the day is coming when that scrub wand just won't look - or feel - so good. That's right; just like with me, it will be time for you to leave.
I think the saddest phrase in the English language is "I have to..." as in, "I have to keep working." And yet that is where many carpet cleaners find themselves. They are burned out either physically or emotionally, and want to do something else in their life. But due to their lack of planning, these hardworking folks find themselves "chained to the scrub wand." The ugly secret of the industry is that most carpet-cleaning businesses never sell, they just wither away.
I avoided this financial slavery by focusing on my sixth and final "Secret Weapon for Success": Running Your Business Today to Sell It Tomorrow. Of course, neither no one develops a business to sell overnight. I first invested years working on the first five Secret Weapons for Success:
1. Valued Added Service. Managing the customer's experience to provide a consistently high level of perceived value and service.
2. Economics 101. Understanding the differences between the buying of goods versus services.
3. The Emotional Dynamics of the Home Front. Focusing on the homeowner's feelings of being trapped, invaded and very, very vulnerable with strangers working in their "castle".
4. Making the Cheerleader with Moments of Truth. Simply put, Cheerleaders function as "unpaid sales people" because you have consistently dramatically exceeded their "Base-Line" expectations. You achieve this lofty goal by creating many positive "Moment of Truth" which are managed by...
5. The Service Circle: Your Cheerleader "Assembly Line." You organize the path your client takes through their transaction with your company by scripting each Moment of Truth they will encounter.
A business built on these five Secret Weapons will create many enthusiastic Cheerleaders, thereby guaranteeing a steady stream of both new business and constantly increasing profits. But remember, one day you will want to retire and enjoy your financial freedom. So here are a few ideas on Secret Weapon for Success No. 6:
Don't let it be "all about you." If all the Cheerleaders must be created by the owner the business will have little sales value. After all, once you sell your business you will be loafing down in Acapulco, not busily working away making Cheerleaders, and who can blame you? Your customers must come to accept someone other than you working in their home. This difficult-but-necessary weaning of the customer away from you will be made easier if you...
"Clone yourself" by scripting out the cleaning transaction. Yes, I know. No one will ever be able to replace your sparkling personality in the customer's home. However, if your technicians say and do the exact same things you have always done, this transition phase will be easier. Of course, for your business to carry on without your constant presence you must also...
Create an Infrastructure. Your business is about much more than just working with the customer. Everything in your company should be documented with a step-by-step procedure. These procedures interlock to produce desired actions, comprising a system. And all these systems functioning together create your business infrastructure. Without an infrastructure, you don't own a business; you just own a job. With quality employees and a business infrastructure in place, your company will hum along just fine without you - which is incredibly reassuring to the prospective purchaser of your business.
Quit playing games with taxes. Don't deny it. Virtually all small-business owners run their operation to show as little taxable profit as possible. Legally done, not even the IRS can blame you. But remember, your company's selling price will largely be based upon the money a new owner can expect to extract from the operation. If your financial accounting doesn't show any net income, it will sound very lame indeed when you must reluctantly admit you have been hiding profits. Nobody wants to own a business that may have tax problems with the IRS down the road.
Focus on your curb appeal. Savvy home sellers know that houses are sold on an emotional basis. Prospective buyers first of all "fall in love" with the house. Then they subconsciously search for the logical reasons to justify the buying decision they have already taken in their heart. Your business is no different. If your company looks a little ragged around the edges, a buyer will notice and lose interest. So help your prospective buyer "fall in love" by focusing on the appearance of your trucks, equipment, office and, of course, your employees. Note: The side benefit here is these items are the same things that your customers notice and appreciate.
Strive for steadily increasing volume and profits over the years. Nobody buys a business for what you are making off of it right now. Your current financial numbers are how you justify the price you are asking. But hope springs eternal in the heart of all business buyers, because they expect to make even more than you are now, so that in the future they also can sell out for big bucks. If your company has been steadily improving its market share and net profit, this signals a new buyer that they too can maintain this business velocity.
Look, really look, at your lifestyle now. The sale of a small service business is about much more than just money. When you buy a small business you are really buying a lifestyle. So analyze your life right now. Would you pay $525,000 or $787,000 or $1.8 million to enjoy your current life? If you wouldn't "buy your life" at these numbers, why would you expect someone else to? In other words, all too often a small entrepreneur can achieve financial success, but only at the expense of incredible personal and family stress. Not too many successful individuals want to pay good money to take on a life like this - and who can blame them?
Achieve "critical mass." Can you stay small and make good money as an owner-operator cleaning carpets? Absolutely! But the sale of your owner-run, one-truck business is not going to completely fund your comfortable retirement. That's OK if you have made other alternative financial investments. Remember, the folks with the money to buy your business very likely don't want to be pushing a wand themselves. So if you want to cash out big, your business must be large enough to pay technicians, fund a support staff - these wealthy perspective buyers also don't want to be answering the phone or doing payroll 24/7 either - and give the owner a good return on his or her investment. This means not only a good profit percentage, but also a high gross volume. If you use the first five Secret Weapons we've already discussed, and have good business management capabilities and the desire to grow, then "critical mass" will be easily achievable for your operation.
>Be absolutely sure. You've heard of buyer's remorse? Make no mistake about it, there is such a thing as "seller's remorse" too, and it is an ugly emotion indeed. For most entrepreneurs their business is both their baby and their life. So be careful that you do not put your business on the block in a fit of emotional frustration and then later bitterly regret its loss. How do you avoid seller's remorse? When you do decide to sell, remember the old saying, "Have a place you are going to, not just one you are coming from."
But you say, "At this point I don't want to sell my business and retire." Wonderful! Your business is always worth more generating cash flow now, and it can always be sold later. But remember those two powerful words: "Everyone leaves". That's right, one day you will "leave" your business. Your only choice is how and when. Therefore, you need to start running your business today to sell it tomorrow, even though "tomorrow" may be 30 years down the road.
What's the hidden benefit for you in this business sale preparation process? Everything you do to prepare your company for its eventual sale also makes it a better business right now: more profitable, smoother running, more efficient, with happier employees and delighted customers. All of which combine to produce a happier you. Who knows, you may decide to keep running your business for years to come because you want to, not because you have to!