CHICAGO — To thine own self be true. ….Good words.
Also good: Know the true worth of your business.
Recognize the achievements you have made and the reputation you worked so hard for. Be thankful, in general, for the great things in your life, and specifically for your drycleaning business.
Do you know where your operation stands in the marketplace? It is to your strong benefit to know the real worth of your operation. There are many ways to accurately value your position.
VALUE IS COMFORT
Another drycleaning owner, and CEO, John Palms of Bibbentuckers in Dallas, Texas, also emphasizes all the various ways to determine an accurate valuation of your garment care operations.
Palms points out several mechanical ways to value your business. “Your CPA or tax accountant should be able to give you a solid number based on 3-5x trailing 12 months adjusted EBITDA.” (Means: Earnings Before Interest, Taxes, Depreciation, and Amortization.)
If they cannot, then something is wrong, he says. “Local brokers that focus on buying and selling dry cleaners can also analyze your financials and market comps to derive your valuation. Market comps tell what other dry cleaners recently bought and sold.”
Palms notes that, “Your CPA and tax accountant can also tell you how to prepare for a sale in terms of financials, tax returns, sales and tax reports, and other documents that are part of due diligence, which include: general liability insurance, workers comp, bailee for restoration business, D&O, and healthcare insurance.”
The value of the business also helps lenders and investors to get comfortable with the amount of debt and equity in the business. If you pay your bills on time, he relates, it also helps with your credit ratings and purchasing power.
Not all drycleaning owners may know the current worth of their business, so it may be time to evaluate.
It is good discipline to evaluate or appraise your business every year or two, Palms advises. It also sets the stage for what you are going to do next.
Suppliers, partners, and equipment vendors like to, as he puts it, “Do business with winners that also treat them with respect and value the relationship. If your company is growing and increasing in value, suppliers want to hitch-on as they say and partner in any way possible.”
He points out that suppliers want to know if you are going to be around for years to come: Will you continue to order the same amount or more if you are growing? And if you buy other cleaners will you continue to stay with current suppliers.
Ultimately, your client’s satisfaction and expressed opinions matter very greatly.
“It’s important that your customers value you as a service and quality provider,” Palms says. “The more they do so, the more business that mindset should bring to you as an operator.”
He describes how the affluent want to spend more money on their clothes — and the way they clean their clothes. They want consistent execution, he notes.
“Most of them are in upper management or own their own businesses,” he relates, “so they are fanatics. If you damage or destroy their garment, they want to know you can repair or refund its market value. Could be thousands of dollars!”
In addition Palms says, any owner contemplating selling his or her business should also invest $399 with OnlineBusinessAppraisal.com and get a fairly thorough appraisal or valuation of their business. “I have used the service a couple of times and been pleased.”
If understanding your true worth leads to potentially selling, then keep in mind what Palms notes, “Buyers will be attracted to cleaners that have unique niches in their market place. It could be unique route capabilities; fur, shoe and leather cleaning, household/linens cleaning,” he lists.
“Some cleaners are diversifying their services and starting in home window treatment and upholstery cleaning as well. Other cleaners may have stronger management, leadership, and financial or accounting prowess,” he adds.
“The trending of the business is also a key attraction,” Palms says. “If your sales and piece count are both up the past several years, that bodes very well for a business in a consolidating industry that has a lot of unknowns in the next decade.”
Know the accurate and updated valuation of your garment care business, whether for a possible future sale, or if you are planning to purchase a business and expansion. Also know the value of your business for yourself, as the owner, to keep track of how you are doing in your marketplace today.
Knowledge is power. Realizing your worth to clients, the market, and on the bottom-line, gives you and your family peace of mind. That becomes your truth. So be true, and let the sun shine on you.
To read Part 1, go HERE.