personal decision

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thefairchilds7's picture
thefairchilds7
Status: Member (Offline)
Joined: Jan 12 2011
Posts: 2
personal decision

 

I have a pool service company that has a sale value today of 225k . The business consists of many pools, 3 gas powered service trucks, two employees and me. We have a service area of 100 miles. 

What is your opinion of pool service in the current transition?

Depending on this question... should I sell? 

I might be able to buy 23 acres from my wife grandparents for they are getting older and no longer able to keep up with the land in their "later years".

Please, What do you think?

Eric,

family of six

 

earthwise's picture
earthwise
Status: Platinum Member (Offline)
Joined: Aug 10 2009
Posts: 846
Re: personal decision

Hi Eric,

I would think that as the economy declines there will be more and more people forced to choose between necessities and luxuries like a pool. It's already happening. As that happens it seems that your business would decline accordingly. Ditto for Peak Oil.

It all depends on your assessment of if/when/how much of a decline will occur. Some folks think we'll have a Mad Max scenario; others (myself included) don't. See this thread.

I'm in a similar situation with my landscape contracting company. I don't think in a seriously degraded economy, a landscaping or a pool business would be sustainable. However I live on four acres in a rural setting with open land available and am currently developing some farming activities as a backup. If TSHTF in an extreme way then I'm prepared. If not, then great, I have I have a supplemental source of income and a reduced food budget. Redundancy is good. 

Yours is a tough choice. A year ago I very seriously considered bugging out by selling everything and moving to another, more sustainable, part of the country. I still think about it occasionally. I would think it would be awfully tempting in your situation to cash out and buy land especially if you can own it free and clear, even more so with (great)grandparents around. Is the land agricultural? If so, it would seem like an enticing opportunity for you. You'll probably agonize over this decision, but I think ultimately you've got a choice between two great outcomes. You know what the status quo is in your current situation. Explore the possibility of a farming lifestyle and see if it might suit you.

Welcome to CM.com and good luck.

rhare's picture
rhare
Status: Diamond Member (Offline)
Joined: Mar 30 2009
Posts: 1323
Re: personal decision

 Here are some questions you might want to consider:

1) What would you do for a living once you sold the business?  225K is not that much to live on, particularly for 6 of you. At best it might be 5 years, then what?

2) How bad would taxes eat up that 225K?

3) Do you have something else you could transition the business into?  For example, assume you have plumbing licenses, can you begin offering plumbing services?  How about adding solar-hot water to your offerings?  Solar pool heating?  That might give you a method to transition from a "luxury" type service to a "necessity" type of service provider?

4) Of course, if you have other skills, or the farm (23ac) is a business, it might be a good time to make a transition.

PastTense's picture
PastTense
Status: Bronze Member (Offline)
Joined: Dec 13 2010
Posts: 47
Re: personal decision

A key question:

What is your income (your salary plus profit) from this business? If 225K is a couple years income I would be inclined to keep the business. If it several years income I would be inclined to sell.

thefairchilds7's picture
thefairchilds7
Status: Member (Offline)
Joined: Jan 12 2011
Posts: 2
Re: personal decision

I received 60k in salary for 2010.

Thanks for your input

Jager06's picture
Jager06
Status: Gold Member (Offline)
Joined: Dec 2 2009
Posts: 395
Re: personal decision

Make the farm a business.

Buld a solar powered, greenhouse based, aquaponics system and sell the excess produce to your local grocey chains as locally grown organic food.

See "Friendly Aquaponics" in Hawaii for details.

Don't make over $500k a year while you are a it, or the S510 "Food Safety and Modernization Act" folks get you, on behalf of Monsanto.

Or not.

Just trying to stoke the fires for you.

 

 

PP Mazzini's picture
PP Mazzini
Status: Member (Offline)
Joined: Jan 8 2011
Posts: 12
Re: personal decision

If I was in your shoes, here is the thought process that I would run through:   

1.  You are proposing to sell you business for 3.75x the amount of annual income that the business generates.  Effectively, you are getting 3.75 years of income up front.

2.  What is the expected rate of decline in the business' income during the transition?  Personally, I expect the transition to be quite gradual. You have to assume a percentage rate in decline in revenue.

3.  If you were to sell the business either now or at some point in the future, what type of cash flow would the alternative investment generate?  What kind of cash flows can you expect to generate from the land that you would like to buy? 

4.  Finally, you have to run lots of different scenarios, incorporating a variety of assumptions on points #1, 2 and 3 above.  Make a chart showing the cash flows from the pool business vs. the cash flows from the alternative use of funds, for each scenario.  Compare the various options, and using the most reasonable assumptions, ascertain the course of action that results in the maximum cash flow over whatever period you have in mind.

Here is an example: 

Pool business revenue declines by 10% per year for ~4 years.  Keep the business for ~4 years, and sell it then for 3.75x cash flow.  Total cash in this scenario is:

Revenue (at 10% annual decline rate)

Yr 1:  60,000

Yr 2:  54,000

Yr 3:  ~49,000

Yr 4:  ~44,000

Total = ~207,000

Proceeds of sale = 44,000 x 3.75 = $165,000

Total cash if business is sold after 4 years = 207,000 + 165,000 = $372,000

So, you take this number, and compare it to selling the business today for $225,000, plus the revenue that you'd earn in years 1 through 4 through the alternative use of capital. 

Good luck

 

 

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