Accountants and brokers will often pluck a figure out of the air based on the EBITDA (or pre-tax profit) with a multiple applied (depending on the industry/sector). So a firm making £100,000 pre-tax profit with a 3 x multiplier would be valued at £300,000.

However, the level of successful exits/acquisitions in the home improvement industry is among the lowest of any industry, for two main reasons;

  1. The business will have provided lengthy warranties to customers which will require ongoing support, service calls and potentially large claims going back many years. These huge liabilities will stay with the company and the new owner will be responsible for them.
  2. Most home improvement companies do not benefit from repeat sales. While some firms may have contracts (eg with a local authority or house-builder) most are completely dependent on fresh leads which means they are inherently high risk.

When a buyer assesses your business as a potential acquisition, they will ask;

  • How long will it take before I have recovered the price I paid together with additional investment (in the case above, on a business making £100,000 profit, with a £300,000 valuation, it would take 3 years which means it will be year 4 before the new owner makes a profit).
  • What is the value of contracts already installed that are under warranty?

At Sustainium, we have decades of experience in the home improvement industry and we understand how it works. This means, if you do sell your business to us, it is in safe hands.

Our team will make a valuation and offer based on many different factors, and we are in a position to move quickly.

What if there is cash reserves in the business?

Businesses can accumulate cash because the high cost of dividend tax makes it unattractive to take funds out of the business. However, by structuring the deal correctly, the owners can sell their business and extract cash benefiting from a significant reduction in tax using the new government Business Asset Disposal Relief (previously Entrepreneurs Relief).

Next Steps

Details of the process involved Sustainium Group acquiring your business can be found here, or you can contact us on business@sustainium.co.uk.