Hey guys! It’s another episode of Junk Removal Made Simple brought to you by the Junk Removal Authority. My name is Lee Godbold and I am with the Junk Removal Authority. The junk removal industry’s premier provider of business packages, websites, search engine optimization, call center, and many other products. You check us out at junkra.com. Today what we’re going to talk about is how to sell your junk removal business for $1,000,000.
One of the very first step you have to do is believe that this is possible. So, a lot of people when they start a junk removal business, they’re not going for a million dollars. They’re going just because they are trying to work for themselves and probably trying to equal or make a little bit more money than they’re currently making. A lot of people that are in the business are like me from before. We were always making under $20,000 a year when I started this. I thought about a million-dollar business, not necessarily that I want to sell, but I certainly believed it was possible. I didn’t know how the hell to get to it, but I did know it was possible. That was one of the major things it’s allowed us to build an organization to this size because I believed that it could be done.
So, that’s your very first step is you’ve got to actually believe it is possible. It’s being done all throughout the country. You’ve got 1-800-Got-Junk? franchises, Junk Doctors and locally owned businesses that are making enough money to be sold for a million dollars. Some are being sold for a million plus all over the country. There are people in every market that are making great money that could lead to a $1,000,000 business. Here’s a few things to remember. Number one, you got to know it’s possible. Number two, there is no way it can only rely on you. That means the business cannot rely on your day to day operations on it. At that point, you can’t ever be on the truck unless there are some random occurrence where you’re subbing in because you’ve got several people out sick. Then the other one time you’d be on the job is when you stop-in to make sure things are being done correctly. If the business relies on you, that business probably worth just what you have as far as the equipment and whatever equity you have in the equipment. It might be worth more if you’re paying yourself a fair salary. However, even if you’re paying yourself a fair salary to manage the business, the business is going to be worth more to an investor and that’s who you need to aim this at as an investor. It’s going to be worth more to an investor if you’ve got a manager in place and not it’s not relying on you at all for day to day operations. You’re making sure things are ticking along correctly, but you’ve got a manager that is in place and has been running things correctly.
So, a few things that have to happen to get to that $1,000,000 a year business. Number one, you need to build it to sell. Right from the very start or if you’re already in business, you need to begin working towards this. You need to be setting up, even if you don’t even plan on selling. I don’t plan on selling Junk Doctors but we’re always building it to sell. We’re always trying to maximize its value. If we ever do want to sell it, great. If not, we’ve got a great sound business that doesn’t rely on us if we’re constantly building it to sell. You need to build it for an investor. Anybody that’s going to spend $1,000,000 is going to be an investor. That doesn’t necessarily mean that they are investors. Not that he’s going to want to be completely hands off, but there’s a good possibility that particular person will. That particular person’s looking to spend a million bucks and they want to get that money back out of anywhere from five to ten years. They want to make sure they get that back out of that business. It needs to be built to run without you.
It needs to be systemized but what does that mean. It means that every aspect of the business is documented and you have established procedures in place. You’re not just winging it. We’ll get into that further in just a minute. Then the final thing once you’ve got it to that point, you’re going to need to monitor it. You need to make sure that the systems you’ve created or the systems that you use are being done correctly. You still need to stop-in on jobs. You still need to do some with occasional customer follow-up calls. You still need to make sure that your team members are getting in on time and your manager is doing their job. Watching your numbers crazily like a hawk is extremely important. Looking at that P&L statement and have some other metrics that you follow. So, these are general principles to get your business to that $1,000,000 price point.
I will actually tell you the exact order of the steps that you need to do if you’re starting a brand-new business to get it to that point. How do you determine the value of a junk removal business? The easiest thing is going to be the multiple of revenue. Generally, it’s going to be worth somewhere between three to five times your net profit as a multiple of revenue. So, its valued three to five times the net profit and that’s after paying yourself and your manager. Again, ideally you have a manager and you’re not the one managing it if you’re actually looking to sell. If you enjoy the work and the management aspect of it and want to do it, that’s great. You also make more money because you save on not having to pay that manager. However, if you’re serious about wanting to sell it, it’s more valuable if you have a manager in place and had a manager in place for some period of time and that the business has continued to be successful without you doing all the day to day operations. It’s more desirable with that manager. It’s less desirable if the majority of your income is from just a few customers. We’ve got some big customers in couple of our locations and when we first started out. We were lucky we went into Charlotte and got this massive contract. It was a point where 70% of our revenue is in Charlotte.
That’s kind of scary because you’re going out there buying trucks and hiring people. Everybody is relying on that contract to continue renewing and bring in as much money as it currently does. An investor is not going to be interested in the business if you only have one or two contracts that are bringing in pretty much all of your money. Do not rely on just a few customers, all it takes is that one customer to go out of business and quit offering the service they need you to provide. When you’re relying only on one or two of anything, it’s not a good thing and investors are going to shy away from a business that relies on just a few people. It’s worth more with a longer track record.
You need to have at least a minimum of two good years and you’d love to have three good years. You want to see your net profit consistently growing, hit a certain point and then still be growing over about two to three-year period in order to get that five times multiplier. You’re going to need three years of history to get that five times net profit. You might be able to get three times net profit in two-year history. Then obviously as I’ve said before, it’s worth a lot more if its systemized. If you’re winging it by relying on just one or two really good employees then it will worth less. It’s the system that the people want and will worth a lot more if it systemized. We’ve covered how it’s valued. Three to five times net profit plus whatever cost of equipment you have or any other property you own.
So, what are some concrete steps you need to take to get you a million-dollar business? This is going to be for those who are not in business right now. In a million-dollar business, you’re going to need around $250,000 profit and that’s give or take obviously. That can vary a little bit, but that’s net profit after all expenses and employees have been paid. You need to see about $250,000 profit and you’re going to need that for two to three years. Now, once you get that $250,000 profit, it needs to continue growing. You don’t want it to be limited to just that for two to three years, it needs to be rising. An investor wants to see some consistent growth. You’re going to need operations manuals and managers in place.
You need to keep a meticulous financial record and know your numbers at all times. You need to know exactly what your expense percentages are and if an expense percentage begins to get off, you need to be able to address that. You have to pay all taxes, don’t get behind with the IRS. Always file your taxes, don’t hide income and report everything. If you’ve got $100,000 a year in cash that you’re not reporting, that might be great for you to spend and you saved that 30%, but you’ve missed out on an income. You’ve made your P&L statement look a lot less, which will make your business worth much less. So, you got to put on your income and do all the taxes.
Let’s roll straight into the concrete steps that you need to do to get yourself to a million-dollar business. Number one, get the right mindset. That’s the very first thing and we’ve talked about it right at the start. If an opportunity or decision needs to be made about anything about going into demolition, new construction, clean up or whatever. You need to always keep it in context. If you truly want to build a business worth a million bucks, you need to keep it in context which is “will this move lead me to have a million-dollar business”. If the answer is no, there’s a good chance that you shouldn’t do it. You need to start right. You need to go out, get incorporated and insurance
It is expensive and it’s going to hinder your profits at the start for sure because there’s a lot of fixed cost here. Incorporating is not expensive, but the insurance part is expensive. Your worker’s comp is expensive. Your DL is not extremely expensive, but you’re going to be hitting that minimum amount at start. Your commercial, although it’s just one vehicle, is as far as a percentage of income is pretty high but you’ve got to do that. You got to protect yourself if you get sued, major accident or big worker injury. You could be dead on arrival. You will be gone before you even got started to get to that million-dollar price point. So, you’ve got to get insured. To remove time, you need to get that system.
This is why JRA and our business packages are so neat. You’re can remove time from the equation. You can remove years from the time it takes you to get to this point by going ahead and having a system in place. If you go with a franchise, you know you’ve got that going for you. If you’re not the franchise person or if you don’t have the money to spend on a franchise, for just $7,500 bucks we’ll get you our business package. Every single person out there can figure out a way to come up with $7,500 if it’s going to lead to you getting a million-dollar business. I can promise you the materials, video training and operations manual we provide. Depending on when you buy this, we either have hundreds or thousands of hours into the system. $7,500 bucks gets you so far ahead of the game. It wasn’t around obviously because we created it when Junk Doctors got in business. If it was, I’d find a way to come up with $7,500 and get it. Otherwise, what I’ve already said that one of the steps you’ve got to do to get it to that point is you got to have operations manuals and systems in place. Instead of you spending the hundreds or thousands of hours developing it, it’s already done for $7,500.
It can be yours, just let us know if you want that step. For those of you that are going to skip that step. I know there’s going to be a few of you that do. If you’re not going to do this step, you’re going to have to cut personal spending back unless you’ve got money already, significant savings or other income. To get this done in any reasonable timeframe, you’re going to have to be very aggressive on your spending and advertising to get to this $1,000,000. That means you’re going to live extremely cheap. As Dave Ramsey says “beans and rice, rice and beans”. Ramen noodles, you can add that in there. That’s pretty much what you’re going to have to do if you’re going to be really serious about getting to that level of income. If you have a spouse that works, that obviously helps offset how cheap you might have to live. Still you’re going to have to cut back to make this work.
You need to advertise like a maniac and sell like a maniac. It is a very noisy world out there. There’s been umpteen dozen junk removal companies that have come in the business scene, even before Junk Doctors got in business. We’ve had some scenes go out, but all the time you turn around there’s another business coming in. Everybody’s got a website now. Most people are trying some form of SEO. A lot of people were doing it on their own with poor results a lot of times. What happens though is if you have a bunch of business doing it on their own, some of poor results or if they’re going out there and they’re hiring a cheap SEO company that might be getting them on the first page but not towards the top of the first page. You’ve got a lot of people kind of running in the middle. You got a lot of people running in the middle of the pack.
You’re not going to be successful if you’re running in the middle of the pack. If you want to get your business into a million-dollar business, you’ve got to commit to really grow at large. You should not dabble. I say it all the time, do not dabble in this business or you are going to get crushed. You might as well be work for somebody else. It can get scary having this advertising, Google AdWords and SEO. We charge $1,500 a month for SEO. What a good SEO firm charges is pretty scary. We tell people it’s going to take six months, so that’s close to $10,000. To get to like a top four ranking, depending on your market, is in about six months. It could be sooner than that depending on your market and it’s not a 100% guarantee but that’s what it’s going to take to get you up there. You’ve got to be willing to accept. You got to be willing to lead. You can’t be in the middle of the pack to make this work.
You need to be a stickler on the details. This is one of the hardest things. One of the most critical things as you grow is the phone stuff like who’s answering your phones. It is amazing how many more appointments you can get by properly explaining pricing, asking for the close and having some basic sales skills to get people booked. You can increase over 100% more bookings. I mean, take somebody that’s not very good on the phone and replace them with somebody that is good on the phone and they can do three to four times the amount of bookings easily by just asking for the sale and knowing how to explain things. So, if your phone job quality begins to falter then you’re not going to get referrals. You’re not going to get good reviews and repeat business.
One of the most difficult things, is as you grow and you get off the truck, start hiring people and you get a manager in place is you’ve got to check over these people and make sure they’re still doing a good job. If not, your growth is going to get stunted and you could actually retract. If you get a bad reputation online, your business is going be much less valuable to a potential buyer.
You need to charge enough to profit. A lot of people want to go in and they want to be the cheap competitor. I mean, that was our strategy, if we’re going to go in business, we’re going to be cheaper than names like Got Junk. I’m going to be the cheapest person out there and everybody’s going to find this. They’re going to use us because we’re so much cheaper and we’re willing to work hard. We’re going to get more volume to make up for the less price and we’re going to kick everybody’s ass by just being the cheapest competitor. The issue with that is, nobody’s going to find out about you. We just talked about how you have to advertise like a maniac. You’re not going to have the money to advertise like a maniac if you’re not charging enough money. You can have the cheapest best service in the world out there but if nobody knows about you, you’re not any good to anybody.
People really aren’t going to take the time to go through what I say earlier about the Google rankings. I’m not going to take the time to go through eight or 10 different junk removal companies. They’re going to look at two to four and after that, if you’re already lower, the only people that are going to find you are the people that are shopping for the absolute lowest price. You better be the cheapest person to get that job but that customer right there, as soon as you raise your prices, they are not coming back to you. That’s not a repeat customer. That’s somebody that every single time all they’re doing is looking for the cheapest company. Got to charge enough to make a profit so you can afford to reinvest in advertising your business.
This goes back to advertising super aggressive, you need to be super aggressive for the first three years. Your business for the first three years will pretty much consumed your life. Those first three years are critical to your long-term success and you getting to that million-dollar year business. After year three, you can then start getting that manager in place and beginning to have more freedom than you’ve ever had. Certainly, when running your business and even as for working for somebody else. It takes sacrifice. You’ve got to put off today for a better tomorrow. If you can’t do that, then you’re not going to get to this point. You’re not going to have a successful business. That first three years require so much time, thought and effort. It’s crazy and a lot of people get burned out. They’ll never make it to that because they’re not going to be able to dedicate three years to really focusing in on their business. It’s a lot of family sacrifice too. Before you get into business, you need to talk this over with your wife and family. Make sure this is something that you’re going to be able to do. Try to involve them because business can be something that’s really fun with the right people and for a family to get really tackled. If you’re not willing to make that sacrifice, you probably shouldn’t get into business if the goal was to do this.
Know your numbers. I’ve said this a few times for a reason because it’s important. Your profit and loss statement and cashflow are by far the most important. You need the cashflow to stay in business. Normally in junk removal you don’t have enough debt to cause the cashflow to be an issue or you don’t have enough customers you bill where you’re behind collecting receivables. That’s normally not the case. Generally, your P&L statements will be your most important. In some businesses, cashflow is the most important because if you don’t have the cashflow, you don’t have operating capital. Watch both of those very carefully. Your labor percentage, if it takes up a little, you need to be aware of it because you need it. You’ve got somebody under quoting or you had to raise your pay people’s pay and you haven’t upped your price. You really need to watch out for that.
That’s one of the things you looking at on your P&L. You also need to know which advertising is working and not working. If you work with us on our business package, we’re going to tell you what works and what doesn’t. I’ll come out right now and let you know that online advertising is where it’s at now. However, you also need to be visiting apartment complexes, getting on the phone and talk to professional organizers and getting involved in Chamber of Commerce meetings, but you need to track that stuff. Print advertising for the most part doesn’t work. It’s not very profitable. It doesn’t mean you shouldn’t do it. We did it for a long time because we were aiming for this. We knew that if we got out there, even if you’re losing a little bit of money on each job we did, we were building a potential long-term customer which would lead to referral business and out reviews then obviously that repeat business.
The lifetime value of the customer can be worth it on print advertising. We’ve dropped most of our print though in recent years as we’ve gotten to the point where we’ve exceeded this and then we started really focusing it on max profit. You got to get the sales first. Once you have all the sales, then you start focusing on profit. You’re not going to get to $250,000 a year net profit out of $250,000 of sales or even $500,000 in sales. You’re probably going to need closer to $1,200,000 to $1,500,000 to get to the $250,000 net profit with a manager in place. So, you got to get the sales first, then focus in on the profit. Have a manager. If you want to continue managing, just make sure you’re paying yourself a fair salary for a manager and have at least a couple of supervisors in place that can run stuff when you go out of town. If you give this thing three years of hard work, you want to be able to take some vacation after that. You need have a supervisor in place that can keep things rolling. Then you need to monitor results, once you have that manager. You got to make sure they’re doing what they’re supposed to be doing.
This all comes down to not thinking you’re a junk man. You’re not a junk man. When you get in this, you’re a business person. It just so happens that you chose junk removal. I’m not passionate about junk, or junk don’t turn me on. To somebody that we get into business, they’re turned on by junk. They want to go out there to save the world by recycling and donating, and being extremely environmentally friendly where they go in through the stuff and selling it, that sort of stuff. That’s not me and never was. It was just junk removal was the business that I kind of fell into and it’s a great business to get in. That’s the reason I’m pushing it now. Once we’ve gotten to this point, I’m trying to get people on the same level but it’s not about the junk. It’s about the opportunity to build you a great business that you can pass on to your family or sell to look after yourself and your family and provide good employment for a lot of people. It’s not going to be about the junk. You’re a business person, you’re going to make smart business decisions to get to that point.
So, when you get ready to sell it and got to the point where you have a million-dollar business, you just got to put it into a call or some business brokers. Just like a real estate broker, there are business brokers out there. There’s online and local. You want to get listed on both, if they’ll let you list on both. You need to ask around to get details. Some people want an exclusive listing. Some people you can list with multiple avenues. Ideally you want to be less than multiple different avenues because that’s going to open you up to the most amount of people. Selling your business locally can definitely work, but you don’t want to exclude online. If you get to the point where you have a manager in place, you’re not needed to be directly involved in the day to day operations and that business is profiting $250,000 a year. You’ll get people living all throughout the country interested and potentially purchasing your business
When you get this thing built to a $250,000 a year profit, you’re going to really question yourself like, why do I want to sell? I got a business bringing in $250,000 a year. I might have to work five or 10 hours a week. Why sell the business and get that million dollars? I could have that anyway in five years. That’s a decision you’re going to have to make. I think a lot of people set this as a goal, it’s a great goal. I imagine a lot of people once they get there, they are not going to want to sell because you’ve got such a great investment. That’s the reason somebody is coming in and they’re willing to purchase it from you. It’s a great target to make but if you want it accelerated, if you want to remove time from the equation and want to have much lower overall investment by like $100,000 lower. Our business packages going to get you straight, it’s going to get you educated. It’s going to get you a system in place where you can come into a market with hard work, dedication and aggressiveness towards advertising. You can really begin to dominate your particular market just as we did in the markets, we’re in. Give us a call at 919-617-1975 or visit us online at junkra.com. We got a lot of great free information on junkra.com. Looking forward to hearing from everybody. Hope you all enjoyed this video and we’ll be back before you know it. Thanks guys!