| What Is My Portable Restroom Business Worth |
“What’s in it for me?” As harsh as the statement sounds, it is truly the rationale prompting negotiation toward the
sale of your portable restroom business. With little public information in respect to portable restroom companies
selling their businesses, those seeking to sell are often caught in a daze, sorting through an array of justifications in
order to establish a price. Any price, is good if somewhere, somehow there is someone willing to write the check.
sale of your portable restroom business. With little public information in respect to portable restroom companies
selling their businesses, those seeking to sell are often caught in a daze, sorting through an array of justifications in
order to establish a price. Any price, is good if somewhere, somehow there is someone willing to write the check.
| Determining A Price For Your Portable Sanitation Business |
Inspired by Journal readers, this article is a collection of information harvested from experienced buyers within the
portable sanitation industry and reflects experience in more than 100 completed transactions across the United
States by an assortment of company types.
Back to “What’s in it for me.” As you prepare your portable sanitation business to sell, consider who might be a
prospective buyer and what value your business would have to them. Common rationale includes, increased market
share, improved utilization of equipment, increased market density, better route efficiencies, improved pricing
structures (buying a lower priced competitor), capitalization of a reputable name, or entry into a new marketplace.
With the exception of United Site Services and/or a handful of larger companies who have exhibited great interest in
expanding into new markets, the most common purchase agreement potential rests in the hands of those portable
restroom companies competing within the same territory.
A prospective buyer will consider how your portable sanitation business fits in with theirs. Common considerations
might include the prospect of your company being folded into their existing operations or the complete opposite
position of strategic value in your existing location.
According to industry experts, the purchase price is not determined by the seller’s hard work, the amount of sweat
put in or emotional ties to the business. The purchase price or the compelling force rests in the ability to establish
future profits for the new owner.
Gross sales and net profits for the past three years are a key factor in determining selling price. Predictable
revenues are essential in establishing value. A company who has built strong revenues based on low bid policies
might find that although it works for them, it presents less value to a prospective buyer who, if desired, could have
the same portable sanitation contract if they chose to bid it as low bidder. They could calculate the lose of the
contract once it came up for renewal deeming the contract as unstable revenue. The strength in route work poses
interest as it represents more of a day to day gauge as to revenues rather than a frenzy of business during a
particular time frame.
Profitability, ranked high for portable restroom company buyers, who explain that at times operations are
conducted out of a home with the owner working 60-70 hours a week, making a good wage, but necessitating the
new owner to hire someone or even a few people to replace the owner/owners, eroding the profitability of the
company. With the ‘home operation,’ the purchaser would need to consider the costs involved in acquiring a new
facility to operate from, if the assets were not to be folded in. The best potential to sell, for a business patterned in
this fashion would be for someone, willing to own and operate the business in the same fashion.
Experienced buyers overwhelmingly expressed value in acquiring a portable restroom company that caters to a
higher priced market, equating not only profitability but long term customer retention to the purchase. They
explained that lower average portable restroom rental rates attract customers that could easily be swayed away by
another portable restroom company offering the same. Since a major consideration in the purchase of a company
is its customers, the value of the asset decreased. An interesting statistic is that experienced purchasers anticipate
the loss of customers when buying a company. The percentage, although not a scientific number has been
expressed as high as 25%. In terms of fast numbers, a business with gross sales of $500,000 along with a price
conscious customer base could fall to $375,000 as fast as the ink dried on the check.
A buyer will evaluate your portable sanitation business structure to assure that it fits into his/hers. As an example
Company A (buyer) has an average rental price of $100.00 per month and pays service drivers $20.00 per hour
while Company B (seller) has an average rental price of $80.00 per month and compensates drivers at $15.00 per
hour. It is reasonable to expect that Company A would be forced to bring compensation up to match existing labor
standards but not likely that rental rates could be forced up without the sacrifice of a significant portion of the
customer base.
Other expressed consideration in establishing price is the general condition of the assets, age and for some the
model. Are the portable restrooms, trucks and trailers in the beginning of their life cycle or the end? In many cases,
employees and/or owners will be looked at, particularly when the transaction will take the buyer to a new market.
Qualified portable sanitation company managers are in short supply and can be a key factor in determining the
success or failure of a prospective transaction. Does the seller have a phone number that goes with the business?
Often one phone number is being used for a multi segmented business and the phone number may not be part of
the transaction, which could devaluate the value in the mind of the purchaser. Consideration is given for length of
time in the portable restroom business assuming that time has proven a measurement of maturity with a customer
base as well as pricing.
Although some consideration is given to purchasing a company because it has become a pricing thorn, many view
this type of structure as a losing proposition, defying basic principals of enhancing profitability.
Ultimately the price is based on all the above considerations. Keeping in mind that the price your portable restroom
business will sell for is only as great as what someone is willing to pay and their incentive is current and future
profits, the scale moves back a couple of notches. In reality, it has been more common during the last three to five
years for portable restroom businesses to sell for approximately 90.62% of annual sales.
In revealing the percentage rate it is important to note that the average percentage rate includes transactions where
businesses sold for as little as 50% and as high as 150% of annual sales
Consideration for profitability is included with a highly profitable portable sanitation business demanding a higher
price. Again, as an example, a business that does $500,000 in annual sales and is not a good fit or is not running
profitable, might fall into the lower percentage rate while a company running the same numbers and showing an
annual profit of $125,000 with good equipment and verifiable records might attract a buyer for 100% of annual
sales. A simplified version of calculating might be four to five times the profit number. Thus, four years at
$125,000 = $500,000.
Typically “cash” not reported will not be included in the price consideration and the fair evaluation of equipment is
an essential part of the process. All purchasers acknowledged that it was critical to come up with a fair value on
portable sanitation equipment particularly older equipment that may be edging close to the end of its life cycle.
When do you get paid? Most purchasers acknowledge that a cash payout is preferred but also negotiable. Some
agreements will go to five years utilizing annual payments although this can be risky for the seller should the buyer
default. For a purchaser, a company showing integrity in numbers, providing customer list, and detailed financial
information, a cash out transaction is a relatively safe bet. Less than good record keeping could send up caution
lights and the insurance of making sure that all is what it is said to be could be cause for a purchaser to want to
stretch payment out. Although most would prefer to cash out of a deal, many times some of the money could be
held back to insure you do not go back into business, or as a consulting agreement and/or to allow the buyer an
opportunity to verify that revenues are what they had been told.
Looking to sell in the future? Purchasers agreed that focusing on profit and running your portable restroom
business as if you were going to keep it forever is the single best way to attract buyers. They cautioned that growth
alone usually drives pricing and profitability down while being over focused on profitability could actually harm
your business in terms of overall growth. Another company shared that preparation for the future sale of your
business should include investing in company assets such as employees, rental equipment and trucks. Ensure that
you manage personnel, sales, accounts receivable and maintenance of equipment to maximize the quality of the
operation and ensure that sales and profits rise until you are ready to sell. Another purchasing veteran agreed,
explaining he would recommend putting together a year to year plan to tend to issues within your business. Start
by selling off older portable sanitation equipment and replacing it with new, until you have an inventory that
averages two-three years in age. He encouraged the upgrade of service trucks and a gradual increase of rates to
create an annual operating profit of within 20-30 percent. Watch your accounts receivable and make sure your
customers pay on time weeding out bad accounts and replacing them with good.
portable sanitation industry and reflects experience in more than 100 completed transactions across the United
States by an assortment of company types.
Back to “What’s in it for me.” As you prepare your portable sanitation business to sell, consider who might be a
prospective buyer and what value your business would have to them. Common rationale includes, increased market
share, improved utilization of equipment, increased market density, better route efficiencies, improved pricing
structures (buying a lower priced competitor), capitalization of a reputable name, or entry into a new marketplace.
With the exception of United Site Services and/or a handful of larger companies who have exhibited great interest in
expanding into new markets, the most common purchase agreement potential rests in the hands of those portable
restroom companies competing within the same territory.
A prospective buyer will consider how your portable sanitation business fits in with theirs. Common considerations
might include the prospect of your company being folded into their existing operations or the complete opposite
position of strategic value in your existing location.
According to industry experts, the purchase price is not determined by the seller’s hard work, the amount of sweat
put in or emotional ties to the business. The purchase price or the compelling force rests in the ability to establish
future profits for the new owner.
Gross sales and net profits for the past three years are a key factor in determining selling price. Predictable
revenues are essential in establishing value. A company who has built strong revenues based on low bid policies
might find that although it works for them, it presents less value to a prospective buyer who, if desired, could have
the same portable sanitation contract if they chose to bid it as low bidder. They could calculate the lose of the
contract once it came up for renewal deeming the contract as unstable revenue. The strength in route work poses
interest as it represents more of a day to day gauge as to revenues rather than a frenzy of business during a
particular time frame.
Profitability, ranked high for portable restroom company buyers, who explain that at times operations are
conducted out of a home with the owner working 60-70 hours a week, making a good wage, but necessitating the
new owner to hire someone or even a few people to replace the owner/owners, eroding the profitability of the
company. With the ‘home operation,’ the purchaser would need to consider the costs involved in acquiring a new
facility to operate from, if the assets were not to be folded in. The best potential to sell, for a business patterned in
this fashion would be for someone, willing to own and operate the business in the same fashion.
Experienced buyers overwhelmingly expressed value in acquiring a portable restroom company that caters to a
higher priced market, equating not only profitability but long term customer retention to the purchase. They
explained that lower average portable restroom rental rates attract customers that could easily be swayed away by
another portable restroom company offering the same. Since a major consideration in the purchase of a company
is its customers, the value of the asset decreased. An interesting statistic is that experienced purchasers anticipate
the loss of customers when buying a company. The percentage, although not a scientific number has been
expressed as high as 25%. In terms of fast numbers, a business with gross sales of $500,000 along with a price
conscious customer base could fall to $375,000 as fast as the ink dried on the check.
A buyer will evaluate your portable sanitation business structure to assure that it fits into his/hers. As an example
Company A (buyer) has an average rental price of $100.00 per month and pays service drivers $20.00 per hour
while Company B (seller) has an average rental price of $80.00 per month and compensates drivers at $15.00 per
hour. It is reasonable to expect that Company A would be forced to bring compensation up to match existing labor
standards but not likely that rental rates could be forced up without the sacrifice of a significant portion of the
customer base.
Other expressed consideration in establishing price is the general condition of the assets, age and for some the
model. Are the portable restrooms, trucks and trailers in the beginning of their life cycle or the end? In many cases,
employees and/or owners will be looked at, particularly when the transaction will take the buyer to a new market.
Qualified portable sanitation company managers are in short supply and can be a key factor in determining the
success or failure of a prospective transaction. Does the seller have a phone number that goes with the business?
Often one phone number is being used for a multi segmented business and the phone number may not be part of
the transaction, which could devaluate the value in the mind of the purchaser. Consideration is given for length of
time in the portable restroom business assuming that time has proven a measurement of maturity with a customer
base as well as pricing.
Although some consideration is given to purchasing a company because it has become a pricing thorn, many view
this type of structure as a losing proposition, defying basic principals of enhancing profitability.
Ultimately the price is based on all the above considerations. Keeping in mind that the price your portable restroom
business will sell for is only as great as what someone is willing to pay and their incentive is current and future
profits, the scale moves back a couple of notches. In reality, it has been more common during the last three to five
years for portable restroom businesses to sell for approximately 90.62% of annual sales.
In revealing the percentage rate it is important to note that the average percentage rate includes transactions where
businesses sold for as little as 50% and as high as 150% of annual sales
Consideration for profitability is included with a highly profitable portable sanitation business demanding a higher
price. Again, as an example, a business that does $500,000 in annual sales and is not a good fit or is not running
profitable, might fall into the lower percentage rate while a company running the same numbers and showing an
annual profit of $125,000 with good equipment and verifiable records might attract a buyer for 100% of annual
sales. A simplified version of calculating might be four to five times the profit number. Thus, four years at
$125,000 = $500,000.
Typically “cash” not reported will not be included in the price consideration and the fair evaluation of equipment is
an essential part of the process. All purchasers acknowledged that it was critical to come up with a fair value on
portable sanitation equipment particularly older equipment that may be edging close to the end of its life cycle.
When do you get paid? Most purchasers acknowledge that a cash payout is preferred but also negotiable. Some
agreements will go to five years utilizing annual payments although this can be risky for the seller should the buyer
default. For a purchaser, a company showing integrity in numbers, providing customer list, and detailed financial
information, a cash out transaction is a relatively safe bet. Less than good record keeping could send up caution
lights and the insurance of making sure that all is what it is said to be could be cause for a purchaser to want to
stretch payment out. Although most would prefer to cash out of a deal, many times some of the money could be
held back to insure you do not go back into business, or as a consulting agreement and/or to allow the buyer an
opportunity to verify that revenues are what they had been told.
Looking to sell in the future? Purchasers agreed that focusing on profit and running your portable restroom
business as if you were going to keep it forever is the single best way to attract buyers. They cautioned that growth
alone usually drives pricing and profitability down while being over focused on profitability could actually harm
your business in terms of overall growth. Another company shared that preparation for the future sale of your
business should include investing in company assets such as employees, rental equipment and trucks. Ensure that
you manage personnel, sales, accounts receivable and maintenance of equipment to maximize the quality of the
operation and ensure that sales and profits rise until you are ready to sell. Another purchasing veteran agreed,
explaining he would recommend putting together a year to year plan to tend to issues within your business. Start
by selling off older portable sanitation equipment and replacing it with new, until you have an inventory that
averages two-three years in age. He encouraged the upgrade of service trucks and a gradual increase of rates to
create an annual operating profit of within 20-30 percent. Watch your accounts receivable and make sure your
customers pay on time weeding out bad accounts and replacing them with good.
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August 2006
Serving the American Liquid Waste Industry Since 2002