Monday Business Review: Custom Closets
It’s Monday again. Welcome back to the typical work week.
We want to start bringing some regular pieces of content to The Steel Road. Every Monday, we’ll send you a business that is for sale that you can use as a blueprint for starting your own business.
This is a key principle, beginning with your business’s exit in mind is essential to maximizing value. In fact, we recommend this book for more on that subject: Maximize Business Value: Begin With the End in Mind.*
Today’s business highlight will have you aspiring to be Jay Pritchett, Modern Family’s business mogul.
Closet and Shelving Design
This business is brought to us today from Sunbelt Business Brokers and is located in Tennessee.
In our humble opinion, this actually seems like a poorly run and scaled business. In 7 years it seems cash flow has never grown past $100,000. Typically service businesses like this go for at least 1 x Seller Discretionary Earnings(SDE) or the cash flow. Often you can see ever 2-3 x SDE on businesses like these. Because it’s selling for 0.78 x cash flow this points to some major operational or cash flow problems.
Because of this, we DEFINITELY don’t recommend buying this business, but it can still be the basis of a good idea.
Getting Started
Custom closet buildouts address a major pain point for homeowners. Inefficient use of storage is incredibly common.
There are several large players in the custom closets industry. California Closets is probably the biggest with over 2000 locations across North America.
Essentially your goal is to go from spaces that look like this:
To spaces that look like this:
These closets are examples from Build.com, a site that provides furniture and shelving builds. Anyone can build these closets with basic tools and knowledge.
Get a practice build under your belt.
If you’ve ever built Ikea furniture you know following those directions can be tricky. Survey friends or family to see if anyone is looking to improve their closet space. Offer to do theirs for free if they’ll cover the cost of materials.
This will help you practice measuring the space, asking questions to determine what they want and how to build it, ordering the materials, and putting it all together.
Once you’ve completed it to their satisfaction, be sure to gather a review on your Google Business page. I mean you did it for free, it’s the least they could do.
If you feel you need more practice repeat the same process.
Once you feel confident and can provide a good customer experience, begin to scale to paying customers.
Now that you are scaling your business, learn from others’ mistakes to build an operationally sound, efficient business.
Use these resources to:
Get customers for your business.
At first when cash is tight, focus on free customer acquisition channels.
As you scale then you can branch into paying for ads.
Gather reviews for every single job you do.
This will have a huge effect on your SEO and eventual paid ads.
Use a tech stack to stay organized and efficient.
Use Airtable to organize bids and manage projects. Easily track shipments and installs so you don’t make big mistakes.
Collect online payments with a payment processor.
By starting your business with these focuses in mind, we’ll find it in 5 years listed at $500,000 revenue, 5 employees, at an asking price of $1,000,000.
Sounds pretty good huh?
Take 2 seconds to click a link and give feedback on this post.
With your feedback, we can improve the newsletter. Click on a link to vote: