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View Full Version : Wanting to buy Commercial lawn Biz-need Advice is it worth this much?


Vanessa31
06-01-2005, 09:15 PM
hello everyone, I wanted as always to know what your advice is regarding a business we are interested in. they have been in business for 3 years, the owner does not work the business he just does the bidding and billing,

he has 4 employees that work it, he has a manager that he pays $35,000/year, so we are thinking that if we decide to buy this biz, that my husband can work full time in it and get more residential accounts for his to do on his own. Anyway I am not sure what to offer the seller if we decided to buy it, we will meet him in 2 more days so I will check everything out and see if its worth it, what do you all think, the business has seemed to grow a lot in just 3 years.

they also gave me the last 3 years of tax returns, according to the income tax papers in 2004 he made $267,824 $85,000 owner benefit

2003 he made $219,137

2002 he made $116,000

here are the details, by the way I will have an accountant review all the tax returns

The biz has 20 accounts total

Price of business is $130,000 with a downpayment of $60,000 he is willing to do owner financing and get paid within 3 years

4 big commercial accounts that bring in $15,732

14 residential bring in $1,425

TOTAL MONTHLY INCOME $17,157


says equipment is worth $45,000 belwo is the list of everything included. long list.....

EQUIPMENT

2002 ISUZU 4 DOOR TRUCK W/LANDSCAPE DUMP SIDE LOAD DOOR

24 FT TRAILER W/EXTENDED TUNG

1-LAZER Z TRACTOR LIQUID COOLED 52" MULCHING DECK

1- TURF TRACKER HYDRO DRIVE 48" MULCHING DECK

1- TURF TRACKER HYDRO DRIVE 36" MULCHING DECK

4- WEED EATERS

3-EDGERS

1-HEDGE TRIMMER

HT-75 SAW

3- STIHL 16" CHAIN SAWS

1-STIHL CHAIN SAW

ASSORTED HAND TOOLS, LADDERS AND MISC ITEMS


IRRIGATION

WIRE TRACKER

MISC TOOLS AND PARTS


PEST CONTROL

TRUCK MOUNT 200 GAL SPRAYER W/300 FT HOSE ELECTRIC REWIND

6X12 ENCLOSED TRAILER

BR-420 FERTILZER SPREADER

LESCO FERTILIZER SPREADER

SPILL KIT


Let me know what you all Think

Vanessa31
06-01-2005, 09:24 PM
By the way we are supposed to meet with the owner and look at the equipment in a few days I am making a list of questions to ask him, but before we meet I will have an accountant review the tax papers. anyway what questions do you guys think we should ask?

Green Pastures
06-01-2005, 09:29 PM
I've always wondered......... what guarantee do you have that his current customers will stay with you once you buy the business.

Without his customers you have $0 in monthly income and a big bill to pay.

Not trying to be a stick in the mud, but does he have these people under contract. How does selling the business to you effect those contractural obligations?

Will his employees stay on and work for you?

Some things to think about.

ed2hess
06-01-2005, 09:35 PM
I think this is very risky because you would have a very high amount of your income coming from those 4 commericial accounts. You better look long and hard at what it is going to take to hold those accounts!!

Vanessa31
06-01-2005, 10:03 PM
Hi, That is a very good point

I will ask him if he is under contract with them, and if so if the customer has to stay with them till the end of the contract even if he sells the biz,

the business name will remain the same, so i am not sure f the customers have to know that the company is being sold since we would keep the same employees

Its a bit tough getting in to this kind of business since we are the new to it, and Thanks to you all for all your help with this Big decision, this sounds a bit risky so we do have to think about it long and hard

arkylady
06-01-2005, 10:05 PM
...the owner does not work the business he just does the bidding and billing...

...in 2004 he made $267,824 $85,000 owner benefit...

If I had a business that made me $85,000/year and all I had to do was billing for 20 accounts, I can't think of many things that would motivate me to sell it ... can you? I'd be very careful.

old dog
06-01-2005, 10:07 PM
If the employees come with it,if he will help you out for a year(under contract,then maybe).Have a mechanic tell you if the equipment is worth that!

nelbuts
06-01-2005, 10:31 PM
So here is what you have.

Contracts with condos that will expire in less than a year.

Condos are a funny breed. If they are stable and the board does not change much from year to year then you are in pretty good shape. However, if the board changes often then you have problems. One year they want one thing then the next it is something else. You may get board members who want to give the condo to a friend of a friend of a friend even though you do good work. They may change property management companies that have a favorite maintenace company they work well with and you will be history.

So I would be very leary of the purchase.

Having said that offer him two months worth of the contracts spread out over 6 months for the business. Then offer blue book for the truck and 30% of the retail price for the equipment. If all is correct then he should get about what his net is for one year. Also, have him sign an agreement that he will not contact or divulge information to others on the contracts you purchase. Otherwise walk away and start from scratch.

Here is an example for you. The 200 gallon sprayer is probably a poly tank and would cost about $2,900 new. Used and in good condition about $1,500 if less than 2 years old.

BTW I live just up the road in Punta Gorda.

CutNLawns
06-01-2005, 10:49 PM
If I had a business that made me $85,000/year and all I had to do was billing for 20 accounts, I can't think of many things that would motivate me to sell it ... can you? I'd be very careful.

This is exactly what I was thinking.

promower
06-01-2005, 10:50 PM
I have to agree this is a risky situation, the business relies on 20 accounts. If the 4 big ones alone dont contintue service with you, your out a lot of cash. Personally I would start from scratch, seems very strange this guy wants to sell when all he has to do is send 4 guys out to mow 20 accounts a week and bring in a decent amount of money.

MMLawn
06-01-2005, 11:22 PM
he has 4 employees that work it, he has a manager that he pays $35,000/year, so we are thinking that if we decide to buy this biz, that my husband can work full time in it and get more residential accounts for his to do on his own. Anyway I am not sure what to offer the seller if we decided to buy it, we will meet him in 2 more days so I will check everything out and see if its worth it, what do you all think, the business has seemed to grow a lot in just 3 years.

they also gave me the last 3 years of tax returns, according to the income tax papers in

2004 he made $267,824 $85,000 owner benefit

2003 he made $219,137

2002 he made $116,000

here are the details, by the way I will have an accountant review all the tax returns

The biz has 20 accounts total

Price of business is $130,000 with a downpayment of $60,000 he is willing to do owner financing and get paid within 3 years

4 big commercial accounts that bring in $15,732

14 residential bring in $1,425

TOTAL MONTHLY INCOME $17,157

Let me know what you all Think


I think something is wrong here is what I think.

First you said he has a Total of (ONLY and I say only 20 accounts cause that is nothing even with 4 commercials in this business) 20 accounts but you then list them as 4 Commercial and 14 Residential so that makes it only 18 Total Accounts not 20. Now of those 14 resis those are only $25 a week cuts at the $1425 you listed per month unless the 14 you put was just a typo and it is 16 resi (to make the 20) but that is even worse because then they become $22 cuts, so that's the best he can do yet he can land 4 Commercials at right at a $1000 EACH a week??? Something doesn't add up there, at least it wouldn't for me.

Also I don't see where even with 4 "big" commercials that he has the accounts/work load to support 4 employees? I mean 14 resis they can do in 1/2 a day so it then takes them 4 1/2 more days to do the 4 commercials?

LASTLY you said his 2004 Tax return showed $267,824 BUT these accounts as you priced them only equal $205,884.00 so either he has shown you "doctored" tax returns (which we all know is simple to produce) or he has lost $62,000 worth of business this year....whichever it is I'd want to know.

Fantasy Lawns
06-01-2005, 11:37 PM
Caution it the word of advise ... n it's a good one .... having a CPA look over the books it perfect

The $62K difference could easily be made up in side work, palm trim, mulch, installs .... jobs outside the normal "monthly" billing .... BUT it is a good point .... Why the difference ... could be honest ..... could be trouble

Nice thing down here is ... at least on the East Coast is we cut year round ...42 visits yearly ... so there really never is a time of contract renewal (resi's that is)

I'd have to agree that the 4 comm giving the brunt of income is sketchy on a less that 4 year life of business .... turn key business are just that ... turn key .... the clients don't even really know of a change .... BUT the comm or condo's or HOA's what ever they are ..... one MUST have extreme caution ... the 3 year finance is nice

I too would be very interested Why is he selling .... could be a good reason or could be trouble

Employee retention would be a plus ....but I'd be thinking about that Foreman that is soon to be out of a $35K job .... he may have a great daily working conversation with the clients n things could get ugly

Cover your bases n hopefully other will give you more advice

Buy a strong sound business is a great way to start ...n his numbers look good .... but only in it such a short time is a red flag

I'd also like too know his total "man hours" used to figure the hourly rate .... also what is the total cost of those man hours ..... in other words if you can .... what is the direct, indirect & overhead cost .... do they add to the point of the numbers matching .... he pays a foreman $35k n he made $85k on top ?? thats close to 45% of the gross .... which would be KILLER .... leaving only 55% to cover total labor and all the related business expenses .... down here .... his yearly insurance would be less than $2K per year with out the pest license but the W/C is 10% of gross labor

Just get some numbers .... n look em over

Good Luck

Vanessa31
06-02-2005, 12:22 AM
Hi everyone and thanks a bunch for your advice, you all are great!I will answer each of your questions in this post

Ok to begin with I did a typo its 16 res. accounts 4 comm

here is what he makes on each account, It says NC on 2 of them I guess this means new accounts?

1-80
2-80
3-80
4-125
5-125
6-125
7-125
8-125
9-1170
10-80
11-110
12-40
13-NC
14-125
15-80
16=NC
17-2433
18-1895
19-125
20-10,164

MONTHLY TOTALS $17,007 and that times 12 is $204,084

he claims $267,824 on tax returns

difference of $63,740? could he be making that in pest control/landscaping etc...

not sure if its a doctored tax return , there are 5 pages for each tax report per year, so i have 15 pages total

The income tax returns they gave me has his ss# on it, and says "US INCOME TAX RETURN FOR AN S CORPORATION"
FORM 1120S

at the bottom it is stamped and says TAXPAYERS COPY

The reason he says he is selling is because he owns another business and wants to focus on that one. anyway i also am not sure why if he is not working hard in the biz, why he would want to sell it, if he is making such good $, well when we talk to the seller we will try to find out as much as I can to see if this is really true or not.

also Since he is offering seller financing I figured he was acting in good faith, since he s going to finaicne so much of the money so it is also a risky for him,.


Ok now the employees are supposed to stay on board, and of course i dont think it would be a good idea firing the foreman, since like I mentioned its best if my husband gets extra res.accounts and doesn't them himself, and lets these guys continue there wor.

i know what you all mean about not knowing of the comm acc will remain, that is something that made me think, because if we were to lose them we would not make much money.

about the equip. I am not sure what its all worth, the truck is probbaly worth about 20k or so, the other equp cannot be worth that much, so i doubt that there is 45k in assets.

I am going to write down everything that you guys are telling me so i can ask him, once the accountant reviews the numbers, it will be easier to decide whether its worth it, but the part that is worrying me is the possible loss of the comm accounts, after we buy the business.

thank again to all you helpful people and God bless.

RiskIt
06-02-2005, 12:35 AM
Hello all... I'm the new guy of the day. I owned a mid-sized printing co. and sold it to a competitor two yr's ago so I have experience in the selling part. I also bought the company, as well, so I understand both sides. I'm here because I'm getting ready to start a lawn care/prop. mant. co. and have been trying to take as much in as I can. (Thank you ALL)
First... the buying: What is your gut feeling about the whole deal. Why does he say he want's to sell out. No-one get's rid of a money maker that they are happy with - Know this!!! He may be burned out or health problems or he is going to have the IRS after him for 941's... you never know - but there is a reason. At the same time you are buying and not going to give the guy all the $$ he wants at signing so you gotta be flexible and can't have everything your way. It's a two way street. I could go on and on about all the little stuff but in the end what does your hart and more importantly your brain say. You can buy a dog that can't bark but have the hart to turn it into a great deal... or the other way around.... you could get the goose that lays the golden egg's and run it into the ground.

Can you work alongside the owner for a week, and the guy's running the day to day??? That way you meet the cust. and the guy's that may or may not stay on.

Most important: Always give as little as you can down, make him hold as much paper as you can. This is the biggest thing... cash is king!!! This is easy to say... make it look inviting to him.

Best words ever told me: "He who holds the gold (money) makes the rules"

As long as you are paying the owner the longer it's in his interest to take care of you. You will have a non-compete in the contract, but you want this to be a win-win deal.

Everything is fresh in my head... I was looking to get out, make a honest deal and they were looking to rip me off. I saw that up front so I used it against them. I acted like a fool and let them think they were running the deal. Let's just say people like to talk about themselves's and like to think they are one up on the next guy....

I got ALL my $$ and then some. I got out clean, no one can come after me (IRS)..... so who won....?

I wish you all the best, if you have any questions that I could help with (I'm very good with QuickBooks, dealing with the IRS, and banks and most other BS) - I hate them all but have figured out how to make them work for me...... let me know:
kbrennan007@hotmail.com

DON'T believe anything on paper - it's easy to make the numbers look good... thats why I said what does you brain say. Take a look from the outside as unemotional as possible.

Some might have you looking so deep into little things (it's important) but so is the other side... what happens if you late on a payment...

Best of luck either way

And hello every one!!!! :)

BCSteel
06-02-2005, 01:38 AM
With only 4 accounts bringing in the vast majority of the work, and one in particular, walk away. Take the $$ that you would use to buy this business and put it into top notch, no holds barred advertising into the area in which you want to expand.

I made the mistake of paying to much for to little several years ago on a buy out. I didnt lose it all but my ROI was very poor. I would have been better off buying new equipment and doing my own sustained advertising assult into my prefered working areas using the buyout money.

I would be extremly wary of this proposition. Already numbers aren't adding up and at an owners take of $85 k/year doing only managment on 20 accounts, how much time is it really taking him? So why would he REALLY want to get out?

Personally, I'd walk away from the accounts but possably make an offer on some of the equipment.

Tider6972
06-02-2005, 02:03 AM
My heart cries for this person. This person wants so badly to own a business and 'buy a future'... it sounds so easy.

But my heart aches, because this person does not know, and does not understand business, and also hasn't a clue about the lawn and green business in particular.

Vanessa31, I wish you all the best of success, nothing but the best!

But I see disaster in your future, in the form of large financial losses.

My advice remains the same as every time before: <b>do <i>not</i> buy</b> a business; certainly not a large business. Either start your own by getting accounts and buying equipment as needed, or put less than $10k in.

Your are not ready to buy or operate, or manage a business of this magnitude.

Contact jaemax, who posted here a few days ago. He has 30 accounts for sale in North Port; they may be worth 3 grand or so.Check them out carefully; meet the customers, pay for the customers who stay with you by the month for 3 or 4 months. Buy the necessary equipment to service them. Start small, learn, and grow from there as you are ready.

Please, be smart and go slowly - don't jump in over your head.

Please understand, I mean no offense. I mean well. I just don't want to see you suffer a huge loss.

This is a tough business. It's hard work physically. And you MUST be a disciplined and carful manager of <i>EVERY ASPECT</I> OF THE BUSINESS.

Best fortune to you.

celawncare1
06-02-2005, 02:42 AM
My heart cries for this person. This person wants so badly to own a business and 'buy a future'... it sounds so easy.

But my heart aches, because this person does not know, and does not understand business, and also hasn't a clue about the lawn and green business in particular.


Is that what you got from her post?? I get so sick of reading all the "Expert" posts listed on here. How can you ASSume that she has absolutely no biz exp? When I started 2 years ago, I had absolutely no knowledge of how to run a biz, but I had previously worked for (2) millon dollar companies. Based on what you are saying, I shouldn't have took the risk?

The only thing I would question and follow are everything that everyone else has posted. Caution and challenge all the numbers and decide from there. If everything adds up, then go for it. For what it's worth my bet is that this guy has consecutively lost money for the 3 yrs he's been in biz, and by the government's standards can't survive a 4th yr in biz.
Oh, and 1 other thing, do not take advice on what to charge from someone in timbuktu, if you are in Fla. It is a whole different ballgame. Find someone you trust that has expeirence in Fla. :)

Tider6972
06-02-2005, 03:18 AM
"How can you ASSume that she has absolutely no biz exp? "
...Not an assumpion, I've read her other posts asking about various 'businesses for sale', and her questions tell the tale.

Your post is telling, also. I'm guessing you're a solo with a Murray rider, who should be picking peaches or digging peanuts - unless, of course, you've been 'let go' by all the growers around?

" For what it's worth my bet is that this guy has consecutively lost money for the 3 yrs he's been in biz, and by the government's standards can't survive a 4th yr in biz. "

....L O L !!! WTF is that supposed to mean ? Did you not see her references to the business's tax returns? The numbers look good!

""by the government's standards can't survive a 4th yr in biz."" WHAT ! ? ! !

Better get someone to count dem peeches fer ya, y'all damm sho' ain't no accountant, boy.

Richard Martin
06-02-2005, 05:05 AM
NC stands for No Charge. This may be associated with the one single large account that is the bulk of this company's income. You get to do the 2 homeowners houses for free in exchange for getting paid to do the large account.

I do not like having all of my eggs in one basket and with 59% of total gross (based on the recalulated numbers) coming from 1 account that makes me very nervous. His current overhead is 59% of gross (how's that for coincidence) and the loss of that one single account would leave you with a gross of $84,716. Subtract your 59% overhead and you're left with $49,992 before taxes. Subtract about 33% for income tax and you're left with $32,998. It would take you 3.94 years just to break even.

The one sure, absolute thing about contracted commercial accounts is you're only going to get them if you are the low bidder.

I would take BCSteel's advice and start fresh doing what your husband wants to do. Residential.

Tider6972
06-02-2005, 11:33 AM
Vanessa, please allow me to restate my opinion.

I understand your desire to own a business. But buying a business of this size and price is risky and requires careful management.

The customer base is very small. When the present owner leaves it's likely some of HIS customers will likely leave with him. The commercial accounts are risky in the sense that they will have to be re-bid eventually, and you'll be bidding against seasoned pros. It's cut throat competition, and unless you have an 'in' with these companies or you are an experienced commercial bidder, you will be in trouble.

With the customer base being so small (very few accounts generating the large proceeds), the loss of only a few accounts could be devastating!

You would, IMO, be very wise to solicit your own business, get your own customers with whom you 'click', and buy equipment as you need it. Keep your money in your pocket as long as you can.

MMLawn
06-02-2005, 01:11 PM
Vanessa, please allow me to restate my opinion.

I understand your desire to own a business. But buying a business of this size and price is risky and requires careful management.

The customer base is very small. When the present owner leaves it's likely some of HIS customers will likely leave with him. The commercial accounts are risky in the sense that they will have to be re-bid eventually, and you'll be bidding against seasoned pros. It's cut throat competition, and unless you have an 'in' with these companies or you are an experienced commercial bidder, you will be in trouble.

With the customer base being so small (very few accounts generating the large proceeds), the loss of only a few accounts could be devastating!

You would, IMO, be very wise to solicit your own business, get your own customers with whom you 'click', and buy equipment as you need it. Keep your money in your pocket as long as you can.

This is VERY GOOD Advice that you should take. This company is as I said earlier actually is a very, very, VERY small operation that just happens to have 1 large paying commercial account. Lose that acct and this company with the overhead it currently has due to the equipment it has and with 4 employees is bankrupt quick!

arkylady
06-07-2005, 07:44 PM
So, what ever happened with this? :)

dvmcmrhp52
06-07-2005, 08:01 PM
Vanessa,
Please read these posts and believe the people telling you things here are not trying to beat up on you or discourage you. They're not.
Ask yourself the question that has been posed.......If a business you owned was making 85,000 a year with little effort why would you sell it?

I'll say it again, buying a lawncare business requires much care and a dose of cynicysm is propably a good thing.

And as well, trying to jump in with both feet running may not be the best idea.................

Your current situation does not need to be compounded by a decision that may not be in your best interest.

best wishes.

Toy2
06-07-2005, 08:11 PM
I was considering buying a Scott's franchise.......I need to have 25K just to be considered???? WTF is that about, plus pay royalties......I have 10K in equipment right now....12 customers.....I'm not rolling in the $$$ yet....but if something happened....I could bounce back pretty quick plus have the best equip. on the block.....start your own....good luck to you...

Pro-Scapes
06-07-2005, 08:21 PM
I was considering buying a Scott's franchise.......I need to have 25K just to be considered???? WTF is that about, plus pay royalties......I have 10K in equipment right now....12 customers.....I'm not rolling in the $$$ yet....but if something happened....I could bounce back pretty quick plus have the best equip. on the block.....start your own....good luck to you...

I agree and thats the approach Im taking. I could lose all my lawns and still be ok between tractor work and other investments. The 59% operating cost and 59% on that one acct is way to coincidental. good pick up on that. If you got 60k in cash to invest set up with a modest equipment package and advertise heavy in your target area. I am really considering launcing a major advertising assault but going to hold off til next spring do to I don't want to take on to much and get clobbered with my pants down. If you take on all that overhead with no promises it is a total risk. All you need is someone to walk in there and take your 10k acct and do it for 9k and your losing almost 60% of your gross. Definatly one for the buyer beware.