Buying an Established Lawn Care Business

[Uke]

I have been throwing around the idea of buy an established lawn business. I owned a small one a couple of years aga, had to get out because of the birth of my first child (wife made me get out). But I have been looking at the this guys business. Being in Colorado, we can only mow between the months of April threw October. He has 150 residental clients that are all weekly. I will have to be driving arcoss town every day to get of my accounts done. He has been in the business for over 20 years he claims. The list of equipment he has is.

4 toro 21 in recyclers
4 ryan lawn aire 4 aerators
2 shindaiwa backpack blowers,
2 36 in toro recyclers,
2 shindaiwa trimmers
12ft single axle landscape trailer
chevy box van 14'(runs great, 95k on it) 2000 model

He is asking 170K for all this. He will hang around until I have a feel for what Im doing. I have been throwing this around for 2 weeks now. I found this web site about 1 week (great website), and have learned a lot about the business. But I need some input from all you guys. What do you think? He claims that he has been making around 120k a year. Cant provide yearly income (because uncle sam has no idea).

[CA CLT]

Let's be generous here on the used equipment to start and get it out of the equation.

Van $5000
Trailer: 1000
2 Line Trimmers $300
2 36" Toros $4000
2 Blowers $500
4 Aerators (who needs more aerators than they have mowers?) $4000
4 21" toros $2000

We have a total of $16,800 in equipment.

That leaves the total of the accounts at $153,200.

I would never pay more than 3-6 months worth of billings for the accounts. 6 months billings on the accounts would be for a guy that has contracts and good books. So if he is asking $153,200 for the accounts, and assuming that the $120,000 you listed is gross for 6 months that you guys work, he is asking almost 8 months worth of billings. He has no good books, so that is a strike against the value of the business, as he has no way of showing profit/loss.

I think you'd be a fool to buy this thing, but there's an aZZ for every saddle.

Good Luck!

[KrayzKajun]

No proof of income = No deal!!!

[Uke]

I was thinking about just giving him a percentage of what the business does. No money up front.

[hollywoodjoe]

assuming he works alone and say 5 days a week,how does he do 30 in a day?

[salandscape]

Can you get the funds without proof of income? If so it is probably at a ridculous %. It seems a bit high. A big bit!

[PTP]

If he will take a percentage of business gross, that would be a good situation for you.

A rule of thumb that I use is that a profitable business is worth 1 years gross. But that is a rule of thumb only and there are some variables that you need to consider.

This may be a good deal for you. But there is one thing that is VERY concerning and that is no proof of income. Think smart, use your head and you will be able to figure out if this is a good deal for you or not.

[CA CLT]

Hollywood,

None of us really know, but I DOUBT a guy with 6 lawnmowers and 4 aerators has been working alone.

Uke, Giving him a percentage of Gross or Profits? I pay franchise fees with another business on the gross, don't go that route. If you want to pay him a percentage of net profit, you can't really go wrong except you might find yourself working for free in a worst case scenario.

salandscape
3 years ago we had a car wash in escrow at 1.2M, but our lender looked at the guys books and said "no way". That was a business with 3/4 of an acre of premium main street real estate as a hard asset. There is no way any lender in their right mind would lend on a deal like this with no good books, and the few measly hard assets that are being offered. The car wash guys lack of books cost him 200K on the sales price. I turned a friend of mine on to it who was a cash buyer. He ran it for 7 months, got some good P&Ls going on the place, and sold it for 1.2M and his guy was able to get funding. Good books make or break you at the bank.


PTP, Being faced with another start up, I've been pounding the pavement looking for turnkey businesses to buy locally. I'd actually be willing to pay 1 year gross for the right setup with good equipment. I can't find anyone even willing to sell a few accounts right now. When I sold my last outfit I sold for 4 months billings. In a service business you really don't have tangible assets in a customer base.

Uke, this is your life and your choice, but I feel like everyone here is giving you pretty good input. Coincedentally, that input all seems to be basically of the same mindset; namely, that this doesn't sound like a very great deal.

[Deputy25]

I would stay away from that deal. Not having accurate books is a major problem, he has no way of proving his worth. Like a previous post stated there is no way a bank would lend you that kind of money without proof of his business. Also there is no guarantee that you will keep all the accounts. Some customers may find somebody else or they may not want to do business with you. Just something else to think about.

[hackitdown]

In my market, the accounts cost me about $50 each in advertising. So 200 accounts at $50 each is $10,000. I simply will not pay more for an account, since I can acquire them via advertising. The down side to my method is that I have only acquired 30 or so accounts per year, and I lose a few every year when someone drops me, or I drop them.

Clearly there is a huge advantage to having all the accounts at once. But still, I wouldn't pay more than a couple hundred per account. (Don't ask me where that number come from, just a gut thing). So $40K for the accounts, and $16.8K for the equipment...offer him $57K.

[lawnpro724]

Buy your own commercial equipment and advertise. What he is selling you isn't worth anywhere near what he is asking. Buy what you need to get started and in a couple of years you will have most of what you need and you will have the customers to go with it if your good at what you do.

[topsites]

Something doesn't quite add up here, I don't understand this deal.

[CA CLT]

Topsites,

It adds up pretty nicely for the guy selling the outfit don't ya think?:cool2:

[SILVERSTREAK INC]

errr ugh i wish you bought my biz in pa when i sold it,
2 scag 61' turf tigers,
97' f-250 with 42k on it 4x4 with plow single cab gas]
1 chevy 3500 dump '95 w/454 & plow 15000gvw
16' open landscape trailer
10' dump trailer used only for mulch jobs
2 pb650s
2 echo 230's trimmers
1 48" walkbehind exmark belt drive
2 lawnboy gold series pushers

sold the equipment for 25k

then the lawns, 127 on the book lawns
25 more paid cash every week

135k a year ON THE BOOKS

sold the lawns for 20k

guy took a loan paid me for the equipment got everything in his name, then had a deal to pay 500k a month for the clients

never paid me for the clients & am in court now he wants to give me all the equiment back and call it even, which 4 years later the f-250 had 130k on it and one scag has a blown motor, breajks me heart i worked my butt off to see this happen to what i worked so had for

the guy was busy working on a brush clearing job until the end of april instead of cutting lawns, after i showed him every lawn, gave him super scrict guidelines for each house, wrote it all down and told him when to start, what days for what hood i sent out a letter exoplaining everything to my customers stating same servicem, new owner...etc....i set him up to go and he wont pay cause at the end of april when he got into the cutting routine too late 45 clients thought the guy vanished,

i built that from nothing in 4 years cut it all with one truck, just me the 250 and one other guy weedwacking/helping ride, so personally id never ever buy one of the easiest biz's to start

[Mattcurry]

tell this guy he is out of his FING mind. NOONE WOULD PAY WHAT HE IS ASKING. NOT EVEN TRUGREEN..... or he would have already sold.... start your own company man you would be better off..


GOODLUCK!

[SILVERSTREAK INC]

big companies will offer a 3 month earnings for clients.....its what the biggest rezzi guy offered me in my area, said he wanted to definately buy it went and met him ....offered me 14,600 on a piece of paper which i just HAD to crumple up lawns only no equipment and no big co would touch rezzis such as brickman or truegreen unless their yearly contract is over 3500 and has special circumstances (like the lawn is the house of a property owner who brickman takes care of shopping centers for)

looking back i shoulda taken the big fat 14k check and kept my equipment then slowly worked my customers back haha

blah!

[zturncutter]

Do not walk away from this deal, Ruuuunnnnnn!!!:walking:

[mdvaden]

If the crew or crews are more numerous, the client list won't take too much of a hit.

But one and two man shows commonly bring a 50% loss in customers after the sale - like within the year.

That needs to be factored in.

[lifetree]

Generally speaking, I agree with the general sentiment expressed by the replies in this thread ... I would offer one comment myself, beside the equipment, my suggestion would be to value each account at approximately $ 25.00. It's true that you can spend about $ 40.00 to acquire a new account on your own.

[Big Bad Bob]

I have been throwing around the idea of buy an established lawn business. I owned a small one a couple of years aga, had to get out because of the birth of my first child (wife made me get out). But I have been looking at the this guys business. Being in Colorado, we can only mow between the months of April threw October. He has 150 residental clients that are all weekly. I will have to be driving arcoss town every day to get of my accounts done. He has been in the business for over 20 years he claims. The list of equipment he has is.

4 toro 21 in recyclers
4 ryan lawn aire 4 aerators
2 shindaiwa backpack blowers,
2 36 in toro recyclers,
2 shindaiwa trimmers
12ft single axle landscape trailer
chevy box van 14'(runs great, 95k on it) 2000 model

He is asking 170K for all this. He will hang around until I have a feel for what Im doing. I have been throwing this around for 2 weeks now. I found this web site about 1 week (great website), and have learned a lot about the business. But I need some input from all you guys. What do you think? He claims that he has been making around 120k a year. Cant provide yearly income (because uncle sam has no idea).

take $30,000. put $20,000 into equipment and $10,000 into advertising and build your own business. this is a ridiculous deal.

[EJD Lawnpride]

Don't do it! How can a guy by himself or even with three guys cut 150 clients a week w/ 21's and 36's? We have two 60's a 36 and 3 guys doing 106. i'm buying accts off of neighbor for 3xmowing amt. You have family, $170k no way, put 30K into start up,and 4o K into bank acct. Total of $70k (on high side) $100k saved!

[magland]

Are the accounts mowing only or is there fertilizing with them also? Making $120,000 off 150 mowing accounts Apr - Oct sounds pretty fishy. I would definitely want proof of that. Apr-Oct equals about 30 mows. $170,000 / 30 weeks = $5666 a week in mowing. Not one guy with a 36", unless he works 24/7.

[Furness & Sons L&L]

Buy all new equip.
Spend a 10000.oo on advertising, on the high side. way high. Do really good work get your name outhere, network with other companys in area. And you will be mowing 5:usflag: days a week in your neighborhood making 100000.00 plus. They key is to return all your phone calls, every last one of them. And be sure to always show up to the estimate always!

[CkLandscapingOrlando]

If you were to buy this what would you do If lets say half your accounts backed out 2 months after you went all In.No contracts on paper,I would'nt do It.Any one can fry chicken with their mouth

[PatriotLandscape]

We looked into buying a company last year our advisor told us that one time the receipts in service industry only goes for companies well established with good structure and TRANSFERABLE contracts. If he doesn't have a good customer contract stay away or tie him to the business for three years

[TGK]

Every once in a while here, we have some a$$ come along and try to pull this on someone.
Others on this thread have said it and I agree, offer him a percent of what the business actually makes. Dont stand too close to him however when you make the offer, he may have a brain aneyuresm.
He knows that business isnt all that. There is no way he is mowing 150 clients and doesnt have a mower bigger then 36'' I can go on and on.
The best advice I can give you is this. What would it do for your own business if you invested the same amount in advertising?
There is your answer.

Chris

[bullethead]

Personally, I think you should buy a business based on a multiple of EBITDA (EBITDA=earnings before interest,taxes&depreciation). For a commercial lawn maint co, that multiple should be around 2.

The residential maintenance company you are looking at is WAY overpriced, do not buy it. Lets say your gross margin on those lawns is $10/ea, 0r $1,500wk. You mow 30 weeks/yr, so gross margin is only $45,000k/yr. Then back out rent, a reasonable salary for yourself for managing a little company of this size and insurance - what does that leave you for EBITDA? Not much, even when you multiply it by 2.

[PatriotLandscape]

EBITDA is the way to go to evaluate the business. No records equals not worth it. Although I am not in the banking industry I can tell you that no bank will give you a SBA loan to purchase a business that does not file taxes. In doing so the person selling did not create a business he created a job as my advisor likes to say.