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View Full Version : how to put a value on an irrigation company


JB926
04-13-2007, 10:37 PM
ive been doing irrigation for 12 years at my familys buisness and this dec Im going to buy out my uncle. I will be purchasing 600 accounts, various machines, trailer, truck, etc. How do you put value on the non tangible things like the accounts. I dont care if its been said on here 1 million times. I want to know how would you put value on the 600 accounts????help:confused:

bicmudpuppy
04-14-2007, 01:15 AM
analyze those accounts. what is your current growth rate? did you have 600 accts last year? or the prev year? How many do you gain/lose every year. Hopefully the net is positive. 10-15% growth would be stable. More than that would imply a company still going through growing pains. Less than that would imply a stable market, but possibly some stagnation on the company part. If you say that growth is stable and want to value the customer base from that 600 number, then the "value" of those accounts is a multiplier of the profit gleaned from those accounts. You are an existing player in those accounts, so you should not have a transitional loss of accounts after the buy out. I would guess the multiplier at around 5. Is this "family" buisness 50/50 between you and your uncle at present? Perhaps a percentage of profit over the next 5 years and the buying out his share of the equipment would be acceptable.

Mjtrole
04-14-2007, 01:25 AM
ive been doing irrigation for 12 years at my familys buisness and this dec Im going to buy out my uncle. I will be purchasing 600 accounts, various machines, trailer, truck, etc. How do you put value on the non tangible things like the accounts. I dont care if its been said on here 1 million times. I want to know how would you put value on the 600 accounts????help:confused:


First off YOU have to have a value for them, look at the books and find out how much revenue these 600 clients are generating per season at least that's a start and gives you something to work with.

How about some more info so we can help you out like:

years in business, makeup of company regarding install % service %, overhead like store front or "out of the basement" operation.

Also, how long have these clients been with the company?

JB926
04-14-2007, 10:22 AM
we have been in buisness since 1958 and irrigation since 1972. We have a 75/25 mix of service and installs. we have a store front but thats not what I want to purchase. Irrigation is only a division of our company. I want accounts, trucks, equipment and I will rent property from him and put up a pole barn of some sort. It Sucks losing a store and office manager and all the other things that come with a large company, but this is long overdue and that is why I am looking to yall for help. Thanks

Mike Leary
04-14-2007, 10:48 AM
I sold my biz last year, I would suggest a good CPA to go back thru the books
and see what the biz has been generating. Is the bulk of your biz installs or
service? Do you have contracts for new work? If not, the biz has to be worth
what you bill out for service work plus the rolling stock, inventory, etc.
Take your best year billing & see if that flies as a purchase price.

HBFOXJr
04-15-2007, 04:49 PM
Jim Houston has a book with one, very useful chapter on this topic. My ex used it to value my business for divorce purposes. I believe his advice is accurate and fair.

Mike Leary
04-15-2007, 06:23 PM
Jim Houston has a book with one, very useful chapter on this topic. My ex used it to value my business for divorce purposes. I believe his advice is accurate and fair.

Jeez Harold, the old timers taught me to post a link when quoting a source.
:hammerhead:

JB926
04-15-2007, 08:06 PM
Jim Houston has a book with one, very useful chapter on this topic. My ex used it to value my business for divorce purposes. I believe his advice is accurate and fair.

can you tell me the name of the book??

PurpHaze
04-15-2007, 09:37 PM
Jeez Harold, the old timers taught me to post a link when quoting a source.

But you're still in training Mike. Once you get the hang of links, pictures, PMs and quotes then you're an "oldtimer" on this forum. Like anything else there is a learning curve... and I must say, Mike, you're learning quite well. :laugh:

DanaMac
04-16-2007, 07:38 PM
OK here is some info I have. Found out today what one local company is selling there's for. $300,000 is what I heard from another contractor that inquired about it. They are one of the older companies, have 2500 customers (I have no idea how active they all are), and no idea if this includes assets or company name. But to me, I think I could spend a lot less than $300k to get 2500 new customers.
Whoever buys this will end up losing some of these customers. There is no way for 100% retention. I would assume losing 25-50% just after the buy out.
They two owners won't be staying on so that is two more EXPERIENCED techs that would need to be hired. And finding good EXPERIENCED techs is hard to do.
Could whoever buys it handle 2500 customers? Not sure, not many companies here with enough staff for that. And I'm not sure how ACTIVE all 2500 are. Heck I've got 3000-4000 in my overall list, but only consider about 1200 ACTIVE. I weed out customers every year, and any that we haven't serviced in 3-4 years get put on the inactive list. Plus I have about 150-200 from another landscape company that I don't consider MY customers. I don't market to them at all with my spring and fall letters.
I also know they have been looking to sell for over 10 years.
This company has sent me lots of overflow calls the last 3 years. Hopefully they still will. They are a great old school company. I really like the owners, good guys.

Mike Leary
04-16-2007, 07:46 PM
A good idea that worked for me was to drop the 1% of the clients that gave
99%of the grief. Jeez, Dana, should I come out of retirement? Got time,
you got money?

Mike Leary
04-16-2007, 08:12 PM
They two owners won't be staying on so that is two more EXPERIENCED techs that would need to be hired. And finding good EXPERIENCED techs is hard to do.
. They are a great old school company. I really like the owners, good guys.

Jeez, It's always sad to see the old timers leave, did they build the biz themselves?

DanaMac
04-16-2007, 08:17 PM
Jeez, It's always sad to see the old timers leave, did they build the biz themselves?

Yup, father still owns it, not sure if one of the sons is part owner or not. Other son worked there for years as well. Sons are in their 40s, now.

Honestly, I don't see them selling it. Or let me put it another way, I don't see anyone buying it for that, or even close. It would be great if they do, and I hope they can get it, but I doubt it.

DanaMac
04-16-2007, 08:22 PM
If you do a search, you'll find info I posted years ago about a list I bought. I don't remember all the numbers. But I paid another guy that was retiring a fee for every call that I went to his customers homes for one year. If I went there 3 times, I paid him 3 times. I think it was $15-$25 each time. Ended up at about $2000-$3000 for the whole year. He had to put his trust in me that I would keep a running total, and I paid him for every single call I did. Of all the customers on the list, I probably heard from 60%, and of that 60%, have retained probably 50% of those. I think his customer list was 100-200. It's been about 6 years and don't remember all the numbers.

Mike Leary
04-16-2007, 08:24 PM
We had one up here in Seattle...Weather-Matic...Imperial...died early,
sons ran it into the ground...Never recovered...I've seen the recent work...
junk.

Remote Pigtails
04-16-2007, 08:44 PM
I went to a seminar at the IA show in San Antonio last year on managing a service company. They said that service contracts are the key to maximizing the value of your business. I've never done them but wish I had. A customer I had 27 years ago and still today made a fortune in the banking software business. He told me way back in 1980 about how service contracts are the real money makers. You bill at the beginning of the year and basically get a bunch of cash flow and profit up front. Plus companies will buy service contracts. This is also the concept of the Service First franchise. It has been a running joke with me and him all these years. He'll call me for service and when I get there will say "Did you ever start on those service contracts?" I have some forms that the seminar gave us for templates.

Mike Leary
04-16-2007, 08:51 PM
I don't know, I was always "Leery" of getting cash up front...I guess I saw
too many contractors go under that way. We stayed comfortable, every install
came "under our wing". I never took cash down, one contract (that changed
to T & M quickly) handshake..look 'em in the eye seat of pants operation.
Are those days gone????

Remote Pigtails
04-16-2007, 09:08 PM
I don't know, I was always "Leery" of getting cash up front...I guess I saw
too many contractors go under that way. We stayed comfortable, every install
came "under our wing". I never took cash down, one contract (that changed
to T & M quickly) handshake..look 'em in the eye seat of pants operation.
Are those days gone????

No-I still do business that way as well as a lot of my buddies. i always describe myself as a phone driven person. But if you are trying to create a value for your business contracts sure help.

londonrain
04-16-2007, 09:12 PM
I don't know, I was always "Leery" of getting cash up front...I guess I saw
too many contractors go under that way. We stayed comfortable, every install
came "under our wing". I never took cash down, one contract (that changed
to T & M quickly) handshake..look 'em in the eye seat of pants operation.
Are those days gone????I never take money up front, I finish the job and the customer is happy then I get paid. I don't have a credit account at the supply houses, I write a check for the supplies when I pick them up......

SprinklerGuy
04-17-2007, 09:23 AM
I had over 150 service contracts at one time in Scottsdale...my best year ever....the service contracts ranged in price from 225-335 for the year....we won some, we lost some...they were great!

For some reason, I'm having trouble selling my colorado clients on them....I think it a different demographic for sure.

I loved them.....but hey, what do I know right she?

Mike Leary
04-17-2007, 01:27 PM
I had over 150 service contracts at one time in Scottsdale...my best year ever....the service contracts ranged in price from 225-335 for the year....we won some, we lost some...they were great!

I loved them.....but hey, what do I know right she?

That's about what our service accounts were too. However when you get
above 24 zones....KA CHING!!!!:waving: $1500 to $2000 a season, we did
blow out no charge first season..then into the books.