Buying a Lawn Mowing Business...Pricing?

[emil35]

I have my own lawn mowing business but am considering buying another company to help grow my business. The businesses I'm looking at are mainly residential with no contracts. Some commercial sites have contracts. Any advice how to value the business and/or get financing for the deal? I was thinking paying market value for the equipment and pay for the customers with a percentage of their performance over the next year. Any equations or industry standards?

Thanks

[Lucky Star Lawn Care]

Buying someone eles contracts can be risky. Because you pay the guy for the contracts then everyone doesnt want to sign up with you. So use caution when tryn to buy contracts. I've been told they go for the per time visit, times 3..so if its 25 they sell that one for 75. Equipment just make offers if they dont come with clients. If you need to go to the bank just be prepared with what you are wanting to buy and what it will bring in for you over time. Try to setup a meeting or something with the current owner and have him introduce you to his clientsand go from there to. Good luck!

[CanAm Land]

You're on the right track. I suggest a % paid monthly. Make sure you stipulate that the monthly payout is based on when the money clears your bank account. That way you're covered.

[Perfect Image TLM]

Ya around here it's yard price for a single cut x 3

[gringo gardener]

bottom line is we WANT to pay no more than 3 mos gross for routes ... but when its time to sell and we think of all the pain blood sweat n tears we've put into our businesses there's no way we would SELL for less than 6 mos.

youve got a couple of things to consider.

You should be prepared to lose up to 25% of what you purchase w/in the first 3 mos. For whatever reason, regardless of the quality of your service many clients deal with a particular contractor because THEY get along. Therefore amongst whatever reasons, once THAT relationship becomes null and void so does the contracts -- for whatever reason we dont know laws of physics I guess -LOL!!

You need to review HIS tax statements for the past 3-5 years so you can get an average (feel) for what each client produces in sales generally. Then you should evaluate the equipment, to see what its value is and what if any you will need.

Employees should be taken into consideration as well. Quite often I have seen if employees make the transition its usually much easier to maintain your invest. They also should have a fairly good idea of who is a PITA and who is worth the time (valuable info when purchasing), if they have been with the company for any length of time.

Heres what I would suggest you do:
Contact your attorney(s) and your CPA to discuss this venture.

For illustration purposes lets say the averages for the past 3-5 yrs is $1500/wk so the asking price will be $36,000 (24wks-6mos).

You should give him a down payment of $14,400 at the time of signing the contract between your parties at the beginning of the first month.

Then at the end of each month for five months your payment becomes due ($4320). You will ONLY be paying for those clients you retain, as you cannot guarantee the clients will stay regardless of quality/value of your services.

So if you have 100% retention for 3 mos you would owe $4320 ea month and if you have 60% retention the last 2 mos then you would be paying roughly $2600 ea month

[HARRIS Property Management]

I had a small lawn business several years back before I started up this one. It had $50,000 in contracts. (not including extras made off those jobs, just the contract value. I sold it for $25,000 cash up fron and sold the equipment at market value which was additional $5000. Basically came out to six months baseline revenue for my contracts. I would value 'pay as you go' customers a little less.

[LawnGuy73]

About one month of service. So if its $50 a cut, you would pay $200 for that account. Assuming that its under contract, if its not I wouldn't pay a dime for it.

[paradise32258]

i know i would want 6 months on rev. like it was said earlier in this post we have a lot of blood,sweat, and time in our accounts. but i can see it from both sides the buyer always wants a deal and the seeler always wants to get what he thinkis it worth. thats when you need to deal , comprimise give 75 to 80 % of the 6 month value.