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View Full Version : What would be fair price for this biz?


bjm95
10-08-2009, 12:14 PM
I am a newbie considering purchasing a existing landscaping biz.

This business is listed for 85k.

97 residential accounts
Exmark 60' zero turn mower,
32'' Toro with sulky, all the necessary equipment such as pack back blower, weed whackers, edger's etc.
2002 GMC Crew cab & two enclosed trailers, one is 14' the other 16'
It's net is 55k

I am thinking 65-70k. Any thoughts would be appreciated.

Thanks!

MarkintheGarden
10-08-2009, 01:17 PM
Interesting question, can you give more details;
Estimated value of the truck and equipment.
Gross revenue.
Region and area.
How long has this business been established.
97 accounts, it is real hard to say what this is worth without seeing service and billing records.

bjm95
10-08-2009, 01:21 PM
gross is 158,600
est on value of equip is 25k
expenses is 153k including a 39k owner salary
locate din central Florida
established for 3.5 years
Presently they operate out of a warehouse & have the tools necessary to do maintenance & repair on their equipment

it's though a broker but told it has good books and records and everything is verifiable.

MarkintheGarden
10-08-2009, 01:56 PM
What I would have to look at is what I could do with the business.
Is it what you want and where you want it? Can you manage those accounts, increase the profitability? Do those tools come with the deal? (I assume the wharehouse does not). Do you know what to do with them?

From an entrepreneurial point of view I would consider making an offer of 52.5 K; $25k for the eqpt, and one half last years net for the accounts. The business only made 5K profit last year and the sale price must come out of the profit, so assuming that the profit earning is sustainable it is going to take forever to pay off 85K. Yes, they may well laugh at 52.5 K.

But what is most important is what you could do with this business versus what you could do with the same amount of money. If you have a lot of experience in this business, then you could quickly increase the profitability. If not then it is hard to imagine you doing better than the previous owner. It comes down to how much you are willing to pay for a 39K per year job.

bjm95
10-08-2009, 02:01 PM
good points. thank you.

steelie man
10-08-2009, 02:08 PM
Why would the expences be 153000. 97 accounts should take you and another guy 3 to 3.5 days to do. Equipment is only worth 25k w/ the truck? Sounds like the old equip. Up here a company's selling price w/ equip is 30% of the last 2 years gross from mowing. How much of the 158000 is mowing? 97 res customers could mean a lot of different things, only do one thing for this customer and only do one thing for that customer. How much of the 158000 is steady weekly income, and how much is gravy?

My $.02

MarkintheGarden
10-08-2009, 02:10 PM
The more I crunch the numbers the more I want to see what is meant by 97 accounts.
Residential, commercial, how much per acre, contracts in place, etc.
Three years is not a lot of time to build up a highly profitable and loyal client base.

bjm95
10-08-2009, 07:54 PM
97 rez accounts strictly mowing. the owner doesn't cut just manages the biz and also sell something else that's why he is selling, to concentrate on the other biz.

there's 2 full time and 1 part time employee, a payroll service and rent of 425 for a warehouse, plus other expenses.

the equipment is 3 years old

last year the owner cut and had a higher gross of about 17k for doing other stuff, trimming etc...

bjm95
10-08-2009, 07:59 PM
Why would the expences be 153000. 97 accounts should take you and another guy 3 to 3.5 days to do. Equipment is only worth 25k w/ the truck? Sounds like the old equip. Up here a company's selling price w/ equip is 30% of the last 2 years gross from mowing. How much of the 158000 is mowing? 97 res customers could mean a lot of different things, only do one thing for this customer and only do one thing for that customer. How much of the 158000 is steady weekly income, and how much is gravy?

My $.02

by that math he should be asking $100, 250. Gross in '08 was 158,700 and '07 was $175, 500. Again the extra 17k in '07 was doing odds and ends.

MarkintheGarden
10-08-2009, 09:49 PM
97 rez accounts strictly mowing. the owner doesn't cut just manages the biz and also sell something else that's why he is selling, to concentrate on the other biz.

there's 2 full time and 1 part time employee, a payroll service and rent of 425 for a warehouse, plus other expenses.

the equipment is 3 years old

last year the owner cut and had a higher gross of about 17k for doing other stuff, trimming etc...

This makes me think that it could be a good deal for someone who wants to be a working owner/operator, but perhaps not the best deal for an investor.

bjm95
10-08-2009, 09:57 PM
thats me :) the owner operator. Im thinking of offering 65k. If you go by the 1.5-2x the net rule it is a little less than 1.5.

What do you think? Thank you very much for your input!

Big C
10-08-2009, 11:17 PM
IMO 97 accounts is a lot for a "newbie" to handle with no experience...and if these are not under contract they are worth nothing because they could drop you the minuite you show up and it is not the guy thay are used to.

bjm95
10-08-2009, 11:27 PM
IMO 97 accounts is a lot for a "newbie" to handle with no experience...and if these are not under contract they are worth nothing because they could drop you the minuite you show up and it is not the guy thay are used to.

I'm not going to be cutting so it will be the same guys they always see. Good point though on the contract part. I will find out about that and see if they are.

MarkintheGarden
10-09-2009, 01:22 AM
thats me :) the owner operator. Im thinking of offering 65k. If you go by the 1.5-2x the net rule it is a little less than 1.5.

What do you think? Thank you very much for your input!

What I do not like about that rule is it does not take into account the company assets. In this case I think you would have liked my formula of assets plus fifty percent of last year's net; 25k + 27.5k = 52.5k.

Also, the short life span of these accounts, there has not been time for grooming the high yield accounts and weeding out the low profit.

If there are contracts in place they are not transferable, and even if they are who wants to take someone to court so you can mow their lawn. That said, you will probably be able to retain 80 to 100 percent of the client base. Unless of course there is some unknown factor like high layoffs in the area.

When considering the value of the accounts, we can divide the gross, 158k by the number of accts, 97 we get 1, 628.86 revenue per year per client on the average. Divide that by 12 and we see the average account is producing 135.73 revenue per month. I like these numbers but I might like them less after I see the payroll costs.

The seller is asking 85k, minus the assets of 25k, this makes 60k for the accounts, or 618.55 each.
If the seller takes 65k, then the cost of the accounts is 40k, or 412.37 each.

The big factors of course are the people, the area, the operating system and so many details.

AzLawnMan
10-11-2009, 07:01 PM
I never understand what someone is thinking about when considering buying a landscape company. What I mean is, 95 residential accounts might as well be 40 because once the clients, relize that the person doing there yard is no longer around they will either get rid of you or ask for a cheaper rate. There not under contract with you, so why wouldnt they. You say you want to offer 65k? Well for 65K you can buy a very good quality truck and new equipment for around 25k. Advertise your a$$ off and go door to door and offer new customer rates. I can easily get 20 new residential yards in a week here in AZ, and thats being picky about who I take. So say you spend 65k on used stuff, employees who may not like how you are gonna run your company and may leave, and customers who may not be comfortable with a new guy around there house. Do it from the ground up, you will apprciate it alot more and know the exact in and outs of a new company. Good luck, sorry if im a "debbie downer" but I see it all the time here.

ed2hess
10-11-2009, 07:39 PM
I'm not going to be cutting so it will be the same guys they always see. Good point though on the contract part. I will find out about that and see if they are.

The guys on the ground aren't the ones that keep an account when there are problems....that will now be YOU. If you have had no experience in running this size business it won't work. You will also have to deal with those employees and you don't know what motivated them to stay and work for the previous owner....they may not be loyal to you.

AzLawnMan
10-12-2009, 01:34 AM
Without a doubt if your not gonna be hands on about doing the work yourself, then your not prepaired for the 8pm call when your settling in for the night and you have to deal with a pissed off customer cause your guys failed to do something and now you have to deal with it. It is a tough time right now with employees and customer service to "I'm not going to be cutting so it will be the same guys they always see". You said earlier that you were gonna be "owner/operator" well it demands alot more work than you know. Just ask the other guys on here that are struggling to keep a customer happy in these days. All im saying is your own customers are different from the ones you buy.

bjm95
10-12-2009, 08:44 PM
Without a doubt if your not gonna be hands on about doing the work yourself, then your not prepaired for the 8pm call when your settling in for the night and you have to deal with a pissed off customer cause your guys failed to do something and now you have to deal with it. It is a tough time right now with employees and customer service to "I'm not going to be cutting so it will be the same guys they always see". You said earlier that you were gonna be "owner/operator" well it demands alot more work than you know. Just ask the other guys on here that are struggling to keep a customer happy in these days. All im saying is your own customers are different from the ones you buy.

Just because I wont be cutting grass doesn't mean I wont be involved. As an owner I will be able and willing to handle the customer service issues and account management. FYI the current owner of the company doesn't cut either that's why I like this biz.

Obviously you don't know my background so to assume I wont be able to handle is a mistake. For example try telling a multi-million dollar company owner that one of your Engineers just lost all the company data. Or the 250k in IT equipment they purchased is on back order and because we wont make the project deadline they will lose about 5k a day in revenue because of it. Sound like fun, think you could do that and still keep them as a customer? Well I did and I know I can handle what lawns can bring.

As a account manager I excel in customer service and have taken over new territories before and that is what this is a new territory.

If necessary I will be cutting, I'm not against it or afraid. You can buy a job or a business, there is a difference. I am choosing the latter, by taking calls at 8pm you have chosen a job.

Thanks for your input Mr. Bitter

bjm95
10-12-2009, 08:49 PM
The guys on the ground aren't the ones that keep an account when there are problems....that will now be YOU. If you have had no experience in running this size business it won't work. You will also have to deal with those employees and you don't know what motivated them to stay and work for the previous owner....they may not be loyal to you.

At 10% unemployment I think I will be Ok on the loyalty part. Part of my job will be to find out what does motivate them and use that to make them productive.
I will meet the previous owner in due diligence and ask about the guys. Employees are employees regardless of the biz, as an owner you need to find ways to relate and motivate them. Many owners suck at it, trust me I know.

AzLawnMan
10-12-2009, 10:58 PM
At 10% unemployment I think I will be Ok on the loyalty part. Part of my job will be to find out what does motivate them and use that to make them productive.
I will meet the previous owner in due diligence and ask about the guys. Employees are employees regardless of the biz, as an owner you need to find ways to relate and motivate them. Many owners suck at it, trust me I know.

Sounds like you've got it all figured out.
Sincerly,

The Bitter guy who netted 328k in '08
Posted via Mobile Device

JayN09
10-27-2009, 02:39 PM
Obviously you don't know my background so to assume I wont be able to handle is a mistake. For example try telling a multi-million dollar company owner that one of your Engineers just lost all the company data. Or the 250k in IT equipment they purchased is on back order and because we wont make the project deadline they will lose about 5k a day in revenue because of it. Sound like fun, think you could do that and still keep them as a customer? Well I did and I know I can handle what lawns can bring.


Stick to your day job. The $39K salary ain't worth the hassle. I'd take disappointing industry clients over home owners any day. In industry, it's about money (and losing some because of a delay is bad), but in residential service it's about trust.

I'm a former engineer turned construction company owner. So much easier to "disappoint" other business people than home owners (not that I'm recommending either).

PROCUT1
10-27-2009, 04:31 PM
So....Lets take my example

200 residential accounts all in the same neighborhood averaging 30 per cut, close enough that you dont even need a truck. Just go house to house to house.

According to some on here. That business/route would be worthless.

According to the real world. The monthly check I get pays my mortgage and will for many years to come.