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HB Lawn
09-18-2010, 08:32 PM
If I were to sell my business, how would I know what price to start at?
Is there a formula? Is it the price of the equipment and customers or is it just the equipment? Please help. Thank you in advance.:confused:

Bunton Guy
09-18-2010, 08:52 PM
Are they all under contract or word of mouth. If not under contract that kills the asking price right there.

The couple i've bought out I paid 1 months worth of gross of each client. Give them the option of buying all or none of the equipment at fair market price.

starry night
09-18-2010, 09:09 PM
Doesn't matter if the customers are under contract or not. You can't sell the contract because the customer is only obligated to you and NOT to the new buyer of your business.

Let me correct myself. You CAN sell the contract but it is worthless to the buyer except as a referral.

Bunton Guy
09-19-2010, 03:30 PM
I understand and agree that contracts are non transferable unless noted in the contract its self...but the notion that the customer signed one gives you a little more comfort that they are in it for the long haul verses the ones that never signed a contract and could hire 10 different companies the following year.

seabee24
09-19-2010, 11:06 PM
Price it for what you think it's worth. Honestly no one can tell you. I have paid 1 month in the past, I have paid way more also,

I would never sell my accou t list for less than 20% of the total income for the year. 1 month would be like 10-12% percent. Really I think I would ask 35% if you had a really tight route. The owner will want some guarantees or ask for your help in signing them...
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soloscaperman
09-20-2010, 01:54 AM
The guys in my area sell it for 3-6 cuts. Usually if an LCO knows a lot of other buddy LCO's he gets the biggest bid or hands them to the closes guy that he likes. It's a risk.

HB Lawn
09-20-2010, 08:42 PM
OK, thanks for your help.

Now lets turn the tables around. Lets say a guy wants to sell his business
(equipment and customers). He's pulling in about $7,500 a month and has about $15,000 in equipment, including trailer. Equipment is mostly 6-8 months old. What would be a fair price for someone to offer him?

seabee24
09-20-2010, 11:10 PM
depends on the equiptment.

A equiptment is worth what its worth. i would never pay more than 75% of its new cost, other wise you would be better to go buy it brand new and get the full warranty. from there you just have to figure out what percentage of its life has already been used and what you would pay. the kicker is, if he wants alot of the equiptment and will not sepeate it from the accounts...then you might be stuck. just depends on alot. is that 15k what he paid new? or what its worth now?


B. customers - it makes no difference to me how much you "bring in per month" i could bring in 100k, but have 90k just in labor - so where is the profit? unless you really think that the old owner is just screwed up the production rates for one reason or another.

but if that 7500 per month shows profitablity, shows the proper amount of man hours, uses minimal fuel, minimal equiptment,minimal travel expenses (these are all dirrect expenses for each account) then i would be willing to pay top dollar. if the owner would help sign them up, even work for 6 weeks, i would be willing to go as much as 20,000 - again that would be for sign customers, 6 weeks of the old owner helping out, and all the numbers would have to work. 7500 billed out for me would have to be 1 man 5 days a week. if these accounts required more than that to make the 7500, then id say his numbers are too low

HB Lawn
09-21-2010, 05:41 PM
$15,000 is what the equipment cost new. Like I said, it's about 6 to 8 months old.

The $7,500 is gross monthly. Trying to get P&L from him, as well as other paperwork.

seabee24
09-21-2010, 06:09 PM
$15,000 is what the equipment cost new. Like I said, it's about 6 to 8 months old.

The $7,500 is gross monthly. Trying to get P&L from him, as well as other paperwork.

7500 gross is fine, but whats the net? thats what the real question is.... do you think you want to buy accounts that gross 7500 and have a cost to servcie of 7000? again, how many man hours went into it?

you do have to stand back and realize that some, not all ways, but sometimes the old owner messed up his own prodcution, so if you think you can do it faster or cheaper, than you still might have a good deal

i would figure that 20% of the customers will end up not using your service, so thats 7500 x 80% = 6000 gross

no matter how good you make the transaction some customers will just choose to break the cycle and they know someone already.

you also have to realize that people sell out for a reason, and that generally its either lack of money (profit) or the work is just so demanding they dont care to do it. the result those issues get passed on to the customer and the work suffers. so customers may drop right away, some will stick it out till the end of the year. the result is, you think you have 30 customers, but really 6 are unhappy and they have already made up their mind to switch reguardless of selling that company or not. I have already be awarded new customers for next year because the people are not happy now. i ask why not switch now, ..."im just gonna let them finish the season" - that then becomes your problem

HB Lawn
09-21-2010, 07:27 PM
Are you sitting down and ready to hear his asking price for everything?

$65,000.

seabee24
09-21-2010, 07:45 PM
seems high , but i also htink alot o people dont give themselfs credit for what their business is actually worth. Equiptment is what it is,

customers can be worth a decent amount if they are good customers, profitable customers.... i would pay up to 50% of a years income per customer, but they would have to meet all my terms

starry night
09-21-2010, 08:43 PM
HB: I don't know what size market you are in. My city is about 50,000 population and the market area about 100,000 pop. All the other companies in our business know the commercial places we maintain including the few residentials that we do. They would also know if I was leaving the business. So my point is, no one would pay me a dime for my locations. Why should they, they can go directly to my clients. So what about your situation? Do you know many of this other guy's customers? If so, why would you pay for them?

Also as an alternative, ask yourself how you might be able to build your own business with the infusion of $65,000 capital.

seabee24
09-21-2010, 08:53 PM
HB: I don't know what size market you are in. My city is about 50,000 population and the market area about 100,000 pop. All the other companies in our business know the commercial places we maintain including the few residentials that we do. They would also know if I was leaving the business. So my point is, no one would pay me a dime for my locations. Why should they, they can go directly to my clients. So what about your situation? Do you know many of this other guy's customers? If so, why would you pay for them?

Also as an alternative, ask yourself how you might be able to build your own business with the infusion of $65,000 capital.

good point - good thinking

i would get him to lower his price, then still work out a deal with him helping you for the first 6 weeks...this ensures you get the work

seabee24
09-21-2010, 08:58 PM
HB: I don't know what size market you are in. My city is about 50,000 population and the market area about 100,000 pop. All the other companies in our business know the commercial places we maintain including the few residentials that we do. They would also know if I was leaving the business. So my point is, no one would pay me a dime for my locations. Why should they, they can go directly to my clients. So what about your situation? Do you know many of this other guy's customers? If so, why would you pay for them?

Also as an alternative, ask yourself how you might be able to build your own business with the infusion of $65,000 capital.

i have to wonder, commercial properties - i as well know who does what...but do you really think in a city of that size that other business owners (not crew memebers) know your res customers? i doubt that unless you told them or they followed you job to job

how would they know you were going out of business? you make them sign a non compeat before meeting with them and reveiling your company name or locations

to me a buy out, is more than just a list...your right he could follow the guy around and find out his accounts... but dont you think that if the old owner (assuming he was good business man) had you shake hands with the customers, told you the pricing, got you to mow the first 2-3 cuts , all before the compition found out about the sale...i would think you would have a better chance

starry night
09-21-2010, 09:44 PM
.. but dont you think that if the old owner (assuming he was good business man) had you shake hands with the customers, told you the pricing, got you to mow the first 2-3 cuts , all before the compition found out about the sale...i would think you would have a better chance

That's the FIRST reasonable answer that I have gotten on lawnsite in the many times that I have questioned the ability to sell accounts. In fact, I'll keep that in mind when the time comes.