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goodfellow
11-05-2010, 11:01 AM
Whats this company worth? The company has website, phone book listings, many testimonials, 50 Lawn maintenance clients approx 25 Snow removal clients, grossing $70,000.00 per year and growing. $30,000.00 in equipment includes everything to get started. Just wondering what other experienced business owners think.

punt66
11-05-2010, 11:02 AM
Whats this company worth? The company has website, phone book listings, many testimonials, 50 Lawn maintenance clients approx 25 Snow removal clients, grossing $70,000.00 per year and growing. $30,000.00 in equipment includes everything to get started. Just wondering what other experienced business owners think.

Its worth market value of equipment and 1 month of revenue. I wouldnt do any more then that.

studebaker48
11-05-2010, 03:20 PM
Its worth market value of equipment and 1 month of revenue. I wouldnt do any more then that.

i second that

zturncutter
11-05-2010, 04:53 PM
Sounds about right to me.

JD2320
11-05-2010, 07:51 PM
Its worth market value of equipment and 1 month of revenue. I wouldnt do any more then that.

i second that

Sounds about right to me.

Except you'd all be wrong. Service businesses with ongoing accounts are generally worth 1X to 1.5X earnings. Now there may be a basic calculation for how long the business has maintained 70,000 a year in revenues that supports the value too. For example if it is a new company, or have they been doing 60-80 K a year for 5-7 years and has there been turnover or not....that sort of thing.

But in my opinion to suggest the business is only worth 6-8000 dollars or 10 cents on the dollar is a bit ridiculous. Would any of you sell your accounts for 10 cents on the dollar?
You can do a google search on the subject if you don't believe that.


The equipment is always a separate negotiation, obviously.

punt66
11-05-2010, 08:13 PM
Except you'd all be wrong. Service businesses with ongoing accounts are generally worth 1X to 1.5X earnings. Now there may be a basic calculation for how long the business has maintained 70,000 a year in revenues that supports the value too. For example if it is a new company, or have they been doing 60-80 K a year for 5-7 years and has there been turnover or not....that sort of thing.

But in my opinion to suggest the business is only worth 6-8000 dollars or 10 cents on the dollar is a bit ridiculous. Would any of you sell your accounts for 10 cents on the dollar?
You can do a google search on the subject if you don't believe that.


The equipment is always a separate negotiation, obviously.

Clients can walk at anytime. There are no contracts. You can get a lot of clients with 6-8k of advertising. Sorry, its not worth that much.

zturncutter
11-05-2010, 08:18 PM
Except you'd all be wrong. Service businesses with ongoing accounts are generally worth 1X to 1.5X earnings. Now there may be a basic calculation for how long the business has maintained 70,000 a year in revenues that supports the value too. For example if it is a new company, or have they been doing 60-80 K a year for 5-7 years and has there been turnover or not....that sort of thing.

But in my opinion to suggest the business is only worth 6-8000 dollars or 10 cents on the dollar is a bit ridiculous. Would any of you sell your accounts for 10 cents on the dollar?
You can do a google search on the subject if you don't believe that.


The equipment is always a separate negotiation, obviously.

In answer to your question, Yes. On three different occasions with two different companies I have sold all or part of my company at these basic rates. On two separate occasions I have purchased other smaller companies for two weeks revenue, accounts only.

JD2320
11-05-2010, 08:49 PM
Well maybe it's different in the mowing industry. That's a shame. Your accounts and hard work is worth more.

Az Gardener
11-06-2010, 12:12 AM
The higher rates do apply when your buying a business, not when your buying someone else's job. To have value a company must generate income for the owner without the owner working.

That is the difference between a company and a job. And that ladies and gentlemen is the difference between 1.5 times earnings and equipment value and 1 months revenue's.

PLS-Tx
11-06-2010, 12:36 AM
Clients can walk at anytime. There are no contracts. You can get a lot of clients with 6-8k of advertising. Sorry, its not worth that much.

I agree, they can and often do walk.

goodfellow
11-06-2010, 09:11 AM
Thanks Guys I appreciate all your help!!!

snomaha
11-07-2010, 10:25 PM
Whats this company worth? The company has website, phone book listings, many testimonials, 50 Lawn maintenance clients approx 25 Snow removal clients, grossing $70,000.00 per year and growing. $30,000.00 in equipment includes everything to get started. Just wondering what other experienced business owners think.

Why are they selling?

JD2320
11-07-2010, 10:36 PM
The higher rates do apply when your buying a business, not when your buying someone else's job. To have value a company must generate income for the owner without the owner working.

That is the difference between a company and a job. And that ladies and gentlemen is the difference between 1.5 times earnings and equipment value and 1 months revenue's.

I couldn't agree less. What difference does it make if you have employees and or if the owner actually has to work?

So a solo operator with a business doing 200K a year has a job, and a business that takes five employees to do 200K is a business?

;)

I think thats a big reason why a lot of people want to have employees. So they think they don't have to work.

News Flash: It's a lot more work, having employees than not.

Az Gardener
11-08-2010, 11:12 PM
If it takes 5 employees to do 200-k it wont be a business for long.

If the solo doing 200-K is incapacitated for what ever reason he also wont have a job err I mean "business" (your term) for long.

Having employees is as difficult as you want to make it. I only worked alone for about a year but it has only been in the last few years that I focused on developing a hiring program. I have been working for a long time on training programs but until I perfected my hiring process I didn't bring in top candidates to train :hammerhead: So I had very mixed results.

Selling accounts -vs- selling a business, if you can't figure it out why one has more value no amount of explaining will change your mind. When its all said and done my business will be worth several times earnings and yours will be worth one months revenue and your equipment.

We both will have worked hard and one of us will be rewarded more than the other because we worked on different things.

wbw
11-09-2010, 08:03 AM
I couldn't agree less. What difference does it make if you have employees and or if the owner actually has to work?

So a solo operator with a business doing 200K a year has a job, and a business that takes five employees to do 200K is a business?

;)

I think thats a big reason why a lot of people want to have employees. So they think they don't have to work.

News Flash: It's a lot more work, having employees than not.

Everybody who has employees knows that it is harder than doing the work yourself. No doubt about it. It just depends on where you want to end up.

fl-landscapes
11-09-2010, 08:30 AM
Except you'd all be wrong. Service businesses with ongoing accounts are generally worth 1X to 1.5X earnings. Now there may be a basic calculation for how long the business has maintained 70,000 a year in revenues that supports the value too. For example if it is a new company, or have they been doing 60-80 K a year for 5-7 years and has there been turnover or not....that sort of thing.

But in my opinion to suggest the business is only worth 6-8000 dollars or 10 cents on the dollar is a bit ridiculous. Would any of you sell your accounts for 10 cents on the dollar?
You can do a google search on the subject if you don't believe that.


The equipment is always a separate negotiation, obviously.

you are 100% correct. This is the real valuation process and most on this board who bash lowball landscape companies turn into lowballers every time this subject comes up. If anyone thinks they are instantly getting 70k worth of buisiness from 6k advertising they are nuts. I get bashed every time I post exactly the formula you posted.

JD2320
11-09-2010, 09:06 AM
If the solo doing 200-K is incapacitated for what ever reason he also wont have a job err I mean "business" (your term) for long.

Could you explain to us what your perceived threshold is for having a job, and having a business? You mention employees. How many employees does someone have to have to be declared a business to you as opposed to "having a job" Because your definition isn't what most people think, including but not limited to definitions in a dictionary.

This is the definition of a Business from the Dictionary.

Businesses are privately owned and typically formed to earn profit that will increase the wealth of its owners. The owners and operators of private, for-profit businesses have as one of their main objectives the receipt or generation of a financial return in exchange for work and acceptance of risk. Businesses can also be formed not-for-profit or be state-owned.

The etymology of "business" relates to the state of being busy either as an individual or society as a whole, doing commercially viable and profitable work.

I can assume (and I don't mean to throw a new wrinkle into it or give some of you more ammo but) that you would never consider someone who runs a business out of their home....a Business either.

How much revenue, how many employees, how many advertisements, how many websites, phone numbers, pieces of equipment, insurance packages, licenses or years into something does it take for you to admit someone has a business instead of a "Job"

JD2320
11-09-2010, 09:14 AM
you are 100% correct. This is the real valuation process and most on this board who bash lowball landscape companies turn into lowballers every time this subject comes up. If anyone thinks they are instantly getting 70k worth of buisiness from 6k advertising they are nuts. I get bashed every time I post exactly the formula you posted.

Thank you. At the end of the day though anything is only worth what someone is willing to pay, but I know for a certain fact that my accounts are worth 1 times yearly value because I know other people that have sold the same product to companies like Tru Green for exactly that.

Maple Wood
11-09-2010, 09:30 AM
Could you get 50 good accounts for $8000 in advertising? How long would it take?
If it took a while to accumulate those accounts are you profitable at 20 accounts or however many you have. Can you make a living while building a business from scratch?
Is your market saturated or open?

Your advertisement will get you a lot of PITAs and bargain shoppers.

If you can value the marketing and time value to achieve the number of customers you are looking at buying you would get a true value.

Some deals I have heard of give the seller a % of income over time. This takes away the risk of the customer walking. There usually is some walking but this bunch of 50 should give you a good starting base.

TheC-Master
11-09-2010, 10:26 AM
If it takes 5 employees to do 200-k it wont be a business for long.

If the solo doing 200-K is incapacitated for what ever reason he also wont have a job err I mean "business" (your term) for long.

Having employees is as difficult as you want to make it. I only worked alone for about a year but it has only been in the last few years that I focused on developing a hiring program. I have been working for a long time on training programs but until I perfected my hiring process I didn't bring in top candidates to train :hammerhead: So I had very mixed results.

Selling accounts -vs- selling a business, if you can't figure it out why one has more value no amount of explaining will change your mind. When its all said and done my business will be worth several times earnings and yours will be worth one months revenue and your equipment.

We both will have worked hard and one of us will be rewarded more than the other because we worked on different things.
The best way to mention it is buying a system. Buying a system is more appealing than buying the person that *is* the system. People want a system that already runs itself and provides additional passive income for them as an asset. They will hold higher perceived value. That being said I'm sure everyone will want a lot out of their business regardless. Solo or not.

JD2320
11-09-2010, 11:44 AM
if you want to buy a system. Buy a franchise. Other than that most businesses get folded into a current operation or turned upside down to suit the new owners needs or way of thinking.

Which begs a new thought. If you buy a franchise, are you a business owner or an employee of the parent company.

TheC-Master
11-09-2010, 11:57 AM
if you want to buy a system. Buy a franchise. Other than that most businesses get folded into a current operation or turned upside down to suit the new owners needs or way of thinking.

Which begs a new thought. If you buy a franchise, are you a business owner or an employee of the parent company.

Bleh franchises are so so. I'd rather start up something and franchise it out. People like the liberties of their own business. But franchises have the name behind them. It depends on the person, not sure I'd recommend it though. If a business was working, I'd imagine most take it for the cash flow. I wouldn't fix something that isn't broken.

JD2320
11-09-2010, 12:36 PM
Bleh franchises are so so. I'd rather start up something and franchise it out. People like the liberties of their own business. But franchises have the name behind them. It depends on the person, not sure I'd recommend it though. If a business was working, I'd imagine most take it for the cash flow. I wouldn't fix something that isn't broken.

I'm not a franchise person myself, but my brother got into one, developed 22 more stores and sold the whole territory back to the parent company and walked away with 25 million dollars.

I also have some nephews that have owned a half dozen Burger Kings that are struggling, so it goes both ways.

TheC-Master
11-09-2010, 12:42 PM
I'm not a franchise person myself, but my brother got into one, developed 22 more stores and sold the whole territory back to the parent company and walked away with 25 million dollars.

I also have some nephews that have owned a half dozen Burger Kings that are struggling, so it goes both ways.

It has its benefits to it as well, if you don't want to worry about starting your brand. My friend bought a subway. But it's best to do multiples with it. The down payment on it was only 50k though, so we'll see how it goes.

Az Gardener
11-09-2010, 05:18 PM
Could you explain to us what your perceived threshold is for having a job, and having a business? You mention employees. How many employees does someone have to have to be declared a business to you as opposed to "having a job" Because your definition isn't what most people think, including but not limited to definitions in a dictionary.

I can assume (and I don't mean to throw a new wrinkle into it or give some of you more ammo but) that you would never consider someone who runs a business out of their home....a Business either.

How much revenue, how many employees, how many advertisements, how many websites, phone numbers, pieces of equipment, insurance packages, licenses or years into something does it take for you to admit someone has a business instead of a "Job"

A business in my world is a profit machine that runs in perpetuity with out a owner there to make it go. Thats my definition not Webster's, mine may be extreme but so is calling a one man show a "business" without the owner it has little value and would cease to exist.

Yes you can run a business out of your home but why would you want to. One of the best days of my life was the day those trucks and trailers left my home for the last time.

A business should serve your life not the other way around. last thing You have to make yourself happy so if solo is it for you great but it takes different skill sets for each.

JD2320
11-09-2010, 08:20 PM
A business in my world is a profit machine that runs in perpetuity with out a owner there to make it go. Thats my definition not Webster's, mine may be extreme but so is calling a one man show a "business" without the owner it has little value and would cease to exist.

Yes you can run a business out of your home but why would you want to. One of the best days of my life was the day those trucks and trailers left my home for the last time.

A business should serve your life not the other way around. last thing You have to make yourself happy so if solo is it for you great but it takes different skill sets for each.

Well yeah. If I am dead. I'm out of business! My executor and or girlfriend have specific instructions as to what to do with accounts, and equipment. Even down to the point of paying people back pre pay money for services not yet received.

I run it out of my home because I don't need anything more. I don't park equipment at the house generally. I rent a storage unit and a parking area in a secure place for 142 a month. I certainly don't need a shop with a big lease payment that I am going to be at for an hour a day.

I can support several employees with this method as well.