buying a lawn business

[marke]

I started a lawn business almost 1 year ago and have 18 residential accounts, no commercial. I saw a lawn business for sale which has 28 residential and 6 commercial accounts. He selling the business for $30.000 which includes a truck an enclosed trailer and a 48" scag and all the rest of the equipment. So i figure with my 18 and his accounts I got something here. He had a family emergency and his wife is now living in orlando which is 2 hours from here in port st Lucie. He is living in a hotel untill he sells his business. So I feel I'll be able to get him down between $20,000 or $25,000. Let me know what you all think.

Markelawn

[marke]

I forgot to mention a truck was also included. So what I would do is sell his truck and my trailer and possible his mower, so I'll get some of my investment right back.

[Team Gopher]

Hi marke,

Here is a great place to start reading about this topic.

Buying other biz's accounts (http://server2.lawnsite.com/showthread.php?s=&threadid=69011)

Determining the value of a Mowing Business (http://server2.lawnsite.com/showthread.php?s=&threadid=59167)

[Mower63]

Marke,

I'm down here in West Palm and in the process of buying a property management company. It took me about 6 months for find something that met my criteria. So a long road to find what you want. Remember it's your hard earned (or borrowed money) that you're putting on the line. Make sure you don't end up with a bunch of junk equipment and bad accounts (seems to be fairly common in SoFla).

Now, not withstanding the fact it may be a good deal. Exercise your due diligence, hire a good accountant and attorney, but don't let them decide the value of the business. They can help validate numbers and risk assess the contracts, but they will only have opinions on what the biz is worth. Only you can determine what the biz is worth to you.

BTW, what is the annual gross sales for the biz? Think starting rule of thumb for valuing as equipment re-sale value + goodwill (start at 20 - 30% of annual gross sales). I know other LCO's in SoFla that paid MORE than the annual gross sales for a good company. They had solid contracts (almost all commercial HOA, POA), good equipment, legitimate employee's, and good financials (BTW cash not proven on the books is worthless goodwill).

Remember, caveat emptor.

I'm not an LCO expert (yet) by any means but you could end up with a huge financial loss if you don't do your homework.

:cool:

Just passing on my many years of construction and contracts experience.

[marke]

Thanks mower63 for your advice I will exercise due diligence I won't just jump in to it. Well I'm not sure of the gross just yet, I'll be meeting him this coming week. I'll have my accountant look over the numbers and then assest what i'll do. I was told he has 42,000 gross left for the year.

Marke

[Mower63]

Marke,

Remember don't pay for what the future promises in terms of billing. Only consider what the business as done in the past. Get at least 2 - 3 years worth of sales information. Has this been trending up or down....if down then WHY? These are questions you need to ask.

I looked high and low for resources on how to buy a business. After a lot of reading I found one that is straight forward and easy to understand. You can even jump around easily to get directly to the information you need.

Take a look at www.diomo.com

I bought the book on-line version and used it almost exclusively to help me figure out this process. Lots of good info.

Best of luck

:cool:

[Tider6972]

Mower63, are you a business broker?

As an entrepreneur for the last 19 years, I have dealt with a few brokers, and you surely sound like one:) ; just wondering?

Marke, a simple search on this site will offer MUCH enlightenment on buying a "lawn business"....there is some very good, eye-opening information here.

[Mower63]

Tider ... Nope, NO and double no....

I'm not a broker. Just an out of work engineer that needed to do something beside bust my hump for another company only to be laid off by a bunch of MBA bean counters.

Since I'm a fairly analytical person I did a lot of research before I plunked down my $$$$. I'm no LCO expert but I did my share of small business stuff when I put myself through college.

I agree with your statement about this site and the wealth of experience / information. However it did not help me understand the process of buying an existing business, which, can be very complicated depending on the size of business you are going to buy.

Just thought I'd add my .02 - anybody can do what they are comfortable with but I'd hate to see anyone lose their Arse....I know I already got a lot of great help from folks on this site.

[Tider6972]

Oh, OK...the engineer 'splains it all ! I am very guilty of over-analyzing everything, and I am only a lowly accountant, errr I mean bean-counter !:D

Goodwill, or blue sky, is a no no in buying any business for me. Buy assets and, very cautiously and carefullynegotiate the customer base.

In a service business, a percentage paid over time as the service is performed is preferable to the buyer, and usually acceptable to the seller. For me, it's that way or no deal.

You cannot "sell" a customer, they have a bad habit of changing their minds;) . Contract notwithstanding.

Good fortune to you both !
Steve

[Mower63]

Tider,

I have a lot of respect for accountants....especially mine. I'm referring to the 'no experience' MBA grads that always seem to come up with some money saving scheme...which always includes head count reduction. Just got tired of dodging bullets...my prior job was consulting to senior management and I got tired of traveling 70% of the time.

Goodwill....tough to value. For a residential account LCO biz I'd value it at 0 - 30% of annual gross sales depending on if the owner was willing to stay on for an extended period. Big commercial, POA's and HOA's....I think there is cause to pay for this situation. These organizations don't simply drop suppliers since the majority of by-laws would require them to go through the costly RFP and board approval process to obtain a new vendor. It doesn't mean they won't...just less likely unless you really screw-up. Unlike a mow, blow and go operation I was looking for lawn/landscape, property maintenance (includes some work to replace light bulbs, sprinkler repair, etc), legit employees, workmans comp...basically a well run professional business.

That is not to say any of the independent guys/gals on this site are not professional. I just happened to have very specific criteria (no illegals, contracts in place, equipment maintenance records, etc.) for the business which I wanted to buy. The smaller operations I looked at were always missing some important element, based on my requirements, and thus I eliminated them without wasting people's time.

Sorry for the long post but since I'm new here, I'm always looking for new info...kind of hard without a face - face.

Since you're an accountant are you running an LCO, broker?, involved in purchase?....why so negative on goodwill? Don't you think an LCO in biz for 10 years with solid accounts and a good repuation would be worth something? I'm sure the owners would dispute any claims of worthless goodwill.

Regards,

:cool:

[Tider6972]

Mower63, I have no qualms with your approach; you are willing to pay a premium (goodwill) for what you determine is a well managed, well organized, well established business.

I take a different approach, guess you can call me a meat and potatos kind of guy. I am simply not willing to pay for an intangible notion upon which I cannot capitalize: you as a new owner MUST create your own goodwill, I don't believe it transfers!

I find that many if not most entreprenuers have what I call a 10 year cycle. At about 10 years, they become bored and are ready for a new challenge. That's where I come in!

I like to buy businesses which have been neglected and poorly managed, turn them around, get them running well and profitably, and sell . I also have a small clientel for whom I provide corporate tax and management services, and a tax service patterned after H&R Block.

Currently, I am involved in my first start-up, a landscape design and install business. I had no intention of doing lawn maintenance, but found a demand for it which I didn't anticipate, and decided to fill that need! I've got one guy doing all the lawn maintenance, only about 12 accounts, but will have a 2 man crew to begin next season, for I have about 15 clients waiting on me to take them on, and I have good reason to believe that I will have no problem growing to over 40 early in the spring.

I am always looking to aquire small companies from owners who are ready to make a move.

[Mower63]

Tider,

Sounds like an interesting approach....I don't have enough experience to feel like risking my $$ in a turn around situation but definitly Kudos to you for taking the challenge. Maybe in a couple of years...right now I've got a 4 year old I need to make sure can get a good education.

Any way I usually burn out after about 5 years and get bored. Then I'll be looking to sell but should be in the 500K - 1MM gross sales....not exactly a failing biz (of course that depends where you are looking at it from).

Regards,

[tonygreek]

Mower63, I find it rather interesting that you come from a consulting background. You're not alone.

3 years ago, I was a Sr. Mgr with Andersen Consulting/Accenture and decided to make a drastic change to avoid the 100% travel I was doing. I went from overseeing DaimlerChrysler's Dodge and Mercedes web development and eComm strategy to opening up a replacement windows/siding company and now am doing my due diligence on opening a landscape design and maintenance division.

Entrepreneurship.... catch it!

Tony,
Dayton, Ohio

[Mower63]

tonygreek,

Interestingly enough, I just stepped off a project in your neck of the woods. I spent the last 9 months flying into Dayton and driving down to Cincinnati for a construction project...400K sqft building. As for entrepenurial...I'm all for it. I figure if I can manage a 30MM design/build project (and everything in between), I can manage a property management / grounds maintenance company.

How 'bout you...any advice on what you would have done different when you made the transition? Nice to know I'm not the only ex-consultant on the board....yeah....I'm going through airport withdrawal currently....must find Starbucks....arggggghhh....

:eek: