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lsylvain
11-12-2004, 02:11 PM
I'm looking at buying back in to the lawn biz. I sold out last year and moved south to FL. I don't really want to start from scratch again and would rather buy an established service. I don't have all the details yet but I wanted to get the thread started.

Asking Price $79 K

$162k revenues

2 crews.

Accounts located in two cities.

I should be getting equipment and other details shortly.

I kept enough equipment from my old biz to run a 2 man crew so I have some room to grow, plus use the 3rd crew to be more efficeient and such.

Tell me what you think.

I should have more info by the end of the day.

MacLawnCo
11-12-2004, 11:32 PM
whats his PL statement say? what length of time is left on his contracts?

lsylvain
11-15-2004, 02:37 PM
OK,

His profit sucks, as in he doesn't have any. I just got the financial statements.

It looks like a lot of his problem is that he spends like crazy. The current owner doesn't do anything with the business so I think that is a big part of why his cost are so high.

Most of the "regular" stuff ie. gas, repairs, payroll, etc are right along the same ratios as my business, but there are some excessive fixed cost.


There are only 20 accounts all commercial grossing 162K. His broker says he has 4 full time guys working 40hrs a week, 160 man hours per week. So he is billing roughly $23 per man hour. Drive time etc should not add up to much since there are so few accounts. I don't like that low billing rate, but I'm not sure what the going rate down here is and I also think that since he has nothing to do with the business there is a lot of sitting around on the job by the employees.

I'm still waiting on the equipment details.

any input? it doesn't look good as of yet.

Fantasy Lawns
11-15-2004, 02:45 PM
Those 160 hrs are those summer or winter hrs ??

My Summer hrs may average 190-210 while just last week was 120 n before that 106

I will say that for 4 guys to only gross $160k is "low" .... I like to think of a full time worker helping towards the gross at least +$60k per year per worker ....n that's just cutting grass

Depending on the equip n such the $79k may be on the lite side of "hi" .... gotta look at the numbers better, the overall look of the accounts, the room of efficency improvement etc

MMLawn
11-15-2004, 02:57 PM
OK,

His profit sucks, as in he doesn't have any. I just got the financial statements.

It looks like a lot of his problem is that he spends like crazy. The current owner doesn't do anything with the business so I think that is a big part of why his cost are so high.

Most of the "regular" stuff ie. gas, repairs, payroll, etc are right along the same ratios as my business, but there are some excessive fixed cost.


There are only 20 accounts all commercial grossing 162K. His broker says he has 4 full time guys working 40hrs a week, 160 man hours per week. So he is billing roughly $23 per man hour. Drive time etc should not add up to much since there are so few accounts. I don't like that low billing rate, but I'm not sure what the going rate down here is and I also think that since he has nothing to do with the business there is a lot of sitting around on the job by the employees.

I'm still waiting on the equipment details.

any input? it doesn't look good as of yet.


I bet he wants out as this sounds like a dog! Think about it with the "probable" facts and numbers. If these 20 accts are all Commerical then they are probably year round service accts. If so that means they 1) are only bringing in $675 each per month, so either they are small or grossly underbid and 2) no way it takes 4 people to service 20 accts in a week.

Assuming he is paying his help what seems to be the industry "average" of $10 an hour and NO O/T but again year around, heck his pre-tax payroll alone is $80K, after his share of the taxes another $8-10K.

No wonder just on these few things alone he isn't making any money.

I wouldn't walk from it, I'd run. :)

lsylvain
11-15-2004, 03:07 PM
Those are summer hours when they are cutting weekly. That's what I thought as well. I was cranking in 100 plus and hour in WV, I knew I had gotten spoiled but I didn't think it was that bad down here.

He calls his 4 employees 1 manager, 1 foreman, and 2 helpers, so I'm wondering if that translates to 1 friend of the owner who tells the bilingual guy to tell the 2 Mexicans what to do while they sit in the cab and play cards.

I need to just figure out if it is that the jobs are under bid or if his employees just suck. Also if the "manager" doesn't work, that works out to about $31 and hour or 54k per employee which isn't bad.

lsylvain
11-15-2004, 03:27 PM
They are small accounts. They do a lot of gas stations and stuff like that. Which again makes me questions if they are underbid at $230 a cut. It is kind of hard to underbid a gas station by much but maybe. The more I dig into his financials the more I think that he has little business/managment ability.

for example:

He has enough equipment for 2 crews and runs 1 - 4 man crew. Unless every job he has is weird and has an excessive amount of trimming, or mowing, he has at least 2 guys just sitting around to wait for the other 2 to finish blowing. I've never seen a 4 man crew work very well.

tonygreek
11-15-2004, 05:42 PM
look at it this way: how many accounts do you think you could land with $79k worth of marketing? sure, marketing takes time, but it's well worth it in this guy's grim situation and how he's apparently fumbled running his business.

howabout this: since you have leftover equip from your previous venture, how many accounts could you generate from $7,900?

worse case, offer to buy the accounts at the usual steep discount.

personally, from what you've said, i'd run from this one.

tony

PLI1
11-15-2004, 05:48 PM
I'd avoid this one like the plague!!!!!!

Fantasy Lawns
11-15-2004, 05:56 PM
It's not the number of accounts ... the buz has $13.5k of monthly income .... that's not to shabby

Down here to make it ..... it's monthly billing or die ... based on 42 cuts per year .... weekly April -Oct than bi Nov-March

The average buy out is 2 months for resi n 3 for commercial (under contract) ... we never really have to contract the resis as there is never a down time .... we mow year round ... so the $13.5k acounts sit around $40k in "value"

After this one has to consider the equip & employee issues .....not that there can't be customer issues as well

MY ?? would be Why are you selling in the $$ making months ....ie same monthly income with half the cost n half the labor

I would have to take a real close look at the labor n bidding to consider if they are under bid or just under efficient

nelbuts
11-15-2004, 06:46 PM
Hello Fellow Mountaineer,

I was born and raised in Weston. Moved to Florida in 1986.

Now for your questions. The guy is trying to get out while the getting is good. Something smells and it is not the salt air. At $162K grose he should be on a mower.

His hourly rate is too low. I charge min. $37.50 per man hour and if equipment is used then it is higher. You did not say which coast of Florida this business is located. Believe it or not it makes a BIG difference.

Remember this is not WV. There are plants here that no one else has to deal with while we still deal with a lot of plants from northern and central areas. Good luck and Go WVU.

lsylvain
11-16-2004, 10:50 AM
I still havn't got the equipment information, I'm sure that will be a deciding factor. If he has 2 full crews of equipment including trucks that is at least 40k if not more. I should find out today. The broker is supposed to be faxing the info over. He had almost 19k in depreciation in 2003 so that may be promising.

The biz in located south of Tampa with a couple jobs on the barrier islands.

I would build my own business, but I have 2 problems with that. I don't really want to go through that again, and I have a pretty hefty mortgage so even if I have every available time to mow filled, I still wont be pulling in enough to quit my job to pay my bills(unless I get some really good accounts or a whole bunch at once). One of the down sides to being able to smell the ocean from your front porch.

The hourly rate that I came up with does not deduct drive time 13500 billed per month divided by 640 hours ( 4 guys 40 hrs a week) = about $21 an hour. Of course this goes up in the slow season. I am thinking that the 4th guy is completely unnecessary and I would replace the 3rd. Cutting hours down to 480 a month during the summer about 28 per hour. Or to look at it per cut cycle $3800 a cycle(at 42 cuts a year)/160 hrs = $24 per hour the way it is now. if I take over it would be more like $3800/120 hrs = $31 an hour. Still a little on the low side. Again not including drive time.


The saga continues

lsylvain
11-16-2004, 01:01 PM
Okay, I got the equipment list he didn't send me the model numbers just the makes and no years. What a pudwacker. He has only been in business since 1998 so lets just assume all equipment was bought then. The list didn't say anything about trucks though.

2 - Stihl Blowers
1 - Lesco Push Blower
honda Push Mower
Stihl Chain Saw
Mac 3200 Chain Saw
Shindowa Chain Saw
Stihl Hedge Trimmer
Echo Hedge Trimmer
Echo Power Pruner
4 - Echo Trimmers
Stihl Trimmer
3 - Echo Edgers
ExMark Cazerz Mower
GrassHopper Speedster
Toro Z Master
Encore Mower
Blade Grinder
Extention Lader
Air Compressor
2 - 16' Enclosed Trailers.

lsylvain
11-16-2004, 03:48 PM
The 4th guy was what I thought. He doesn't work with the crew, he does the owners job.

I'm figuring the equipment is worth about 15k giving him 3 cuts on the accounts $52,500 tops for the whole deal. I think somewhere in the mid 40's is better.

What do you think?

tonygreek
11-16-2004, 07:31 PM
if you are seriously considering this purchase, i would absolutely protect yourself with a scheduled payment plan based upon customer retention milestones. what happens if those 3 cuts you are paying him prove to be total losses because they drop you prior to, or post, cut #1?

tony

Kelly's Landscaping
11-16-2004, 09:35 PM
Buying a company this small never seems to make much sense to me one the account list is not that big I have a hard time thinking you could not get that many accounts with just a few k in advertising in the spring. And the other thing is used equipment I hate used equipment I do not trust it I feel like I am buying someone else’s problems. I would rather buy my brand names and have newer reliable equipment then let some one else make those choices for me.

So right there I would have strong reservations but the next problem I see is the crews lets see one guys does nothing he’s going to love how fast he is fired. And if he does nothing my guess is the other 3 have a very relaxed pace as well it sounds like you could do everything with just yourself and one man and maybe a few hours a week ot. Now you have also thought of that and that’s what has you thinking because you could eliminate 50-55k a year in pay roll and then that becomes a rather profitable company. If you buy it you many need to replace all of the men and that has timing problems as the work has to still be done while you replace the rotten apples and learn the list your self.

So what are you buying a list and some used equipment we started last year with 65k and worked from scratch and we are around twice the size of this business for sale. Think long and hard 79k spent correctly you can get large very quickly if you want to take a short cut look at buying a cutting list.

lsylvain
11-17-2004, 10:16 AM
The 4th man is a manager that does the owners job and doesn't mow. He does the estimating and customer relations stuff. The current owner also owns and A/C business and devotes all his time to that. The manager is not staying with the business, nor is the foreman so I don't have to worry about getting rid of them anyway.

As far as the equipment goes, with what I already have and the extra added equipment 2/3 of the equipment can die and I still have plenty to get the job done. I really havn't seen much difference in cost between new and used equipment over the years anyway. You can spend and extra $1000 a year in repairs and maintainance or you can pay and extra $1000 a year for new equipment. At least that has been my experience. Plus I can spend 15k and have enough equipment to run 3 crews or I can spend 15k and bearly have enough to run 1.

Basically I know I would rather buy than start from scratch, so the question is really not "whether I want to buy or not", it is "how much is this business worth", "is this business worth buying."

Thanks for all the input

MMLawn
11-17-2004, 10:19 AM
if you are seriously considering this purchase, i would absolutely protect yourself with a scheduled payment plan based upon customer retention milestones. what happens if those 3 cuts you are paying him prove to be total losses because they drop you prior to, or post, cut #1?tony


Absolutely do this. Also I realize that you want to grow the business but with only the 20 small commerical accts you said earlier then for sure no more than you and one other person can handle those and that is how I would start and dump that extra payroll as at this point it is not needed.

MMLawn
11-17-2004, 10:31 AM
Basically I know I would rather buy than start from scratch, so the question is really not "whether I want to buy or not", it is "how much is this business worth", "is this business worth buying."


Based on that and keeping in mind that I personally (an several others as they have posted) would not buy this business as I don't think 1) it is a good deal at all, 2) I don't really think you would be buying alot at 20 small commerical accts, but yes it is a start 3) I don't think it is a profitable business as it currently is.

That said, if I were going to buy it I would only do so if the current accts signed new contracts with me in advance and then I would pay:

Equipment: $15,000.00 (Assuming your $15K is right, which it looks like it may be) and I would paid that amount in full at the closing.

Accounts: $16,000.00 (assuming that the the gross stated iss correct and they all re-sign new contracts, this amout would drop by 10% for each acct that did not sign) this I would only pay over a stagged period to ensure the customers didn't drop. Probably try for 6 months to 1 year with equal monthly payments so if they did drop after say 1 month you weren't in the hole.

lsylvain
11-17-2004, 11:46 AM
New contracts are a given in any business sale, otherwise there is nothing for the seller to sell other than a list of names. As far as deferred financing goes most of the people I have spoke with have paid around 50% down and the remaining 50% over a 5 month period 10% a month based on the number of jobs retained.

ie. 10k monthly billing purchased for 20k

10k down

then 2k a month(or 20% of monthly billing) for 5 months as long as no customers are lost. Say for example each month you loose 1k in customers for 5 months.

month 1 - 9k in billing - 1800 payment - 7200 gross margin

month 2 - 8k in billing - 1600 payment - 6400 gross

At this point you have already got your initial 10k back. (yes I know you have other expenses, same as if you got these jobs through regular advert.)

month 3 - 7k in billing - 1400 - 5600 gross

4 - 6- 1200- 4800 gross

5 - 5- 1000 - 4000 gross

months 6 - 12 you bill 5k on the original 35,000 gross

Total gross margin for the year = 63,000 Cost you 10k up front. That is a 630% return on your advertising $ in year 1 and a 100% return in 2 months.

Also take into account that you will always be trying to take over biz in the off season meaning same billing less expenses. Where as, when picking up clients you are going to get them during season when cost are higher.

When you look at things you also need to look at them from both sides. When I sold my business I wasn't going to take any less than 3 months billing and it killed me to take that for it. My concerns were what if this guy goes out and looses all the accounts because he is a dumbass he is gona blame it on my jobs and not pay. There is = risk on both sides. The buyer runs the risk of paying something for nothing and the seller runs the risk of giving up something and getting nothing.

MMLawn
11-17-2004, 12:16 PM
lsylvain, I realize from your profile that you are only 24 years old with just 2 years in the biz and as you said earlier that you have a fulltime job I assume that was part-time cutting, so I have kept that in mind, but what you are doing here is asking and then answering your own questions when you fail to get the advice that you just ask for or hear something you don't want to hear. The majority of the posters have said that this is not good deal as it has been presented and they would not do it. You continue to say though that you want it anyway no matter what their advice and make detailed post countering what their advice is. so the question is really not "whether I want to buy or not", it is "how much is this business worth", "is this business worth buying."


I personally think at this point it seems that you are only trying to "outdo" each post with your business "wisdom", so if you don't want our honest input then stop asking for it. Because folks on here will give you their honest opinion as it should be and has been ask for, not just what you want hear. If you truely do want honest opinions then stop countering every post that responds. If you don't want honest opinions then good luck, just buy it, be done with it and let us know how it works for you.

New contracts are a given in any business sale, otherwise there is nothing for the seller to sell other than a list of names.

Exactly BUT, LCO's are bought and sold every day by dumb@sses without signed contracts with the new customers that yes makes it worthless as several of us pointed out earlier. Just do a search on here and you'll see that.

lsylvain
11-17-2004, 01:47 PM
MMLawn, First I am not 24 and I have more than 2 years of experience, I don't know where you are getting that, you don't even know who I am. secondly, my business was full time unless you count the couple of hours a week went to school mostly at night but occasionally during that day. I highly doubt that if you had several state and federal mowing contracts and made enough money to put you and your wife through college without her having to get a regular job, you would consider yourself part time.

I'm sorry if you think that I should just listen to your "I'll only pay 10% of the revenues." that you pulled out of you butt, and take it as gospel. When the average business sells for 1 years total revenues. (all businesses not just green) And from what I have figured from other people on the site and my own personal experience is that 2-3 months of revenues is a good estimate.

I'm sorry, that I would rather buy a biz then start from scratch, but that is my choice to make. If I wanted your opinion on whether to buy or start my own the thread would be titled. "Buy or Start your own??"

I'm sorry that you think that saying "this isn't a good deal" somehow puts a price tag of this business. OK 79k is too much, well of course it is too much, if the seller put a number that was less than the value of the business he would be screwing himself.

I'm sorry that you think that it is stupid for me to want people to give me information I don't already know. At least you should be able to know that I can read the 4 post that say start you own, I don't need another 100 to tell me the same thing.

I'm sorry that I don't want to hear people's "opinion", and want to hear credible information about the value of a business. You said the accounts were worth 16k with no reasoning behind that number.

I am sorry that you cannot understand the difference between statements pertaining to buying a business in general, and buying this particular business.

I am sorry that I want to hear something different and something that someone put some thought into instead of the cookie cutter responses, and off the top of you head remarks. Like "run away" when that person hasn't even seen what equipment comes with the business. If the business has 100k in equipment I'm sure he would change his mind.

I'm sorry that when I first started coming to this site in 2000 or early 2001 people tried to help each other and gave credible advise and now it is just a bunch of people ranting and posting pics of how sexy their new mower is, or how they think this other company is dealing drugs because they have nice equipment. And that whenever anyone asks a simple question they get a hundred stupid answers. Like the guy the other day that asked about the cost of a 1M insurance policy. He got a ton of post telling him he didn't need it, or why do they want him to have that much, instead of just answering the kids question.

I'm sorry that I think it is funny that you always here what I bad idea buying a biz is from people who have never done it, and how great it worked out from the people who actually did it.

MMLawn
11-17-2004, 02:00 PM
MMLawn, First I am not 24 and I have more than 2 years of experience, I don't know where you are getting that, you don't even know who I am.

Additional Information Group Memberships
Biography:
How did you find LawnSite.com?: Though search engine Your Age: 24 Company Name: Quality Lawn Care Years in Business: 2
Location:
Bluefield, WV


I'm sorry that I don't want to hear people's "opinion", and want to hear credible information about the value of a business.

Then why did you start this thread and ask for opinions?

I am sorry that I want to hear something different and something that someone put some thought into instead of the cookie cutter responses.

Agian, why ask us then?

I'm sorry that when I first started coming to this site in 2000 or early 2001 people tried to help each other and gave credible advise and now it is just a bunch of people ranting and posting pics of how sexy their new mower is, or how they think this other company is dealing drugs because they have nice equipment. And that whenever anyone asks a simple question they get a hundred stupid answers. Like the guy the other day that asked about the cost of a 1M insurance policy. He got a ton of post telling him he didn't need it, or why do they want him to have that much, instead of just answering the kids question.

Then leave again, but I find it a very good site and see wonderful and helpful members and information on here all the time.

I'm sorry that I think it is funny that you always here what I bad idea buying a biz is from people who have never done it, and how great it worked out from the people who actually did it.

This statement really makes no sense, but I have bought and sold numerous businesses myself. As a matter of fact that is why I can sit in my office nearly everyday and be on LS, except one a week when on that day I have so many yards that I have to help out.

MMLawn
11-17-2004, 02:08 PM
As a matter of fact I am on the computer at one of my off shoot businesses right now as I type this because I have an appointment at 3PM with a potential buyer for it..

Evergreenpros
11-17-2004, 02:14 PM
I'm sorry if you think that I should just listen to your "I'll only pay 10% of the revenues." that you pulled out of you butt, and take it as gospel. When the average business sells for 1 years total revenues. (all businesses not just green) And from what I have figured from other people on the site and my own personal experience is that 2-3 months of revenues is a good estimate.



Service businesses typically sell for 10% of yearly revenues. This is a good shorthand calculation. Just as you mentioned the "average business sells for 1 year total revenues" the longhand version is "The average business sells for 5 times net profit, when net profit is usually 20% a year" hence the 100% of yearly sales. However, this is yearly PROFIT, NOT INCOME. Which means, in order for you to translate a sole operater type of business you have to add in the amount of labor cost it would take to get the work done. So if you generated $50,000 in revenue and had $40,000 in "profit" and it would cost $35,000 to hire somebody to do the actual work and manage them you really only made $5,000. And good luck getting it done for that cheap (including all payroll taxes, benefits, workmans comp, etc) Actually the "business" really isn't worth anything. The only thing of "value" is the customers and equipment. Hence the 10% of yearly receipts.

$50,000 in sales X 10% is $5,000. Conversely, it would probably take about $5,000 in advertising to generate $50,000 in sales. Then you add in land, equipment, and any other assests the business might have.

MMLawn
11-17-2004, 02:18 PM
I tell you what. Since you really don't care what the other members on here opinions are for business or what the real market value is for this stated business, not basic Business 101 formulas but the REAL world numbers and as it is clear that you are hell bent at buying it at an unrealistic price. IF you have excellent credit and FICO score and you have unincubered real property for a lien, I'll loan you the money to buy.....for let's say 40% since you don't deal in real world markets.

Let's see did Sam Walton become a Billionaire by using the Business valuation numbers or by going against those and dealing in real world fact and numbers and not just paying what they expected??

MMLawn
11-17-2004, 02:20 PM
Service businesses typically sell for 10% of yearly revenues. This is a good shorthand calculation. Just as you mentioned the "average business sells for 1 year total revenues" the longhand version is "The average business sells for 5 times net profit, when net profit is usually 20% a year" hence the 100% of yearly sales. However, this is yearly PROFIT, NOT INCOME. Which means, in order for you to translate a sole operater type of business you have to add in the amount of labor cost it would take to get the work done. So if you generated $50,000 in revenue and had $40,000 in "profit" and it would cost $35,000 to hire somebody to do the actual work and manage them you really only made $5,000. And good luck getting it done for that cheap (including all payroll taxes, benefits, workmans comp, etc) Actually the "business" really isn't worth anything. The only thing of "value" is the customers and equipment. Hence the 10% of yearly receipts.

$50,000 in sales X 10% is $5,000. Conversely, it would probably take about $5,000 in advertising to generate $50,000 in sales. Then you add in land, equipment, and any other assests the business might have.


EXACTLY Evergreen!! Sad thing is though he ask for it but will not accept that as the "real world" answer. He is just too hung up on Business 101 class. I was really trying to help him in my post, now I couldn't care less. Let him buy it at that stupid price the guy wants and he'll be bankrupt in 6 months.

lsylvain
11-17-2004, 03:28 PM
I never said I was or was not going to buy this business. I was trying to figure out what the dam thing was worth. I know that there is no way in hell I would sell my business for $16,000 that is just crazy. I also would not pay 79k for this one that is also crazy.

You obviously were never trying to help out since you supposedly have bought and sold hundreds of businesses. If you wanted to help out you would have said something like "well, when I bought this business I paid X amount and got X amount and lost X amount of customers, it worked(didn't work) out." Instead you used you supposed 25 years of experience to say

"Based on that and keeping in mind that I personally (an several others as they have posted) would not buy this business as I don't think 1) it is a good deal at all, 2) I don't really think you would be buying alot at 20 small commercial accts, but yes it is a start 3) I don't think it is a profitable business as it currently is."

A generic statement that does not show any intention on your part to engage in a discussion about the value of a business, only that you wanted to show your ass as the guy who can tell that a business is a bad deal with very limited information, thinks that because 1 candy bar for sale isn't a lot you shouldn't buy it, and has x-ray vision that can see across 3 states and read the bottom line on an income statement.

From your first post you were being unreasonable and making generalized statements like "I think it's a dog." Then when I tell you that I understand how to protect my own interest during a business deal you get all offensive and try to insult my age and experience. Only exposing your age and ignorance. (lets try a little experiment!! right a number down on a piece of paper say the number 24 or 2 then look at that paper several years from now. My bet is that it will still say the original number written on it.)

I never once said anything to insult you or anyone else until you started with your crap. Go back and read the posts. You even cut and pasted one that I wrote saying that I didn't think it looked very good, then you turn around a few post later and say that I don't listen and I am going to buy the business anyway and ignore everyone.

You are such a tool. Now I really am remembering why I quit using this site. The boards are just overflowing with people like you who have been on the site for 5 months and posted 700 and something post, over 4 a day, probably all just as meaningless as the next and you expect the rest of us to think that you are this great business mind who owns all these businesses yet has time to waste on the Internet, like you are right now, waiting for me to reply.

kootoomootoo
11-17-2004, 04:18 PM
If a guy cant sell his business professional ie by having everything listed without exception how likely is it that he runs the business any differently. I'd spend the 80000 on a pizza shop.

kootoomootoo
11-17-2004, 04:20 PM
If a guy cant sell his business professionally........ ie by having everything listed (age, model, serial number, purchase price, warranty, depreciation info) without exception how likely is it that he runs the business any differently. I'd spend the $80000 on a pizza shop.

MMLawn
11-17-2004, 04:33 PM
You obviously were never trying to help out since you supposedly have bought and sold hundreds of businesses.
From your first post you were being unreasonable and making generalized statements like "I think it's a dog." I never once said anything to insult you or anyone else until you started with your crap.
You are such a tool. Now I really am remembering why I quit using this site. The boards are just overflowing with people like you.

No my young now 26 year old friend I said numerous businesses, not hundreds, read it again. I never insulted you I simply stated what I thought of the business as you ASK for and was really trying to assist you. As to the business you presented it was and still is a DOG with those numbers and I would still RUN from it at that price. I also told you what I would pay for it and why, but you didn't like my price and wanted to pay MORE ;) Also DOG my friend is a term used all the time, again in the real business world every single day....even Donald Trump calls a bad business a dog. Even if it isn't taught in Business 101.

As to your actually buying this $160K+ business and your "huge" house payment, then if you are all that and have so much business knowledge with your Business 101, and so much extra money lying around then why and how in the world did you bounce a friggin check over not having an extra messily 15 dollars in the bank???? ;) My goodness.

BTW, my check are free.....on all of my accounts :waving:

I had a check bounce last month because the bank charged me $30 for my checks instead of $15.


I agree with you though I have wasted enough time with you. My last business advise to you is Try and not bounce any more checks.

Lawn-Scapes
11-17-2004, 06:10 PM
Have you looked at any of the accounts? Looked at equipment?

Do you think that maybe the work be can completed by 2 people in 50-60 hours?

If they are mostly gas stations as you say.. your work & trucks will be seen by many.... potential to pick up more work?

If the accounts are of some quality and I thought I could shave a bunch of labor hours off.. I would consider it. I'd need to meet each client and have signed contacts.

It's worth? Whatever you're willing to pay for it.. right?

tonygreek
11-17-2004, 11:51 PM
lsylvain, you seem to have just enough information about business to make yourself dangerous, but too much optimism to see beyond the glass being half full. i'm not quite sure where your business background comes from, but you've owned an lco in the past. throw everything textbook out the window and take a good, objective look at the facts. actually, before that, throw away the idea of this acquisition being a quick entry back into the biz. by that, i mean be completely objective about it.

as you seem to recognize, a 1x valuation is in no way applicable to an lco, so move past that and look at the number you seem to have latched onto, being 2-3 months. for some reason, you are hell-bent on this purchase, so if you go with that number, i'll reitterate to attach it to a rider of a sliding payment schedule for successful retention of clients. so take a base number of 2.5 months, or $27k, plus $15k for equip, comes to 42k. remove the equip from the valuation and asking price because honestly it should be treated and or viewed as a secondary transaction. as for textbook, this is one that is absolutely textbook. unless it's something of a proprietary nature, inventory should always be viewed outside the scope. with that being said, we come to 27k for a client list of qualified leads. if you want the list that badly, offer a fraction of that, with additional premium paid as retention increases. btw, i call them qualified leads because i don't recall detailed mention of contracts. if they exist, have you seen them? are the customers held to them in the event of a sale?

so far, i've seen no post that wants you to fail. you wanted us to play devil's advocate, as you indicated in your opening post, so this is what you get.... for free even. this could prove successful to you, but beyond the equipment, i honestly don't think you'd really get much of anything for your money. to be blunt, i'll echo the sentiments that from the details you've given, it's a dog and your capital is probably best used elsewhere. speaking of, i saw you write that you are sitting under a large house payment? if you don't mind me asking, is this purchase being funded by savings or will it be a secured loan (please don't same home equity line of credit....)? that would be the final checkbox on my list of rational thoughts on do i or don't i want to buy this business.

tony

lsylvain
11-18-2004, 10:55 AM
tonygreek,

I am not hell bent on buying this business, I am looking at several opportunities at the moment. I am the head accountant for a real estate broker so I see 100's of business listings monthly. This particular one caught my eye because the guy is loosing money on it by from what I can tell over spending and poor management.

It is difficult to get an great deal of information about any real business deal before actually making an offer, putting up a non-refundable deposit, and signing several agreements. So before I put up several k as a deposit I want to have a good idea about what I am looking at. Not sending me the specs on the equipment is a smart move by the broker. If he tells me all the equipment info and other specifics I can easily go track down all this guys jobs and tell the customers he is going out of business and steal the jobs from him. Trust me I know, I lost a 32k a year apartment complex last year because someone found out I was moving. Also by keeping things vague it cuts down on the buyers loopholes for getting out of the contract. In general, in order to get out of the contract and keep your deposit the sell has to be dishonest with the information given to you prior to the offer. Ie. if he says the equipment is great I can get out be saying it isn't great. If he says I have this mower I could only get out if he didn't have the mower. anyway....

As far as my house goes, being in the RE business I found a house that was part of an estate sale. Little old lady kicked the bucket and left the house to 6 of her kids. So I got the house for 80% market value. (not a good idea to fight with you siblings when mom dies) I put all the proceeds from my business sale as a down payment plus some. The reason my mortgage is steep is because we spent about 100K more than we had originally planed, but earning an 65K profit in basically a day was well worth it. So yes to answer your question yes I will be using a h/e loan witch I would have anyway had I not used my savings as a down payment. (I was saving more money in interest on my house than I was earning so it was better to use my money as a down payment and pull it out later.)

All 20 accounts are on signed contracts which will be transfered to me. Of course the client has to agree to the transfer and yes, should I go with this business there will be some means of discounting for lost contracts. Preferably I would like to make the sale right around contract negotiation time, however this may cause a problem when it comes to increasing contract prices. (who is responsible of the increase me or him kind of problem.)

I honestly think the contracts can be completed with 2 guys running on OT. Like a said earlier the owner has nothing to do with the biz so I'm sure there are huge gaps of time where the guys are just screwing off.

I have been very objective about my different options. I ran the numbers over and over, weighed different means of getting back into the green biz and decided that buying was the best option for me. I don't want to spend several years building up business so that I can get the good jobs. I don't like residential work, I go for the big jobs, colleges, apartment complexes,etc. It is difficult to get that kind of work without a good solid base to start from. Now in the tax biz I came up with a different choice and decided it best for me to start my own, which worked out rather well last season. Earning 50% of your yearly revenues in 3 weeks is always nice. gotta love earned income credit. I have also looked into the food service stuff since my wife is a GM for a fine dinning place here in town. That I have decided is an industry better to buy into rather than start because of the excessive startup cost.

lsylvain
11-18-2004, 11:27 AM
Try again MMLawn, you must underbid most of your jobs from the look of your mathematical ability. 24 + 4 = 28 I don't understand why you think that age has anything to do with experience or intelligence.

Funny, I work in the business and real estate world and process multi million dollar transactions and I have never once heard someone use the term "DOG" other than when people want a fenced in back yard or are buying a vet hospital. ****NEWSFLASH***** The Apprentice is a TV show and DT has been broke a whole lot more than he has been rich.

As far as bouncing a check, as a sensible person I keep the majority of my money in places where it earns/saves interest. When I bounced that check I had made the bank transfer that day but with Amendment 21 the check I had written immediately cleared and the transfer I made was not posted until 2:00. Had it not been for the $15 screw up I would have been fine. I also never said I had all this money laying around. I believe I said that I have a big house payment and it would be difficult for me to pull in enough grass $ to pay all my bills when I got too busy to work my current job. Funny the guy who can't add 4 to 24 thinks he can insult me for bouncing a check because the bank screwed up. Funny a guy that doesn't even have enough faith in his own reconciliation ability is afraid to write checks close to his balance and thinks that anyone that can perform simple addition and subtraction is stupid. The other day I wrote a check at work that left me with $2 in the account if there is a screw up and it bounces and it is guaranteed to be that banks fault.

Gautreaux's LNG
11-18-2004, 11:49 AM
Looks to me like theres too many hands in the pot and not enough on the tools. We could do 20 locations in one day. Unless they are far apart and travel time is eating their up time on the yards. I think you could make it alot better with a reduction in force. Figure it with your self and a good helper to start and work from there to see if you can make this company work. What kind of equipment is included?

lsylvain
11-18-2004, 12:34 PM
Gautreaux's,

That is what I have been thinking since day 1 when I saw the initial figures that came with the listing. I think with proper planning and efficient use of resources this biz will do pretty good. Unless of course he is doing 240k in work for 160k. There is a rather wide service area to contend with and with so drive time may be a problem, however I do have a plan for that, even if I was to start my own.

I can't keep much equipment at my house because of ordinances and such so I will have to rent a storage place anyway. I'm figuring get a couple of small places around the area that are convenient to the current jobs. Then have the crew meet at whatever location we need to for a particular round of jobs. I also figure this will be good for when bad stuff happens, need an extra trimmer, whatever, you wont have to drive all the way back to the other side of town to take care of it. I havn't really looked into pricing smaller units to compare to the larger ones to see if it is feasible. It just sounds like it might work, plus that gives me extra places to put up signs and gain exposure. My tax business office is empty from May to November also so that has some possibilities. I can't store equipment there but I could bring the truck there in the AM and meet the crew when we are on that side of town. Essentially, it would not get rid of the drive time, but I would not be paying people to sit in the truck for an extra hour a day. Plus once I build up to more than 1 crew they can start on different/(different sides) of town etc.

There is just a big ? about the price. I got people telling me 10% up to 50% yearly revenues. Of all the listing I have seen I havn't seen any priced under 25% yearly. I know that there are chepos that wouldn't pay anything and there are people that would pay 100% so I'm trying to find the middle ground somewhere that is reasonable to me and the seller. Trying to screw the seller is just going to make the transition rocky at best and vise versa.

anyway, thanks

lsylvain
11-18-2004, 12:36 PM
Oh sorry, the equipment list has already been posted earlier in the thread. I think on the first page.

I'm figuring it is worth about 15k for the equip.

thanks.

Fantasy Lawns
11-18-2004, 12:52 PM
It's never the "number" of accounts .... it's the billing income vs. the efficiency of work performed to receive that income …. THAT”S IT …. That’s all of it …this thread is getting like 2 hen’s clucking at each other

I have (1) "location" which is 15 acre’s & another “location” which is 127 Homes in a HOA with common grounds ….. these are (2) “accounts” which billing is greater than what is being argued over in this thread …. Think these will be worth anything when I sell?? …. Think that they can be done in 1 day ... even with a "good helper" ?? Don't think in the number of accounts ... always keep the eye on the income

Ohhh ya …. That’s right ….. accounts aren’t worth anything when selling a business …. They only have an insignificant intrinsic value …. Sure …. I’m building MY business to SELL n it WILL sell ….. one day ….down the road

WHY do all this work …. Grow a business to a great success n than just give it away …. TRUE this business in the thread may be a “dog” but only in the way it is being handled by the present owner …. Who knows in the right hands it could be a great start to get one right in the work field …YES more needs to be looked into …. Such as the present condition of the accounts n can time be cut to produce greater hourly income

Aside from that …. Buying a business is one of the BEST ways to get started …. If one can afford this option …. It’s how I jump started mine years ago …. Was cutting grass …. Solo …. Sometimes with a helper … than bought 50 accounts with $10k in billing ….n I was off n running …. I still have some of those accounts ….even after 3 years I still had over 75% …. Some were lost due to me not liking the income others thru home sales n such

BUT it got me going in the extra crews …. Got me to begin to RUN my business n not have it run me …. So keep your mind open to change …. Think to GROW

lsylvain
11-18-2004, 01:41 PM
Exactly fantasy,

the number of accounts isn't an issue. I'd rather have one 162k account personally. A second biz I'm looking at has 33 accounts and grosses 6.3 k a month. This one has a larger asking price than the one we are currently talking about. but it is a profitable company so it looks better on paper.

It really depends on how you look at the jobs as whether they have value or not. To a guy that turns over 90% of his customers every year they don't have much value, but to someone who keeps 90% of his/her customers it does. It also is a representation of the exposure of the business. If there are only a few small accounts no one knows this business. Having a lot of jobs or even just one high profile job can make a big difference in "brand name" recognition. Believe me, I got one big apartment complex in 2002 then in early 2003 things when crazy for me, go back and look at my last couple of post. One specifically titled "Yellow pages paying off this year", on something to that effect.anyway.... I usually spent about 6% of my gross on advertising each year so to me a job is automatically worth 6% of its yearly regardless. In this case about $9,500. Then you add in the time you save for estimates etc. When I was still in the biz people didn't start calling until after I was mowing which generally meant I only had time for 1 estimate a day. so 20 accounts would take me 20 days to estimate missing about 40 cuts(7 miss 1 cut, 7 miss 2, and 6 miss 3 cuts) total, averaging 200 a cut, thats another $8,000. So right there those jobs are worth at least $17,500 to me. (not including that now I can estimate an extra 20 accounts in their place.)

I've seen businesses that pull in millions a year yet they still loose money, and 90% of the time it has to do with poor management.

I am sorry if I am alway skeptical of anything anyone says when it comes to money issues. I know I am. The last time I listened to someone about money issues it cost me a small fortune. a couple of years ago I wanted to buy $1000 worth of Kmart stock under the assumption that there is no way that the fed will let Kmart go under completely and give wal-mart the monopoly. At the time that equated to about 2000 shares. Yesterday Kmart bought Sears for 11Billion and their stocked closed at over $100 a share. I thought about jumping off a building. Just thought I would throw that in. To me loosing 1000 was worth the chance for 200000.

lsylvain
11-18-2004, 01:47 PM
Thank's for the input, and helping out fantasy. I wanted this thread to be about figuing out how much a particular business was worth ball park and it turned into "you are stupid for wanting to buy a business."

anyway

thanks

tonygreek
11-18-2004, 08:43 PM
great thread going.

lsylvain, is his broker actually asking for a deposit for you to due any real due diligence? never have i needed to put up any money, just a non-disclosure/non-compete, to look at the books of a prospective company. for a lawn business, i'd find that especially absurd.

out of curiosity, do you know the name of the business? is it brandable, or will you need to change the name of the co.?

tony

lsylvain
11-19-2004, 09:24 AM
tony,

I havn't gotten that far with him about the $. All the businesses I have looked into in this part of the country wanted a down payment before I could really crack open the books and check out the jobs. I have copies of the financial statements for 2003, the first half of 2004 and a proforma for 2004.

I WV they didn't care but I've looked into 3 in Fl and all wanted $ down first, just like when you buy a house. It's not really that big of a deal and it keeps the smucks who don't have any money from bugging the Broker and owner. I just got burnt on it a couple years back when I was first looking to move down here. I put up a grand for a little operation and when I cracked open the books something smelled so I didn't want to buy and gave up my deposit. Everyone in FL is trying to buy something, it is just booming down here. So there are no shortage of buyers. Last month total property value in my county went up 28%. Highest in the state and top 10 in the country. Give 3% to appreciation that makes 25% more houses every month. anyway...


I know the name of the company but I havn't been able to see them in action to see their overall appearance etc. I will probably change the name regardless at some point, maybe not in the first years, it just doesn't suit me or have that zing to it that people remember. I like to have a name and advertising that all the other guys try to copy. My last biz I called Quality Lawn Care, QLC. and my slogan was "Making the World a Beautiful Place One Yard at a Time" Within a few years I see TLC (Total Lawn Care) "Making the World a Wonderful Place One Job at a Time" At first I was pissed, But when a couple of people said "I saw you sign down at so-in-so's house." I thought cool, this guy is running around copying me and people think that it was my sign and look the # up in the phone book and call me instead of him. Granted if he got a bad rap it might come back on me.