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chambers 38
01-13-2005, 07:18 PM
So I have to opportunity to buy out a existing company in my area.
I am going to be working out a payment plane with him along with a contact with collateral.
What I am asking is what are somethings you have encountered in doing a buy out or some pointers that I might need to know to help me not get scewed.

Whats included,,
2, ztr's one grasshopper and one Arines
1, 6x12 trailer
1,echo blower
1,aerate
1,Thacher

18 regular customer's
Price in under 10,000$$

Thanks for the help
(p.s) the owner of this company is saying all customer's are going to stay on with the sell of the company..!!

Drew Gemma
01-13-2005, 07:30 PM
read my post about ohio and laws go see a lawyer it is the best thing I ever have done bought out 2 diff. lcos

J Hisch
01-13-2005, 08:54 PM
I just bought out a company that had 85 residentals. First, determine if what your paying for is worth it. Review all the financials, profit/loss, balance sheet, determine the value of the assests. Then come up with your price. Make sure they are not keeping any customers back from you. I am assuming you know this person if they are willing to allow for payments. If not this really shows the owner believes in his company if he is willing to let you make payments. Make a non-compete agreement etc. Remember business is a risk you never know what your getting into utill your in. Also, don't look so much at how much you can make, look at what you can afford to lose if it goes bad.

J Hisch
01-13-2005, 08:57 PM
If this is any consolation to help you determine a value this is what I just bought for 36,000.00

90,000.00 in Gross sales
85 residetnal Accounts
Scag 61" 400hrs Ztr
Scag 52" 800hrs Ztr
Scag 36" hydro walk, with sulkey
3 Echo timmers
3 Echo blowers
16ft trailer with gate assist
Blade grinder

earthwerks unlimited
01-13-2005, 09:07 PM
I'm not a LMO but I friends that are.
I have a BIG problem with the guy that tells you that all the customers will stay with you---that is basically a contract he has with you that he can't back up: what if they don't like you or your work---for whatever reason?

I had a friend that sold his biz to another and what they decided was that the buyer gets to keep the the existing customer---however at the end of the season, what ever customers are left and still want your services then each will cost x-amount of dollars each (if you pay the guy for 50 customers and if at the end of the season you only have 5---is that a good deal? Nope. But you have to do your best to make sure you keep those customers serviced properly.

As far as the price (I have no clue what your equipment costs new), at least for commercial property (motels, stores, apartment houses, etc.) the ruule of thumb is the price is based on what a year's worth of income is for the property. As him to see his tax return for how much he reported that he made ---it could be much higher or much lower than what the biz could reralistically make. Then compare that to his acounting books to see how the number compare. I have know people to inflate the numbers (income) for the biz with the intent thjat they will be selling it so those big numbers are meant to not only impress but deceive. BE CAREFUL!

Are you buying his biz name too? Be careful as you might end up owing taxes, costs for equipment he hasn't paid for yet, and any possible lawsuits he didn't disclose to you. Don't be a sucker--you'll get licked every time.

You also have to look at what it will cost if you bought the same equipment new and used. Then you have to consider the costs to repair his old equipment to make it useful if it is in disrepair. Junk is junk. In fact it could cost you to get rid of his junk too.

Good luck!

chambers 38
01-13-2005, 09:30 PM
I know equipment wise the grasshopper is only one year or less new.
And im not taking his company name, I have my owen and thatís not even in the work's.
The thing about seeing how he did (income/expense wise) is that he is in a word a scrub, but not a "bad one"; I guess he didnít do everything legit and he has only been in business for a year!!
Plus all customers are in one community except for 4-5 that are close
The customers have told him he just needed to find someone as reliable as him,
Iím thinking of having the customers see my work with his equipment and have them (if they like my work) sign a service agreement (not a contract) other only resion I donít wonít to use a contract because I know the customers will run??!!

Thank's keep them coming I hope this help's you help me

earthwerks unlimited
01-13-2005, 10:27 PM
With the type of work (residential and lite-commercial non-mowing work) I do the cost/value of equipment fluctuates widely. Typically it is about 50-60 percent of new regardless of condition. I got into lawn mowing for one season adn luckily I was able to buy two walk behinds for $400 and $600 a piece and able to sell them at a reasonably small profit. Have/how you determined the value of his stuff?

Agreements: Like I told a former client when they cancelled an agreement they had with another guy for $250,000 to do work for them: "why would I have you sign an agreement when you can cancel it anytime---like the last guy?" Her response: "Good point"

I took her word that I had the work, went out and bought $40,000 in equipment and another $2000 in material. I did about $4000 in work when the the last guy found out about it, he talked to the owners and got his work back and they let me go. Now I'm sitting on $2000 of material I can't reuse or resell---luckily I can still use the equipment I bought---but it will take me 5 years and not 6 months to pay it off.

chambers 38
01-14-2005, 06:51 PM
Good points,
I am going to go with him and met the customers and introduce my self along with evaluate the equipment and value of equipment.

Dose anyone have any idea's where I might find a contact online??

Thanks

earthwerks unlimited
01-14-2005, 07:53 PM
Chambers---I hope you can take some constructive criticism in the light that it is intended. And please forgive me if I'm out of line, but from one businessman to a soon-to-be another: if you want---and you should---to project a professional image you may want to consider brushing up on your grammar and spelling. It's your business I know, but the reason I say this is eventually you will have to write your agreements or contracts and it could be extremely embarrassing if there are mistakes in it. Ultimately it is a reflection of you, your business, and your work---and more important, your future.

My experience: I saw the anguish my late uncle endured trying to sell fire wood and do odd jobs as he couldn't read or write. He was a very intelligent man, well spoken. He had a lot strengths; reading and writing not among them. It held him back from doing great things with his life.

J Hisch
01-15-2005, 10:09 AM
If he has only been in business for a year and now wants to fold, dont give him anything for his customer base, they are not established. Just buy his assests, but truly i dont htink it will be a very good purchase, unless you just wanting the equipment. These customers might not even be good ones.

timturf
01-15-2005, 11:06 AM
If he has only been in business for a year and now wants to fold, dont give him anything for his customer base, they are not established. Just buy his assests, but truly i dont htink it will be a very good purchase, unless you just wanting the equipment. These customers might not even be good ones.

I think you are on to something!

Braxton
01-15-2005, 11:14 AM
if you want---and you should---to project a professional image you may want to consider brushing up on your grammar and spelling. It's your business I know, but the reason I say this is eventually you will have to write your agreements or contracts and it could be extremely embarrassing if there are mistakes in it. Ultimately it is a reflection of you, your business, and your work---and more important, your future.

I agree totally. There are many on this site and others that could benefit from this advice. And yes, I probably have been guilty of posting a misspelling or two as well from time to time, but I do try to catch it.

As for the rest of this thread, I haven't a clue. I have heard of people buying contracts. How is this done? In the case of buying an existing business, or simply buying contracts, what's to stop a customer from simply telling you that they hired the previous owner and don't want to do business with you? If that is the case, what stops them from going back to them? Would a non-compete clause be the answer? Even at that, they can still leave for another LCO. What are the advantages of "buying" as opposed to getting customers in other ways?

Thanks.

Braxton

chambers 38
01-15-2005, 03:15 PM
No I am not buying customers, equipment only and customers go with equipment as agreed
I am looking for a prewritten contact that I might be able to use and rework so that it fits my situation.
I know that the customers might not stay and Iím figuring on losing a percentage of them but not if I can help it

chambers 38
01-19-2005, 10:07 PM
Just an update,
I went to the man's home to see the equipment and is in good condition.
The grasshopper along is worth the asking price, it is a 218 with only 80 hours on the ztr, the other equipment is in good condition but a little older and the other ZTR is a home owners ztr arines 40inch I think it was.
He decides to quit because of his back and he is making more as a body man at my work.
Their is a list of customers that are going with the sale of the equipment it is 20 customers long.
I am currently working on a contract for the sale of equipment with customers.

P.S. yes I can take constructive criticism on my spelling and understand it is need of work I just hope you professionalís will not see me as less of a "business man" in the making (I hope)


Thank you for all of your time!