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Old 03-08-2002, 12:21 PM
LawnLad LawnLad is offline
LawnSite Senior Member
 
Join Date: Jan 2002
Location: Cleveland, Ohio
Posts: 738
Needle him on his numbers. You have to do your due diligence to see if his numbers make sense. Have your accountant review them, and then audit/question some of the numbers.

33% profit is high (but great if real). This must include his own salary.

What you're not buying is his name/goodwill, systems, etc. The only thing of value are hard assets ($50 K ish) plus the value of his contracts - if they're guaranteed (which they aren't).

Employee and customer retention is never guaranteed. My recommendation would be to pay a percentage of gross sales from his clients for a period of time, one to three years. If he stays and assits, have a separate consulting agreement from which he will be paid that encourages him to help his customers with the transition. This agreement is very important. If he's convinced his business has value and you can buy that value since his customers will stay with you, he should be willing to wait for some of his money. As in, put your money where your mouth is.

Buy the equipment separetly if you want it. You may not need it, or only some of it. Buy this at market value since you may choose to buy new elsewhere or used elsewhere. Offer him a package deal to take it all as one package price that would be less than the sum of all put together. He has a selling cost if he sells the equipment on the open market - so let him give you a discount to keep him from having to waste his time.

Lastly, make sure you have a lawyer draft the purchase agreements, non compete etc. You don't want a deal this large to go south... and you get left holding the bag.

Good luck!
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