So this guy thinks he NETS more than 50% of his gross??
He's crazy, stupid or lying.
IF he netted 50% or more he would NOT be selling.
False false false.
IF you want his equipment you never buy equipment for dollar value....
offer him 40% on the value if the equipment
If it's "worth" 12k then you buy it for $4800.00 if he wants more he can sell it on craigslist and piece it out over months or a year.
with 125k gross...lets assume 30% of that is chewed up in materials (fertilizer, mulch etc)
that leaves $87,500.00 for man hours billed.
Assume an average of $55/hr (for arguments sake)
thats roughly 1600 man hours.
40 hours per week x 20 weeks is 800 hours.... so he has... TWO employees?
You already have management and infrastructure in place, so managing another two employees worth of work wont affect you much, if at all. your overhead won't increase significantly, so... this could be a win for you.
Now, the question is, how do you compensate him for the work/contracts.
The answer is, how you would for any other salesman who sold work/brought in sales to your company,
For every dollar he brings in, you pay him a negotiated percentage... this is normally between 6 and 11%
I'd suggest offering 8%
you could go as much as 12%
on $125,000.00 so that's $10,000.00 for the first year.
Offer him a three year buy out.
So he has the capability of making $30k in three years off the deal.
(that is IF all the clients stay with you)
He can of course, through his dealings and daily goings on, find more work for you, other than what he is already giving you...meaning he can sell more for you... so he could in effect earn more than that, by doing some side sales.
so say a fair $5 grand for equipment, and $5 grand up front to seal the deal (we walks away with 10 grand)
Then as the clients begin to pay their bills you can cut him quarterly sales checks.
if they all stay on, you will owe him 5 grand more in season 1, so $1250.00 for quarter 2, $1250.00 for quarter three and $1250.00 in quarter 4... IF all the clients stayed on AND actually paid their bills.
If he doesn't like the deal, you CAN offer a higher percentage.
But the notion of paying him what is equipment is worth makes no sense for you (because you can look on craigslist and pay asking price for anything you want, you dont have to take his stuff) and the notion of paying him money (upfront??) for a client list that will make you NO money (you'll be giving it to him) also makes NO sense. At least not to you.
Let's revisit, there is NO way his net is higher than 50% on his properties.
Truth be told you'll be lucky to make 18% on these properties (125000 x.18) or $22500.00, you are offering him 10,000, or almost half of that, for doing NO actual work on them. If he's belligerent about his super secret money making formulae, include int he agreement that IF his properties produce the net he claims? you will give him 50% of the net.... so HIS claim is a NET of 78k in one year , you will give him $39000.00 IF his properties net that (which they won't) and IF they all stay with you and they all pay (ON TIME)
BUT there is NO three year deal.
One year, then that's it....
Your three year offer of 10k per year (dependent on them all staying and paying) is a more guaranteed 30k.. I think this will call his bluff and he will sell to you for this.
So in short... 10k to seal the deal, and $1250.00 each quarter after that for a total of three years. he gets less if customers leave or dont pay their bill, and he gets more if he sells more in the mean time.
IF he claims "oh I need more than that to pay the bills/loans I owe" there is NO way he'd be giving up 78k of net if he had that much debt and needed it pay if off.
I'm assuming that 78k of "net" includes his owners salary, which isn't true net... true net comes after you take your own pay out, because you, after all are an employee too.
So after his 60k gets pulled out... there probably is only 18k of net, and he's got loans out there? I bet he's actually losing money (which is why he's selling)
This shouldn't affect you tho, because your overhead is already being taken care of by your already established business.
I would disassociate myself quickly from his company name however. use your own. You're not looking to take on his entity and therefor his debt as well.