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Old 07-15-2013, 03:36 PM
bigpoppa85 bigpoppa85 is offline
LawnSite Member
 
Join Date: Jul 2013
Posts: 14
Need some help...thinking of buying a business

Hi everyone I'm a long time lurker but finally registered,

I'm thinking of buying a lawn maintenance business (with a little tree trimming).

Here's the basics:
Gross revenue:
2010- 105,000
2011- 135,000
2012- 148,000
2013- on pace for over 150k

Profit on schedule C
2010-40k
2011-66k
2012 -on tax extension.

He has the equipment valued at 15k. I have it around 8,000.

Accounts re 75% commercial.
He's asking 100 k. With an earn out (if any customers leave within 12 months, I subtract tht properties % of revenue and I pay him that amount less than 100,000.

This business is located in the plains states.

Is this reasonable? I'm thinking his price is too much. Thoughts? I don't currently have a lawn business, but I have 8 years exp in residential and commercial mowing.
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Old 07-15-2013, 04:34 PM
Sprinkler Buddy's Avatar
Sprinkler Buddy Sprinkler Buddy is online now
LawnSite Senior Member
 
Join Date: Oct 2012
Location: Florida
Posts: 974
With your mowing experience, I would just start building your own lawn service and not buy any accounts. Trying to do both and the cost and overhead of doing both, insurance, etc... for tree work most likely would be a problem.

We don't own our customers and the headaches you would have when they start dropping isn't worth it to me. I haven't heard of any buying a lawn business that was glad they did so. The few I know personally that have bought accounts wish they hadn't later down the road.
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Old 07-15-2013, 06:32 PM
GreenUtah's Avatar
GreenUtah GreenUtah is offline
LawnSite Senior Member
 
Join Date: May 2005
Location: SLC, UT
Posts: 866
A couple of things jump out at me with these numbers. Starting with the 48% profit margin on 15k/8k worth of equipment. Unless there is basically NO competition in the market, even for a one man band, those numbers (profit percentage) would be hard to come by.

That suggests accounting errors or worse to me. I think I'd want a detailed look at expenses (to see what's missing) with my accountant before making a commitment.

Beyond that, 2.5 times net plus equipment with fallouts and whatever other liabilities and assets (like branding..if a significant effort has been put into it, for example) considered is fairly common practice. So if those are actual profit numbers (verified), he'd actually be asking on the low side.

Of course what something is worth is always determined on what a buyer will pay, as shown consistently across our industry and all business, for that matter. But I'd go have a second and even third look at expenses.
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