1st meeting about buying another company

Discussion in 'Pesticide & Herbicide Application' started by grassmasterswilson, Aug 1, 2012.

  1. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Posts: 4,537

    So I'm meeting with another business owner about buying his business. I'm wondering what info you would expect to see or take home at the first meeting.

    Obviously I will want to run the numbers so I was thinking I would need the following.... detailed client list showing sqft, what apps done, and price per app(not looking for names or addresses for now, just enough info to run numbers against my overhead), last few years balance sheet?,

    What else would you want to see or expect him to offer?
     
  2. ztman

    ztman LawnSite Bronze Member
    Posts: 1,007

    tax returns for last five years and any contracts he has. Are you buying the business and continuing with the business name, or buying the assests and accounts?
     
  3. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Posts: 4,537

    If it works I would just be buying the accounts and assets. I met with him back in the spring and didn't feel we could get things done in time to make a smooth transition. So I contacted him and hope we can get the deal done so I can start fresh in 2013, if we can get on the fast track maybe late 2012 although there may not be much to do.

    When we met I couldn't get much info out of him. He showed me some numbers, but wasn't too eager to tell what he did per round or what he charged. Not sure how serious he is.

    The reluctantcy to show or talk about the details of his business makes me wonder if he really wants to sell.
     
  4. ztman

    ztman LawnSite Bronze Member
    Posts: 1,007

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  5. olcllc

    olcllc LawnSite Member
    Posts: 202

    Balance sheet for sure, although your operating expense may differ. A detail profit and loss statement for the past three years is the best way to see accurate net earnings. I used quickbooks pro and can print that information off in a matter minutes. It will include each customer and should show all transactions they have done with the customer. P&L statements are good to show their actual work. Anyone can tell you they do this much work or that much... but i would want to see documentation.

    I recently sold my business and provided all this to the interested buyers. I sold my active accounts and client list.
     
  6. RigglePLC

    RigglePLC LawnSite Fanatic
    Posts: 12,097

    Lots of people are reluctant to share close business secrets--but keep probing--he knows that eventually you have to learn all these things. You will not buy at any decent price, unless you have the business data--all the data.

    There is a slight advantage to buying now and making the transition in summer or early fall. Customers are seldom shopping for a new company in the fall-the transition is easy. You don't have the problem of huge low-ball marketing pushes and thousands of competitive brochures and flyers being passed out to your newly acquired customers

    The main thing you need to know is his prices and square feet. Naturally you will want to measure a few yourself--or at least with aerial photos. And you want to call a few to check and see if they are really customers or just names pulled out of the phone book. After that you don't really care about his chemical and labor expenses, or his overhead. Your expenses are the only thing that matters. Naturally do not buy accounts that are too far away to service profitably, (except at a big discount).

    Naturally you will want to talk with some of the local fert dealers and see if his business reputation is good. Dealers are reluctant to release this info...but if the guy owes them money--the dealer is angry, and will usually tell you. If his account is current--they are usually happy to tell you that. Be nice to your dealer--he may have information that you need.

    Purchase of his equipment us usually a spearate deal.

    You may want a non-compete clause.

    You may want to pay him over a period of 6 months--in installments with interest. Many banks will not finance your outright purchase. They want to finance equipment--something they can repo if necessary.
     
  7. huntergreen

    huntergreen LawnSite Member
    Posts: 5

    I would also find out how his customers pay him. Do they write him a check, credit card, auto draft into his account (which would have to change). How many customers have prepaid or are they billed at the end of each month, treatment, etc. I just went through this but I did not buy the business. The deeper I got the worse it looked. Most of the time unless the individual is ready to retire there is a reason they want out. If everything looks good I would also involve a lawyer to make sure everything is done properly.
     
  8. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Posts: 4,537

    Thanks guys. When I met him this past march I think he was asking 75k which from his gross numbers was over 100% of yearly gross. He had included a lot of customers who were one time or per call customers. He also thought it was worth more because he did not mow and that could easily be picked up.

    I think it's overpriced and will need to somehow show I'm interested enough to get him to print out a customer history report and hand it over.
    Posted via Mobile Device
     
  9. One time or per call is worthless to me. So what if he thinks it's worth more bc he doesn't mow. Your paying him for what he has, not what he thinks he could get.
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  10. ztman

    ztman LawnSite Bronze Member
    Posts: 1,007

    Just something to consider, for you and others. When you buy the assets and the accounts, but not the company, unless the contracts with the customers say they are assignable the customers are not bound to stay with you
     

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