????? About buying another business.

Discussion in 'Pesticide & Herbicide Application' started by 2zeroturns, Sep 13, 2006.

  1. 2zeroturns

    2zeroturns LawnSite Member
    Posts: 5

    Thought you all might have some imput? I have a chance to buy another fert & weed control business. Included is all the equpment and the accounts. But they are asking for a percentage of next years (2007) profits as part of the selling price. Is this normal? I've never bought another business before. The selling price is reasonable but why should they get part of my profits when im doing all the work and it is my business. Thanks!
     
  2. indyturf

    indyturf LawnSite Bronze Member
    from Indy
    Posts: 1,873

    that is usually how it works, especially if the price is reasonable I would want the % based on the number of customers that stay with you after the buyout. I have never been a fan of buying other companies to grow the business. you can do a lot of advertising for what it cost you to buy someone out.
     
  3. turf hokie

    turf hokie LawnSite Silver Member
    Posts: 2,744

    I usually look to buy a business to gain market share quickly or eliminate competetion.

    I have not been in business long but picked up a small company 2 years ago for .25 on the $1. (I stole it, he wanted out) And I walked away from one that wanted 1.25 on the dollar. That one hurt b/c the guy that bought it is now a major pain in my a$$. Had another company trying to sell the 40 accounts they had in my county and they will be lucky to give them away. Not enough accounts to be worth the purchase. (not enough market share and not in the areas I want to grow)

    If you are just looking to pick up some customers to purely grow your business there are better ways. If the price is fair and/or in your favor then it does not matter what your intent is, pick it up.

    It is a tough call sometimes. Kinda boils down to what you want to do and are comfortable paying for the company. i.e. how quickly can you recover what you laid out.
     
  4. Uranus

    Uranus LawnSite Bronze Member
    from Mass
    Posts: 1,624

    Right now I'm am very lucky. An owner I met through a landscaper friend is GIVING me 15 accounts on monday. I asked him how much and he said he has seem my work and justs wants to find someone who will take care of the clients like he did. He is keeping 20 till the end of the year just for some cash flow while he grows a new tree company. Free is good/GREAT. I know one of the accounts is $125 a week. SWEET! They are all within 4 miles of me and only one is on the outskirts of where I mow. Since I'm getting them for nothing I will buy him and his wife a gift certificate to a nice restaraunt. Take care of the whole tab plus some drinks. And if he ever needs help he's got a friend out there in me
     
  5. J Hisch

    J Hisch LawnSite Senior Member
    Posts: 952

    Yes it is normal practice, if you dont have enough money for turn key buyout. But this late in the year give them a low margin on the dollar and demand they assist with this winter sales. Ensure you get a no compete and you have to determine how much you are willing to share. I would probably go 2%-4% of Gross. Depending on how much they did for you over the winter. Give them payment now small amount see how winter goes, then determine if they keep 95% go high on percentage, or at that time just buy them outright.
     
  6. teeca

    teeca LawnSite Bronze Member
    Posts: 1,202

    also, commercial customers/contracts are not worth any money in a buy-out. i talked to a person that deals in buy-outs and he told me that contracts (if their a major part of the deal) are worthless. here one day gone the next. point blank.. if you buy-out a company w/ a large contract, and it comes up and you lose it, what do you have?
     
  7. dcondon

    dcondon LawnSite Silver Member
    Posts: 2,246

    No way would I even think about buy other accounts. I can see the equip but that's it.!!!!!
     
  8. dvmcmrhp52

    dvmcmrhp52 LawnSite Platinum Member
    from Pa.
    Posts: 4,205

    They're looking to unload after they've sucked the money out of the business for this year and now they want next year as well while you're stuck with paying for a business that has no real return until next year?


    Here's my vote..............:walking:
     
  9. dcondon

    dcondon LawnSite Silver Member
    Posts: 2,246

    I'm with you DVM!!!!!:walking: :walking:
     

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