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Biz Valuation

Discussion in 'Lawn Mowing' started by lsylvain, Nov 12, 2004.

  1. lsylvain

    lsylvain LawnSite Senior Member
    Posts: 777

    I'm looking at buying back in to the lawn biz. I sold out last year and moved south to FL. I don't really want to start from scratch again and would rather buy an established service. I don't have all the details yet but I wanted to get the thread started.

    Asking Price $79 K

    $162k revenues

    2 crews.

    Accounts located in two cities.

    I should be getting equipment and other details shortly.

    I kept enough equipment from my old biz to run a 2 man crew so I have some room to grow, plus use the 3rd crew to be more efficeient and such.

    Tell me what you think.

    I should have more info by the end of the day.
     
  2. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    whats his PL statement say? what length of time is left on his contracts?
     
  3. lsylvain

    lsylvain LawnSite Senior Member
    Posts: 777

    OK,

    His profit sucks, as in he doesn't have any. I just got the financial statements.

    It looks like a lot of his problem is that he spends like crazy. The current owner doesn't do anything with the business so I think that is a big part of why his cost are so high.

    Most of the "regular" stuff ie. gas, repairs, payroll, etc are right along the same ratios as my business, but there are some excessive fixed cost.


    There are only 20 accounts all commercial grossing 162K. His broker says he has 4 full time guys working 40hrs a week, 160 man hours per week. So he is billing roughly $23 per man hour. Drive time etc should not add up to much since there are so few accounts. I don't like that low billing rate, but I'm not sure what the going rate down here is and I also think that since he has nothing to do with the business there is a lot of sitting around on the job by the employees.

    I'm still waiting on the equipment details.

    any input? it doesn't look good as of yet.
     
  4. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    Those 160 hrs are those summer or winter hrs ??

    My Summer hrs may average 190-210 while just last week was 120 n before that 106

    I will say that for 4 guys to only gross $160k is "low" .... I like to think of a full time worker helping towards the gross at least +$60k per year per worker ....n that's just cutting grass

    Depending on the equip n such the $79k may be on the lite side of "hi" .... gotta look at the numbers better, the overall look of the accounts, the room of efficency improvement etc
     
  5. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569


    I bet he wants out as this sounds like a dog! Think about it with the "probable" facts and numbers. If these 20 accts are all Commerical then they are probably year round service accts. If so that means they 1) are only bringing in $675 each per month, so either they are small or grossly underbid and 2) no way it takes 4 people to service 20 accts in a week.

    Assuming he is paying his help what seems to be the industry "average" of $10 an hour and NO O/T but again year around, heck his pre-tax payroll alone is $80K, after his share of the taxes another $8-10K.

    No wonder just on these few things alone he isn't making any money.

    I wouldn't walk from it, I'd run. :)
     
  6. lsylvain

    lsylvain LawnSite Senior Member
    Posts: 777

    Those are summer hours when they are cutting weekly. That's what I thought as well. I was cranking in 100 plus and hour in WV, I knew I had gotten spoiled but I didn't think it was that bad down here.

    He calls his 4 employees 1 manager, 1 foreman, and 2 helpers, so I'm wondering if that translates to 1 friend of the owner who tells the bilingual guy to tell the 2 Mexicans what to do while they sit in the cab and play cards.

    I need to just figure out if it is that the jobs are under bid or if his employees just suck. Also if the "manager" doesn't work, that works out to about $31 and hour or 54k per employee which isn't bad.
     
  7. lsylvain

    lsylvain LawnSite Senior Member
    Posts: 777

    They are small accounts. They do a lot of gas stations and stuff like that. Which again makes me questions if they are underbid at $230 a cut. It is kind of hard to underbid a gas station by much but maybe. The more I dig into his financials the more I think that he has little business/managment ability.

    for example:

    He has enough equipment for 2 crews and runs 1 - 4 man crew. Unless every job he has is weird and has an excessive amount of trimming, or mowing, he has at least 2 guys just sitting around to wait for the other 2 to finish blowing. I've never seen a 4 man crew work very well.
     
  8. tonygreek

    tonygreek LawnSite Gold Member
    Posts: 3,391

    look at it this way: how many accounts do you think you could land with $79k worth of marketing? sure, marketing takes time, but it's well worth it in this guy's grim situation and how he's apparently fumbled running his business.

    howabout this: since you have leftover equip from your previous venture, how many accounts could you generate from $7,900?

    worse case, offer to buy the accounts at the usual steep discount.

    personally, from what you've said, i'd run from this one.

    tony
     
  9. PLI1

    PLI1 LawnSite Senior Member
    Posts: 254

    I'd avoid this one like the plague!!!!!!
     
  10. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    It's not the number of accounts ... the buz has $13.5k of monthly income .... that's not to shabby

    Down here to make it ..... it's monthly billing or die ... based on 42 cuts per year .... weekly April -Oct than bi Nov-March

    The average buy out is 2 months for resi n 3 for commercial (under contract) ... we never really have to contract the resis as there is never a down time .... we mow year round ... so the $13.5k acounts sit around $40k in "value"

    After this one has to consider the equip & employee issues .....not that there can't be customer issues as well

    MY ?? would be Why are you selling in the $$ making months ....ie same monthly income with half the cost n half the labor

    I would have to take a real close look at the labor n bidding to consider if they are under bid or just under efficient
     

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