Buy out

Discussion in 'Lawn Mowing' started by Imow4u2, Feb 26, 2003.

  1. Imow4u2

    Imow4u2 LawnSite Senior Member
    Posts: 377

    Well gents I have an opprotunity to increase my operations. I was at the local John Deere store the other day picking up parts for my blade,and I was talking to a local LCO who works at Deere part time. I was just BSing with him and asked when things are going to green up again. Thats when he asked me if I was looking for more contracts,I told him "yeah, could use a few more." He replied how about 35? I said "why are you looking to get out?" Yeah, he replied as he's close to retirement. So I guess I'd like to hear some input on what I should ask him when we meet this week-end? He currently has 4 choppers ranging from2 to 6 years old and I think 300 to 2000 hrs. I can by the whole ball of wax, mowers, truck-trailer and the business. I told him that I would'nt be interested in the truck and trailer he had no problem with that and he could also sell the equipment seperate. He told me that I could just purchase "the business" I'm sure I'll find out, but how would any of you define "the business" He has a lot of nice contracts both commercial and residential,in town and in the country. All these are within a 20 mile radius of my normal route.
    This may be a big step for me, If I go for it,I drive full-time now and do lawn care on the side. I currently have 10 accounts, bumping that to 45-50 will require me to take the step from part to full-time. I do enjoy lawn care more than driving for someone which will keep me motivated.
    I was thinking about having him sign a no competition clause which would keep him from taking the customers back, in case he got the itch to mow again.
    I guess I should be excited, but I always like to look before I leap. Sorry for the long post gents, I would really appreciate some help on this one!:)
     
  2. Fvstringpicker

    Fvstringpicker LawnSite Fanatic
    Posts: 7,604

    First, I'd find out what kind of accounts he has--why does he have 4 choppers to service 35 accounts
     
  3. Husker1982

    Husker1982 LawnSite Senior Member
    Posts: 478

    Pesonnally I would not take the equipment. If you are moving to around 45 accounts and they are small enough to handle by yourself then I would buy something new too start off with if you don't already have something big enough. Although you may want to get one of his mowers if he is letting go reasonably for a back up (never ever ever hurts to have one). I have bought two businesses out and paid what they gross in two months. This is a good rate for where I am at. You will make your money back plus some early on. Be sure you do get with him and get a contract together. Some might say get an attorney but that is not needed. Remember you are buying a smaller business from a most likely respectable guy. Get the new accounts in a contract and make that part of the contract you make with the guy selling the business.
     
  4. Mark P

    Mark P LawnSite Senior Member
    Posts: 352

    Four Choppers 35 accounts, hum strange days indeed. Id see if he is interested in just selling the accounts, Surely he don't have 35 commercial accounts 3-10 acer each, wouldn't that be nice........Marks Mowing Service
     
  5. Imow4u2

    Imow4u2 LawnSite Senior Member
    Posts: 377

    Well boys I met with him this afternoon and I thought his asking price was a little steep. He is asking for what he grosses in a year! Maybe this is in line I don't know? He has 10 or so commercial accounts that pay great and the rest are residentials 20-30 dollars a pop. He says that he grossed 25,000 last year and he is asking 23,000 for the business, this will only include the contracts no equipment. This will keep me busy and I could work part time until things pick-up, he told me that he turns down work all the time. The way he was doing this is with 3 choppers and two helpers,while working full time from 7 to 4, in the afternoon they would start mowing. I would like to drive truck in the morning and then mow from 10-11 on. If this sounds in-line let me know as I would like to get right back to him as another guy was pulling in the drive as I left. Not to worried though as he is a scrub with junk equipment.
     
  6. lawnboy

    lawnboy LawnSite Senior Member
    Posts: 321

    dont do it. You can spend virtually nothing and get 35 accounts by yourself. If your work is good. His accounts are not worth more than $5000, and that is if they all go with you when he announces he his quiting. We spent $800 last week on advertising, and have picked up over $10,000 worth of work off of it. You are crazy if you spend this.
     
  7. J&R

    J&R LawnSite Senior Member
    Posts: 835

    I would run as fast as you can away from that deal.10-20% of gross tops. Is the com.accounts large or small. 20-30 on res yards in my area is low priced.
     
  8. lawnworker

    lawnworker LawnSite Senior Member
    Posts: 900

    His accounts are under charged by 20%.
     
  9. LB Landscaping

    LB Landscaping LawnSite Bronze Member
    from Maine
    Posts: 1,309

    23k without equipment??? No way. Is he going to guarantee that the customers will stay with you??? Like Lawnboy said you can get that kind of business for alot less on your own. I spent a around five hundred on advertising last year and got more business than that.
     
  10. osc

    osc LawnSite Senior Member
    Posts: 502

    Are these written contracts that can be transferred? A customer base is one of those intangible items that may or may not pan out. Personally, I would want to buy the equipment and have the contracts throne in at very little cost. You can always sell the equipment.
    Most businesses sell out with all the necessary assets plus customer base at a price of next to one year's revenue. Lawn businesses with no real estate or store front to operate out of sell for less. I think those customers are worth about six cuttings.
    His price is way too high if the equipment is not included and have a non-compete agreement drawn up. There is nothing to prevent him from starting right back up, especially if he has the machines.
    Also, ask for docs or check with the state to see if he is current with sales tax, worker's comp, unemployment insurance etc. If you buy the assets, you are liable for those items as you are suppose to hold back the amount owed at the time of sale even though you may just be buying assets and not the company. Believe me, check with your attorney.
    Also, go to his county court house and ask if there are any UCC filings (liens), on his business or assets. If those machines are not paid off, you will owe the money.
    Buying another business can cost much more than you bargain for. Do not do this without a written purchase agreement from your attorney. Spend the 200 bucks.
     

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