Buying a Business... here are the numbers

Discussion in 'Business Operations' started by jhaid, Nov 26, 2003.

  1. jhaid

    jhaid LawnSite Member
    Posts: 7

    Here are the numbers on a business that i have an opportunity to purchase.

    55 accounts all residential
    52" exmark
    21" residential mower
    Back pack blower
    10hp leaf blower
    weed wacker
    stick edger
    commercial hedger
    commercial snowblower

    asking 20k for it.....

    equipment brand new is worth just over 10k....

    all the accounts are within a 5 miles radius...
    no accounts are under contract, however he has had them for over 7 years and he is going to work with me for a few weeks to make the transition easier. I will be keeping the same name of the company. This is only mowing....
    shows a gross of 46k and expeses of 5k... 41k take home....

    Please give me any advice on if this is a good buy.... thanks
  2. justmjc

    justmjc LawnSite Senior Member
    Posts: 261

    Your missing a truck in there some where.

    This is my opinion. Used equipment usually commands a significant less value than new, depending on how old it is. If your talking 5-7 years old, then I'd give him up to 50% of value, if that. If only a year or two, I'd go up to 85 or 90%. Accounts go for about 25-30% on average and I've seen up to 50%.

    46k annual = $11,500 - $13,800 @ 25-30%

    SO, if you think the equipment is worth $8,500 - $6,200, then the $$$ value is fair.


    None of your accounts will be under contract. That's trouble. With or without a contract, you have no guarantee they will stick with you. After your few weeks of working with the owner, ask if you can get a contract from the homeowners. No contract, no sale. That's the way I see it. If you can't protect yourself, then it's not worth your time. The way I explain it to the homeowners that DO give me grief about the contract is this....I explain they have the right to cancel anytime, without fees or penalties. The contract protects me against unpaid balances if I must find a way to collect on them.

    3RD STEP

    Get a non-compete clause. If he starts up again, who's to say the customers won't decide to want him again?

    Also, negotiate into the price a rate or percentage back, based upon the customers you lose prior to cutting season. You don't get 5 accounts, you recieve X dollars or credit for each one you didn't land.


    If he will let you, see if you can put down say $3000 and make payments for the season you cut, allowing you to make cash on your investment. Then negotiate no payments for the months you don't cut. Pay it all off at the end of the following season. This is only 1 of many examples. If you can't get him on price, then get him on terms. Good terms for you, good price for him. Winning situation for both.

    I would say unless you get them under contract and the equipment is worth whats mentioned above, then no this is not something that would interest me. I could stand to lose a little on the price, however do not lose your azz on the income, if these people will not sign with you.

    PS. Where about's in Michigan are you located, and how did you happen to come across a business sale. I've been looking in my area and no one's putting up any deals.
  3. jhaid

    jhaid LawnSite Member
    Posts: 7

    Thanks for the quick reply....

    He does have a truck he will throw in but its an s-10 and i want to start pushing snow next year so that wouldnt do me any good. He originally wanted 25k but he said he would take 20k w/o the truck. I came across this deal because he went to the same high school as me and I had heard he was looking to sell so i contacted him. He had offers for just the accounts but he is looking to sell his whole business as a package.
    I understand what you mean by not having contracts, however, i am not too worried about that considering I would have the endorsement of the previous owner and i could be wrong but it seems like most wouldnt go through the trouble of finding a new lawn company if it seems like nothing is going to change besides the person pushing the mower...But like i said i wouldnt know that is just my assumption.
    Another question is do you see potential to build a big lawn care operation? Having all the accounts close together like they are...
    Is snow plowing worth it? Is there money in it?
  4. walker-talker

    walker-talker LawnSite Platinum Member
    from Midwest
    Posts: 4,771

    Personally myself, I would jump on that deal. You might want to check out the properties first and see how much revenue each is bringing in? It all depends on how you want to go about this. Are ready to put the effort for this many lawns? Will he let you make payments? Looks like you could pay off the business in 6 months.....that sounds good to me.
  5. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Somethings that come to mind...

    1. Only 5K in expenses seems extremely low
    2. 46K on 55 accounts seems extremely low
    3. Is this a legitamate business (if so), get a P & L Statement
    4. Is he a solo operation?
  6. kootoomootoo

    kootoomootoo LawnSite Platinum Member
    Posts: 4,369

    Just a thought ....I bought 60 customers about 5 years ago.
    Within 3 months I was up to 95. two ways to look at it.
  7. J Hisch

    J Hisch LawnSite Senior Member
    Posts: 952

    I would buy it, but would have a non-compete clause as mentioned above. Any time in business you have the opprotunity to get a return on your investment within six month that's always a buy or great investment. I would also assure that you can handle that solo.
  8. 65hoss

    65hoss LawnSite Fanatic
    Posts: 6,360

    Expenses do seem to low. If he is solo the expenses probably are not much higher.

    All residential can be good or can be bad. It really depends on his reputation with the customers and how the transition is handled. Him working with you some is not bad, but somethings are even better on you keeping that business.

    I wouldn't give $20k for this business with that little of equipment. To much money for only 55 residential customers.
  9. EagleLandscape

    EagleLandscape LawnSite Platinum Member
    Male, from Garland, Texas
    Posts: 4,347

    46k for 55 customers is WAY TOO LOW!!
    (36 cuts * $25 cut) * 55 customers = $49500. dont do anything for under 25 bucks, its a waste of time and money.
    have him sign a non-compete agreement for all those accounts, and possibly the 5 mile area.
  10. jhaid

    jhaid LawnSite Member
    Posts: 7

    I dont think there are 36 weeks of mowing in Michigan...

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