Buying a landscape business - What is proper.

Discussion in 'Lawn Mowing' started by BradLewisLawnCare, Apr 26, 2011.

  1. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Posts: 279

    I already have a business, but we are expanding rapidly. I need more trailers for our trucks. We need more space and more equipment. Not necessarily mowers and stuff, but in general i am doing 2-3x more proposals and went from a 3 person business to 6 in 2 weeks. This does not include subs. So i found this ad.

    Items For Sale
    48" Scag commercial Pro V walk behind 17hp Kawasaki hydro drive $3200/b.o.
    21" Snapper 3 in one mower 6.5 hp Briggs and Stratton $250/b.o.
    21" Billy Goat walk behind vacuum 5.5 hp Briggs/Stratton $450/b.o.
    Trac-Vac 8.5hp truck loader $750/b.o.
    2 Stihl FS80R string trimmers $100 ea./b.o.
    Stihl HL 100 articulating head pole hedge trimmer $150/b.o.
    2 Stihl BR 340 backpack leaf blowers $150 ea./b.o.
    8'x10' 3000lb. landscape trailer with hand tool racks and trimmer trap trimmer racks and tongue storage box new deck 2 seasons ago and new gate latches. also comes with fast strap mower/equipment straps for securing mowers or equipment. $1000/b.o.


    Guy wants $6300 for everything.

    I offered $4500.

    Is that too cheap?

    He also has some accounts. He was working when I called and I drove to the site to see this equipment perform. Job turned out to my standards so I assume equipment is good, or he wouldn't have used it all on a commercial property.


    Next question - What is proper in buying his accounts?


    What if I was to hire him since his business failed (confidentiality form in place)? Anyone been through this?

    What do you think.
     
  2. Floridalandcare

    Floridalandcare LawnSite Senior Member
    from Tampa
    Posts: 314

    I have . When I was looking to expand ,Bill Phagan (Green Industry Consulting ) found me a person who was getting out of the business . The person selling was selling his company as a whole , with accounts and equipment and had a price allready set . I offered to buy all his trucks , trailors ,mowers ,2cycle stuff and a ton of irrigation stuff . I paid cash for all that . With the accounts I offered him 3 months on the accounts with us doing the work with all my new employees (his old ones because they knew the routes). and he kept billing the accounts for three months .After 3 months I officially took over .
    I think the way we did it was a win win for for all . He got his money , I saved money other than paying a lot larger payroll for three months with only my original accounts paying them . The customers got to know me during the three months so people accepted it having seen us for the last three months , they were not thinking "I just got sold to someone I dont even know ". When we re-lettered our trucks after 3 months and sent invoices everyone allready knew who we were. I think I lost 2-3 accounts .
     
  3. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Posts: 279

    So i should bring this guy on if i get his accounts until the clientel know me for me. What should his cut be? I thought 5-10% of revenue for a year and I'd pay him $12/hr to run my new equipment with my employees with him. I know $12 isnt that much but im buying the equipment and giving him a percent on the job.

    So i am paying him as a temporary foreman while my guys get the hang of the routes. He is solo and has no employees.
     
  4. topsites

    topsites LawnSite Fanatic
    Posts: 21,654

  5. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Posts: 279

    Ok my financial situation might help a bit here. We had an awesome winter. I bought a new truck in which i have $500/month payment for the next 5 years. Every bit of equipment is paid for and I could pay off the truck with our operating cash. I have already funded my roth for 2011. I have a masters in finance, but love landscaping. The question is not should I grow, because that is happening. I would pay for the equipment cash. Cash flow is high margins now are high as we do a ton of residential. My question is what to do with this guy and has anyone bought a business or accounts from someone else. PROCUT has 2 threads about businesses he over financed and foiled. With all due respect, he does not have the same structure.
     
  6. lukemelo216

    lukemelo216 LawnSite Bronze Member
    from ...
    Posts: 1,267

    is the guy looking to keep working in the landscape industry? maybe he wants out just to get out entirely. I actually just bought out a business this past year. We have worked out a deal for 25% of the revenue for 1 year.

    It would help make things much easier if you hired him, but I think I would be careful about doing that, because I tend to think he may overstep boundries somewhere down the line, unless if he was just temporary for a month or 2.

    There is not 1 way to buy a business, there are multiples. He could be asking for 20% of the overall value of the business. (So if the business is work 100k, he could want 20k for it) Which you could split that up over 5 months at 4% each month, or what ever. The skys the limit.
     
  7. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Posts: 279

    Actually he posted to just straight sell the equipment. Was about to give up everything. Got his @$$ handed to him plowing when his truck went down. He did not have a back up. So he is broke and wants to sell equipment. It is my idea about the accounts. I could buy just equipment, just trailer.... He does want to stay in industry but he says he can't stand the business end. I don't think he has the concept of how much the accounts are worth. I think temporarily hiring him might be best to transfer clientel over...
     
  8. lukemelo216

    lukemelo216 LawnSite Bronze Member
    from ...
    Posts: 1,267

    yeah that would work. I think from what I understood from a guy I talked to about the year, that generally accounts should be sold for about 23% of there value in the green industry
     
  9. BradLewisLawnCare

    BradLewisLawnCare LawnSite Senior Member
    Posts: 279

    What would you pay a person to show you(my foreman) their route and work with you(my foreman) on the route?
    Posted via Mobile Device
     
  10. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    I have done a couple of small purchases, in both occasions the equipment was not up to my standards. One time I paid 2 months revenues over about a 4 month period. Our quality is much higher so the clients knew right away that they were getting an up grade. The other time I traded 50-k worth of L/S install work to them for about 5-k of monthly accounts. We don't do install work and the other company had some accounts that were out of their geographic area. In both occasions I knew the owners for years so it was an easy decision.

    I tried to buy a much larger company but in the end the only thing that had value to me were the accounts. I explained to him that at my current growth rate I would be his size in 3 years or less so unless the business would pay itself off in less than that it would be a bad deal for me. Of course he didn't see it my way and his business continues to shrink in size. There are few buyers shopping for 1 million $$ residential maintenance companies.

    I don't care what people say this is a very different industry and maybe anyone with some basic business skills could run /manage a mow and blow company but much beyond that you need a lot of other skills to be successful at least in my market/niche. For that reason I don't think our businesses are as marketable as other industries. If there are fewer buyers the prices will be reduced. Not that they have less value just that there are few buyers so its harder to get the value out of them.
     

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