******BUYING a Lawn Care Co. **********

Discussion in 'Business Operations' started by louisianalawncare, Dec 1, 2004.

  1. louisianalawncare

    louisianalawncare LawnSite Member
    Posts: 27

    I have been presented with the option to buy a pretty large company.

    When looking at this company, what would you guys look for I have some details

    1. $230,000 gross a year
    2. All contracts come with it
    3. All equipment
    2 Hustler ztr
    4 trimmers
    2 edgers
    12' trailer + racks and toolboxes
    toro tiller
    2 redman 8000 blowers
    1998 chevy 1500
    sprayers, spredders, ect.

    Need advice on looking at the books????????????????
     
  2. walker-talker

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

    That is a pretty big step for you, especially being in the business for only 1 year. I would take the books to a CPA and ask them their opinion. I would also ask for some time logs is they have it, but I guess that might be in the books. Before making a purchase this large I would want to know if it's profitable.

    Also, I would ask the owner to deduct the cost of the CPA should you accept his offer.
     
  3. tonygreek

    tonygreek LawnSite Gold Member
    Posts: 3,477

    any idea why he is selling? if he's got 2 brand new redmax 8000s and is selling, i'd wonder what's up since it seems he's quickly decided to sell. of course, they could be standard purchases for the fall for his lco. just throwing it out there.

    make sure to have someone look at the books for you, and be sure to view the equipment and the business as two separate transactions, and cost breakouts, in order to come closer to a fair valuation. as walker said, look at the time logs and get a handle on his labor overhead.

    oh, and if you really wanna stoke the lawnsite fires, what's he asking for it?
     
  4. louisianalawncare

    louisianalawncare LawnSite Member
    Posts: 27

    He owns a retail / mechanic shop for commercial lawn equipment and wants to focus on that end of it.

    $110,000

    ** I'm sure he would stay on for X amount of months for the transition.
    Will definately get C.P.A. to look at books.

    ?? Should I rewrite all the exisiting contracts to fit my business name or do that when they renew? also thinking of a small discount for old customers as an incentive to renew with the new owner-if the budget alows it

    ?? know a good Ins. company

    ** Think he will assist in the finances

    Thanks guys
     
  5. cleancutccl

    cleancutccl LawnSite Senior Member
    Posts: 698

    That's a pretty good chunk of change. I'm looking at buying some accounts and wouldn't pay more than 15% of gross. That's accounts only, no equipment in the deal. Like everyone else said, it all depends on if its profitable.
     
  6. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569

    Of course as the price could vary some because you didn't provide the exacts of the equipment, but I have figured them on the higher side so if anything it would be less if the equip is of a lesser value.

    Also it depends on how much time is left on the contracts as well since it is the end of the year already, if they are transferable and I'm sure they have an out for the customer anyway, probably 30 days. But since the contract is not with you then in court they would probably be let out anyway. But having contracts is better than not as to buying.

    Remember this is my opinion, and I am not a big fan of "buying" an LCO's accts because I don't think in most cases in is a good investiment or buy as most times you don't retain most of the accts, but this info is based on sound business buying principals in the LCO business.


     
  7. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    I would do a couple of things.

    1. I would absolutely have to have a P & L Statement for the past 3 years at least.

    2. You have to figure out what all his equipment is worth (truck, mowers, etc.).

    3. Personally, I would have to review these properties and see how much each one brings in.

    Take your time, don't rush into this. Buying a quarter of a million dollar business (turn key operation) is a pretty big step. Keep in mind you will also need employees (you are not going to produce those numbers as a solo operation btw). Your next step as well is getting an attorney to help you with the sale (including a 5 year, non-compete clause in the contract).

    Keep us posted and good luck!
     
  8. tonygreek

    tonygreek LawnSite Gold Member
    Posts: 3,477

    that's a pretty large amount. my suggestion is to read mmlawn's post, and then read it again. if you take only one bit of advice on this, be absolutely sure that any deal features the aforementioned staggered payments based on customer retention.

    also, you might weigh out the amount of money, in marketing terms, that you think it would take to land a similar customer base and see whether that's something you could live with doing on your own.
     
  9. Evergreenpros

    Evergreenpros LawnSite Bronze Member
    Posts: 1,155

     
  10. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    there are accountants out there who specifically specialize in business valuation. http://www.aicpa.org/accredrefweb/abvsearch.asp is the locator for the American Instiute of CPAs business valuation specialists. give one of them a call... after all, who would you trust, a business valuation professional or some guys who maintain landscapes?
     

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