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Buying an Established Business?

Discussion in 'Lawn Mowing' started by NEWINNJ, Apr 13, 2004.


    NEWINNJ LawnSite Member
    Posts: 31

    I have been approached by a guy selling his side busniess which consists of 90+ accounts and various equipment. I have no idea what he is asking but I do know that he MUST sell the business due to a a regular career change. He has called me and wants to set up a meeting. What should I be asking and how do I begin to figure out how much his accounts are worth? The equipment I can probably figure out. Any help appreciated. More info to follow as I get it. Thanks

    NEWINNJ LawnSite Member
    Posts: 31

    Everyone afraid of this question or should I have done a search?
  3. 65hoss

    65hoss LawnSite Fanatic
    Posts: 6,360

    Based on taxes, I might sell you mine. uggh.

    That is a tough question to answer is the reason you haven't got answers yet. Also, most people are working at this point during the day and will not be around until tonight.

    Don't just take his word, see his tax returns. Check out the real revenue. You want a non compete clause and TLC between him and the current customers. I've got to run, but others can help more later today.
  4. wojo23323

    wojo23323 LawnSite Senior Member
    Posts: 608

    20%-30% of gross revenue. Like Hoss said, get to know all customers before purchase. Try to arrange a payment plan, that way if any customers are lost for any reason you can adjust the price.
  5. justmjc

    justmjc LawnSite Senior Member
    Posts: 261

    20-25% of the annual income shown on the books. I met with a guy that claimed he had 85K in income, but could only verify 60K. I didn't buy it, but some poor schmuck did. Remember, you are purchasing a perferred customer list, not guaranteed customers. There is nothing holding these customers from switching.

    So, set it up like this. 20-25% of EACH account that you land. 1,000 down, or something low risk, with payments each month for X years. Explain to him that neither him nor you can guarantee customer retention because of lack of iron clad contracts. He's selling a perferred customer list, that's all. To put anymore down than stated about is just crazy. Being that the business has 90 accounts, I would venture to say that it is not self run. It may be established, but not self sufficient without you being present to operate it. Get a non compete clause for 5 years or longer. Good luck, I'm sure others can add as well to my opinion.

    PS. About the guy that was selling the business I looked at buying, he sent me a message stating that he'd get a ceace and desist order against me. He gave me all the account information, the pricing, the estimated time to do the work, all the information i need to verify whether this was a good purchase. But he sold the accounts, and I sent my advertisment to them, offering them an option to look at my service. I signed up 1 so far. Anyways, I explained to him that he's selling a preferred customer list, without contracts. I'm breaking no laws advertising to his former clients. His contract is with the guy that purchased his business, not with me. He made himself fair game as soon as he offered this information in attempts to sell this business.
  6. 2Sam2233

    2Sam2233 LawnSite Member
    Posts: 19

    I purchased an exisiting business a couple of years ago. This will be my 3rd year full time. The approach I took was I sat down with the guy to determine price for each account and the number of times cut per year. Then I calculated an annual gross. I paid about 30% for the biz including equipment. Before we made the transaction I went with the guy to all the clients and met them to let them know what the plan was and to make sure they would stick with me (as long as quality was good). I only had one or two that decided to let relatives do the job. I have never regretted the decision. It was the best way to get into the biz in a full time capacity and be able to support the family.

    I hope this helps.

  7. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    I hear ya Eric...I feel like I'm up the proverbial creek without sufficient means of locomotion...lol

    NEWINNJ LawnSite Member
    Posts: 31

    First of all thanks for all the great info. Here's more info I got from the guy today. Will be meeting with him Friday. Business is comprised of 90 full maintenance accounts (cutting. trimming, some fertilizer, and pruning of bushes). He wants 18,500 for the accounts and 50,000 for equipment(see list below). Account value was based on 8 weeks gross which seems ok to me but equipment seems high.

    2001 F450 Dump truck with 19,000 miles
    2002 US cargo 8x16 enclosed trailer
    99 walker 42" deck 1350 hours
    2002 scag 48" WB Belt hopurs unknown
    21" Bobcat
    Leaf Vac and Loader
    Plus various trimmers, edgers, blowers,etc

    Please let me know what you think
  9. scott's turf

    scott's turf LawnSite Senior Member
    from NH
    Posts: 949

    Yes the equipment seems really high. You could buy all that stuff new for under 50k.
  10. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Is the F450 a diesel?

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