Buying an Established Lawn Care Business

Discussion in 'Starting a Lawn Care Business' started by Uke, Jan 22, 2007.

  1. Uke

    Uke LawnSite Member
    Posts: 2

    I have been throwing around the idea of buy an established lawn business. I owned a small one a couple of years aga, had to get out because of the birth of my first child (wife made me get out). But I have been looking at the this guys business. Being in Colorado, we can only mow between the months of April threw October. He has 150 residental clients that are all weekly. I will have to be driving arcoss town every day to get of my accounts done. He has been in the business for over 20 years he claims. The list of equipment he has is.

    4 toro 21 in recyclers
    4 ryan lawn aire 4 aerators
    2 shindaiwa backpack blowers,
    2 36 in toro recyclers,
    2 shindaiwa trimmers
    12ft single axle landscape trailer
    chevy box van 14'(runs great, 95k on it) 2000 model

    He is asking 170K for all this. He will hang around until I have a feel for what Im doing. I have been throwing this around for 2 weeks now. I found this web site about 1 week (great website), and have learned a lot about the business. But I need some input from all you guys. What do you think? He claims that he has been making around 120k a year. Cant provide yearly income (because uncle sam has no idea).
     
  2. CA CLT

    CA CLT LawnSite Member
    Posts: 61

    Let's be generous here on the used equipment to start and get it out of the equation.

    Van $5000
    Trailer: 1000
    2 Line Trimmers $300
    2 36" Toros $4000
    2 Blowers $500
    4 Aerators (who needs more aerators than they have mowers?) $4000
    4 21" toros $2000

    We have a total of $16,800 in equipment.

    That leaves the total of the accounts at $153,200.

    I would never pay more than 3-6 months worth of billings for the accounts. 6 months billings on the accounts would be for a guy that has contracts and good books. So if he is asking $153,200 for the accounts, and assuming that the $120,000 you listed is gross for 6 months that you guys work, he is asking almost 8 months worth of billings. He has no good books, so that is a strike against the value of the business, as he has no way of showing profit/loss.

    I think you'd be a fool to buy this thing, but there's an aZZ for every saddle.

    Good Luck!
     
  3. KrayzKajun

    KrayzKajun LawnSite Fanatic
    Posts: 10,742

    No proof of income = No deal!!!
     
  4. Uke

    Uke LawnSite Member
    Posts: 2

    I was thinking about just giving him a percentage of what the business does. No money up front.
     
  5. hollywoodjoe

    hollywoodjoe LawnSite Member
    Posts: 31

    assuming he works alone and say 5 days a week,how does he do 30 in a day?
     
  6. salandscape

    salandscape LawnSite Member
    Posts: 168

    Can you get the funds without proof of income? If so it is probably at a ridculous %. It seems a bit high. A big bit!
     
  7. PTP

    PTP LawnSite Bronze Member
    from Tulsa
    Posts: 1,383

    If he will take a percentage of business gross, that would be a good situation for you.

    A rule of thumb that I use is that a profitable business is worth 1 years gross. But that is a rule of thumb only and there are some variables that you need to consider.

    This may be a good deal for you. But there is one thing that is VERY concerning and that is no proof of income. Think smart, use your head and you will be able to figure out if this is a good deal for you or not.
     
  8. CA CLT

    CA CLT LawnSite Member
    Posts: 61

    Hollywood,

    None of us really know, but I DOUBT a guy with 6 lawnmowers and 4 aerators has been working alone.

    Uke, Giving him a percentage of Gross or Profits? I pay franchise fees with another business on the gross, don't go that route. If you want to pay him a percentage of net profit, you can't really go wrong except you might find yourself working for free in a worst case scenario.

    salandscape
    3 years ago we had a car wash in escrow at 1.2M, but our lender looked at the guys books and said "no way". That was a business with 3/4 of an acre of premium main street real estate as a hard asset. There is no way any lender in their right mind would lend on a deal like this with no good books, and the few measly hard assets that are being offered. The car wash guys lack of books cost him 200K on the sales price. I turned a friend of mine on to it who was a cash buyer. He ran it for 7 months, got some good P&Ls going on the place, and sold it for 1.2M and his guy was able to get funding. Good books make or break you at the bank.


    PTP, Being faced with another start up, I've been pounding the pavement looking for turnkey businesses to buy locally. I'd actually be willing to pay 1 year gross for the right setup with good equipment. I can't find anyone even willing to sell a few accounts right now. When I sold my last outfit I sold for 4 months billings. In a service business you really don't have tangible assets in a customer base.

    Uke, this is your life and your choice, but I feel like everyone here is giving you pretty good input. Coincedentally, that input all seems to be basically of the same mindset; namely, that this doesn't sound like a very great deal.
     
  9. Deputy25

    Deputy25 LawnSite Member
    Posts: 12

    I would stay away from that deal. Not having accurate books is a major problem, he has no way of proving his worth. Like a previous post stated there is no way a bank would lend you that kind of money without proof of his business. Also there is no guarantee that you will keep all the accounts. Some customers may find somebody else or they may not want to do business with you. Just something else to think about.
     
  10. hackitdown

    hackitdown LawnSite Silver Member
    Posts: 2,515

    In my market, the accounts cost me about $50 each in advertising. So 200 accounts at $50 each is $10,000. I simply will not pay more for an account, since I can acquire them via advertising. The down side to my method is that I have only acquired 30 or so accounts per year, and I lose a few every year when someone drops me, or I drop them.

    Clearly there is a huge advantage to having all the accounts at once. But still, I wouldn't pay more than a couple hundred per account. (Don't ask me where that number come from, just a gut thing). So $40K for the accounts, and $16.8K for the equipment...offer him $57K.
     

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