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Buying an existing business / valuation

Discussion in 'Business Operations' started by ericlepping, Jan 31, 2006.

  1. ericlepping

    ericlepping LawnSite Member
    Posts: 2

    I'm about to start discussions to buy an established group of customers from another business. I'm interested in opinions on how to figure a purchased price. If anyone has done this, what sort of value did you agree on? Percentage of gross, a year of gross, x months of gross...? I'm in eastern PA if that has any bearing on it.
    Just as a note, I have a 4 year old business. Me and one employee. This would allow me to about double the size of the business.
    Thanks in advance for the help.
  2. nobagger

    nobagger LawnSite Gold Member
    from Pa
    Posts: 3,065

    eric, we just bought a company out today. I figured the price on a few things, First, the equipment-it was pretty much older things that I didn't really have a need for but it came as a package deal. I got all of the model numbers the I called that dealer and got the list prices. 2 cycle stuff was 3-4 years old but only used one day a week for 8-10 hrs per day so I figured its worth 1/3 of list price. 48" w/b 2yrs old I figured its worth a little over half of list price (its in great shape, and main. records galore) Now to the hard thing, the customer list. I originaly told him I won't pay for "blue space" (thats the space above their property if they don't sign with you), but then I got thinking it's worth something, he has some good commercial accounts in there. I told him I would pay 1 months worth of revenue for the list. He said OK and the deal was done, now for all the paperwork.:dizzy:
  3. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    the only right way to value a business is based on an earnings multiple (plus assets). If im buying Id look for somewhere around 1.5-2.5 and If im selling it certainly wont be for less than 4.
  4. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

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    Here is another quote I found on this topic.

    I hope this helps.

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