Buying business, Need Advise Quick!!

Discussion in 'Business Operations' started by Luket99, Jun 3, 2002.

  1. Luket99

    Luket99 LawnSite Member
    Posts: 3

    Ad in paper reads:
    Lawn Business for Sale
    Will train, all equipment, truck, and trailer
    $63,000 last year, on the increase this year.
    10 years in business
    Buy for $60K

    I talked with him today, and am meeting with him tomorrow. He says he has 50-55 yards, a 48' X-Mark ZTR, weed eaters, Edgers, Blowers, Push mowers, duel axle trailer, and 94 Chevy pick up. Is it me or does this add up? Should he be bringing in more than this? He said he cleared 40K. How much are the accounts worth?
    He says he is burned out.
     
  2. KenH

    KenH LawnSite Bronze Member
    from CT
    Posts: 1,622

    It sounds to me like he is just mowing, and probably spring and fall cleanups. Be careful buying someone else's headache. He is obviously getting out for a reason.

    When you buy a business, you are not guaranteed to keep the customers.

    If you are really interested, ask to see his books----and I wouldnt pay 60,000.

    Unless he has some high end accounts, the business is probably worth the value of the equipment.
    HTH
     
  3. jandmlandscaping

    jandmlandscaping LawnSite Member
    Posts: 23

    what part of ct are you from ken?
     
  4. LawnLad

    LawnLad LawnSite Senior Member
    Posts: 738

    There are a bunch of threads on this topic already - you'll get good detailed info by searching some of these old posts.

    To buy someone's business for near the equivalent of their sales is not worth it. You can create $60,000 in sales without much trouble. The business, if generating 10% profit (higher than industry average) would take you 10 years to pay off, all things remaining static, with no growth potential for you.

    The value is his equipment (0% to 60% of cost new depending on how rough it is) and maybe a MINOR consideration for his accounts. There are no guarantees that his customers will stick with you when you take over.

    $63K on 50 yds... that's just over an average of $1K per year. If he's charging bottom dollar and won his customers on price - and you realize this and try to raise prices, you'll more than likely loose most of them.

    If he's burned out and getting out, it's maybe because his customer mix wasn't making it for him. Making his accounts worth all that much less. Be very, very leary of buying someone's accounts without knowing what his P&L's look like, the types of relationships with the customers, contracts, etc. Make sure you have a non-compete with the guy as well. Sure would hate to buy him out and then have him turn around with your money, buy new equipment and go back into business.

    Take teh $60 K you'd buy the business for and invest it in your own business and build it. In fact, you don't need $60 K to start. You can do it for less and use the money you earn to grow your business.

    Good luck!
     
  5. John Allin

    John Allin LawnSite Bronze Member
    Posts: 1,489

    Lawn Lad.....
    Man, I love reading your replies....
    Well done dude....
     
  6. Ground Master

    Ground Master LawnSite Senior Member
    Posts: 505

    Price is way too HIGH.

    Figure this way:

    Equipment- offer what the equipment is worth, i.e. what each piece can be sold for.

    Customers- Offer 10 to 20 percent of the first years sales. You'll find a few will want to "jump ship" and go with another company.
     
  7. Hawkeye5

    Hawkeye5 LawnSite Senior Member
    Posts: 295

    Customer retention is a big question. For all you know the customers are all family and friends and will dump you quick. It's only the first week of June and he is burned out? As pointed out, that may say volumes about the PITA factor in his current customer base. Frankly, if you have the cash, why buy his equipment? The accounts are going to be up for grabs anyway and you can get your own equipment. JD
     
  8. Sean Adams

    Sean Adams LawnSite Gold Member
    Posts: 3,597

    I'm not saying I know this for sure, but this person may have seen some of the different ads run in some of the trade magazines. There are companies and consultants who claim they can help you sell your business for anywhere from 100% to 150% of your gross receipts. I have talked to people who have read these ads. They do not look any further. They see that and think that it is within reason to ask for the same for their business. As everyone else said, be cautious. And like LawnLad said, don't even think of opening your check book until you thoroughly review P&L's, etc... It is true - buying a business can make it easier. But $60,000 for a $63,000 business seems a little out of bounds. Best of Luck!
     
  9. Mowmyyard

    Mowmyyard LawnSite Member
    Posts: 28

    I bought an existing business this year to compliment my fathers small 15 customer list (getting ready to retire from his f/t job to do lawn care full time) and I just bought the customers so I did not have to buy the equipment) I paid 20% of his last year receipts. I signed contract in Jan with 1,500 down payment and the base price was based on customers retained on April 1st. then he took the rest of the money out of the cash flow from the business. I covered expenses and my father and I did the work. I recieved a check from him just today. Whew! He still took all calls and we worked closely the whole time. Went well i have two month of exposure with these customers and so far so good. Did not mean to ramble, just wanted to help.
     
  10. Mr Distinctive

    Mr Distinctive LawnSite Member
    from FL
    Posts: 16

    I have just bought a business of similar size for $45k. I spent 6 months researching the buying process and talked to numerous accountants. The key is not the revenue, but what is termed the 'owners benefit'.

    The many business brokers around selling Lawn Care companies set an asking price of 1.0 to 2.0 times the owners benefit. So to reinforce some of the earlier replies get into his P&L and Balance sheet and identify how much cashflow (no depreciation etc) is the owner benefiting from the business. THis may include his medical benefits, car loans, gratis home cuts, entertainment etc.

    It can get quite murky especially if the business is loosly managed with no formal financial records.

    Also get him to sign up for seller financing i.e. you put down X% and amortize the balance over e.g. a 4 year period at 7%. This helps insure he keeps a passive interest in the fortunes of the business. i.e. if you go under he doesn't get his check. 75% of of lawn care businesses sold have some form of seller financing.
     

Share This Page