buying existing business and financing

Discussion in 'Starting a Lawn Care Business' started by irishstuey81, Nov 25, 2013.

  1. irishstuey81

    irishstuey81 LawnSite Member
    from Iowa
    Posts: 38

    Hello everyone, new to the site. I started last year working for a fert company and was only planning on doing this in the short term. I have an opportunity to buy a buddy out of his fert accounts. He purchased them last year, but clearly didn't have the time or knowledge to maximize this side of the business. To be honest I actually liked the work and think I'm going to make a go of it. IF the terms are right. A couple questions about financing the purchase.
    1. Did you go with bank financing or use another route like home equity/family.
    2. We have agreed to go with 25% of gross for the accounts. I am going to stipulate that this is paid over 3 installments based on retention and other key aspects. Does this seem fair? common?
    I'm sure I'll have more questions in the near future and hope to someday help someone else new out. Thanks for any help you can provide, Stuart

    By the way, the equipment
    1 ground logic pathfinder xc (110 hours) He is asking too much,but I think we can find a happy medium.
    1 Z plug, I love this machine. Runs great, just needs some tlc
    1 200 gallon spary tank, need to take to small engine shop to make sure they are sound.
    1 100 gallon spary tank
    1 anderson spreader and 1 cub cadet
    1 Ryan aerator,
    4 stanley back packs
    2 blowers and couple other small components.
     
  2. Glenn Lawn Care

    Glenn Lawn Care LawnSite Silver Member
    Posts: 2,647

    You could try to take out a personal loan or sincr he is your friend see if he will go with a small down payment and pay him as you get paid kinda deal.
    Posted via Mobile Device
     
  3. pistolgripnova

    pistolgripnova LawnSite Member
    Posts: 13

    I recently bought out my old boss and paid about 14% of yearly gross, I did have to pay it in a lump sum. I would be sure of the numbers he is showing, not saying he would try and put one over on you but sometimes people over estimate how well things are going. I would also either work in a provision for lost business or at least be prepared to lose some. I had asked the same question before I bought him out and had a couple people tell me they lost up to 75% of their customer base when ownership changed. My situation was a little different because I had been running the crew for years and the customers knew me, most people hate change and that can be a bad thing for a new owner. I was also advised by wiser men than me to have a non compete clause drawn up which was a very good idea.
     
  4. A. W. Landscapers  Inc.

    A. W. Landscapers Inc. LawnSite Bronze Member
    Posts: 1,287

    Doesn't sound like a great opportunity.

    Your friend purchased these accounts a year ago and didn't have the time or knowledge to service them correctly and now you want to buy these "accounts"???

    Sounds like you would be purchasing a bunch of POed clients who haven't been well taken care of over the last year and most of them are probably looking for an entirely different company who can correctly service their property...if they haven't already found another company.

    Proceed with caution.
     
  5. inzane

    inzane LawnSite Silver Member
    Posts: 2,365

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  6. irishstuey81

    irishstuey81 LawnSite Member
    from Iowa
    Posts: 38

    I am concerned about this. He is showing me the whole list of clients and I'm going to randomly contact 25-30 (150 total) and get some feedback from them. I'll probably offer those customers a 3-5% discount for their feedback. Or if someone else has a good idea, please let me know. THanks for the responses. I have around 30 accounts just from friends, family, and other aquaintances and haven't really started selling. I do expect to lose 10-20%, but I know he is still bidding new properties, because some of them are customers of my current boss. And no I didn't give him a list of the clients.
     
  7. pistolgripnova

    pistolgripnova LawnSite Member
    Posts: 13

    Whoa, I missed the part where he just bought it a year ago. Two ownership changes in a short amount of time may make people feel anxious, especially if the customers are not thrilled with his current service. I agree with Scott, be careful moving forward. By the way, does this company have an official name or is he doing everything under his name?
     

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