Buying Existing Business

Discussion in 'Starting a Lawn Care Business' started by rocky224, Jan 9, 2007.

  1. rocky224

    rocky224 LawnSite Member
    Posts: 10

    Any help or opinions would be greatly appreciated!

    I'm in negotiations to buy an existing lawn care business that grossed approximately $200,000 in revenue in 2006. About 30% is actual cutting, the rest is clean ups, renovations, maintenance, plowing, etc. Sale includes all equipment which appears to be in good shape as well as 2 trucks and a trailer.

    I had a friend who used to own a landscaping company look at the equipment and he agrees it is quality and well taken care of. I have seen tax returns and have done my due diligence in making sure all information I have seen is true and correct. The seller is seems extremely honest and nothing has happened to make me doubt anything I've seen.

    My question is what would this be worth on the market, soup to nuts, for this business. Also, do you expect clients to leave because he sells the company?
     
  2. sunriseturf

    sunriseturf LawnSite Member
    Posts: 114

    I've been through it a few times myself. I think what your asking is how much is the customer base worth. If your paying him a fair market value for the equipment than that is no brainer. How long has he had the customers. The real question is what was his net profit and thats were you really have to dig deep. Check time cards for the amount of man hours it took to produce the amount of revenue the company produced. Factor out your direct costs like materials, equipment and subcontractors and once you get that amount divide it by the number of man hours. Make sure ALL man hours worked are accounted for and if you are near 40-45 dollars per man hour you doing ok. If he does less than that then the value of the business should go down and vice versa. Talk to his employees if he did 200k he probably had at least two maybe three working with him. Make sure you ask the same questions and they should tell you what the owner tells you. "How long does it take to do this list in the spring with 2 guys?" ect....obviously there is a lot more to it and I have been stung bad before so be careful. PM if you wish and I will be happy to help you.
     
  3. rocky224

    rocky224 LawnSite Member
    Posts: 10

    He has 2 mexican workers. About 50-55 hours per week at an average of 40 weeks. The 2 workers have been with him for 2-3 years and will be staying on with me, hopefully. What do you think?
     
  4. ed2hess

    ed2hess LawnSite Fanatic
    Posts: 13,327

    I would worry about the fact that only $60K(30%) is mowing. The rest may be upsell that you will need to do.....
     
  5. joe the lawn guy

    joe the lawn guy LawnSite Senior Member
    Posts: 523

    how Meany of the accounts will stay for a year i got 20-30 acct's from a guy and half were gone in two months around here i would only pay for two cuts but thats just one part of your problem
     
  6. sunriseturf

    sunriseturf LawnSite Member
    Posts: 114

    Make sure these guys have proper documention. If his 2 guys are doing lets sas 2100 hours each....How Many is the owner doing? I would say at least that. Your looking at maybe a total of 6300 hours spent in the field. If he's getting close to 40 per hour he should be around 250K.......and thats with out factoring in direct costs that I mentioned before. You want to make sure that your customers stay with you and the work stays with you i.e. "repeat business" which means maintenance. If any of it is installation or design it's not worth nearly as much. Dig deep into it and get as much info as you can on it all.
     
  7. rocky224

    rocky224 LawnSite Member
    Posts: 10

    Both guys are around 50 hours per week. I know for a fact that the owner is not with them much, so I should be able to reduce the overall hours or drop down to 1 helper eventually.

    As for the rest of the revenue, the rest is made up of spring and fall cleanups, plowing, fertilizer application, landscape installations, leaf removal, etc.

    It looks like he does a good job of upselling these accounts to make them quality yearly accounts.

    What do you recommend I do to make sure these customers stay with me? They are not under contract. I was thinking of keeping his name for the business for 6 months. The help is the same, same trucks, equipment, etc. The owner will be able to help me throughout so the handoff is as smooth as possible.

    Also, any insight on how to put a value on a business like this?
     
  8. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Posts: 7,961

    I think part of the sale, if paying a premium price should include the owner staying on for a period of time. During that time you get to know the clients and the in's and out's.
     
  9. rocky224

    rocky224 LawnSite Member
    Posts: 10

    What do you think is a fair amount of time for that? I was thinking one month and then have him available in certain situations for one year.
     
  10. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Posts: 7,961

    More than one month for sure. He needs to introduce you as his business partner. Show you all of the accounts. Then he can slowly disappear.
     

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