buying out another business

Discussion in 'Business Operations' started by WarEagleCRL, Apr 23, 2012.

  1. WarEagleCRL

    WarEagleCRL LawnSite Member
    Posts: 66

    hey guys, I've tried searching several times for old posts w no luck on this topic. Anyone know any specific threads or keywords to speed this up?

    I've got an offer on the table to buy out a friend of mine as i type. He wants to take another job cuz he hates cutting grass and he's just burnt out on it. Close friend of mine, and I'm offering what i think is a fair price. He has 84k/yr in maintenance. abt 40 accounts, mostly residentials, a few decent commercials. I'm really interested cuz he has good yds, most r close to ones i already have, or in hoods i don't have any and need a presence. He bills em all level billing (same thing ev mo). 75% of the accounts include basic maint, squirt and fert, and pruning 2-3x/yr, the rest are just basic maint. his equip is mainly junk tho, poorly taken care of, never does any prev maintenance it looks like. Abt to move to a new town for a new job. I did a thorough inventory of all his equip and i value it abt $9000. thats it. not really yard sale values either. I like him a lot as a friend, he's just lost all motivation and he's already sold anything of real value this past winter and he's really been operating bare bones. Im offering him $9k + 10-15% of the gross of any accounts that keep me for a 12 mo term. That still leaves me almost 3k/mo profit. $7k/mo - 2 guys 80 hrs mo at 10/hr + payroll liabilities - 15% cut for him - $125/day it costs me to have my equip running. I should have all my $$ back by the end of the summer. No brainer- I want it.
    Anybody on here ever bought out a competitor, friend or not? this a fair deal or what?
    He wants a % of landscape jobs that come along w maint accts but i quickly shot that idea down. Ill pay for whats there and ill keep paying him a % of who keeps me mo to mo for 12 mos. told him he's selling meat and potatoes, the deserts all mine. 10% for 12 mos is pretty common around here from the few people i no who've done it. Im in the southeast
    Any help is greatly appreciated, esp w an old thread(s)
     
  2. WarEagleCRL

    WarEagleCRL LawnSite Member
    Posts: 66

    o yeah...its apr 23 and he wants me to take over may 1. He's given me the right to 1st refusal, but he seems to have no sense of urgency. wtf? if it was me i wudve been shopping around for buyers a long time ago and already been talking to clients introducing my replacement. like i said, he's lost all motivation. If he wasn't a friend i cud easily just wait on him to move away, then jump in and scoop em all up. I have his client list w addresses and billing amts. I am a friend and a christian so i wudnt do that anyway, but if he doesn't accept my offer hows he gonna find anyone else who can inventory everything, check out the accts, and take over may 1 w/o missing a lick?? really draggin his feet on this deal and i don't understand
     
  3. Ben Bowen

    Ben Bowen LawnSite Bronze Member
    from PNW
    Posts: 1,053

    If it's a "no brainer"- do it. You know your business and area, and his business as well. If you are sure that it will be profitable for you then don't worry what anyone else would pay.

    I bought out a business last year. The pay structure was different so I am not sure that my experience is relevant. However, I did research this site and found that most of the responses to these questions are silly, like, "accounts aren't worth anything".

    I will say that we also bought out a friend and that it has worked extremely well. Hopefully it does for you too.
     
  4. WarEagleCRL

    WarEagleCRL LawnSite Member
    Posts: 66

    thanks for the reply dude. Yes its a no brainer for me, I'm just trying to c it from his point of view. he thinks its worth more of course. Ive never bought anybody out and only know like 2 guys around here that have.
     
  5. MJB

    MJB LawnSite Silver Member
    from Wa
    Posts: 2,869

    I've seen the maintenance accts sell for whatever they invoice per month , equipment was extra. Unless there is a contract you risk losing many if they decide they don't like being sold, or you.
     
  6. Duekster

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

    I would toss in a non-compete / no raid for good measure. If he says it is not needed then why complain?

    I would have him stay on in some capacity for atleast a month.
     
  7. MrPike

    MrPike LawnSite Member
    Posts: 21

    Around here people expect to get one to two months gross on accounts with about a 7 month billing season for mowing. That equates to 15% to 30%. With you paying only the ones you keep and having a good match on routes, you could go up a little and still get a good/fair deal in my opinion.
     
  8. Duekster

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

    If I did go up over 15% or One Month, I would pay that the second year.

    IE, 5% up front and then perhaps a percentage each month until done. You can do this in Quickbooks as a commision.

    Edit - I would rather pay small amounts over a period than lump sums at the end. For example, I pay my share of payroll after every pay period now. Partly because I can not pay quarterly any longer most of the season and secondly it is just easier to pay at the time 500 to 1000 than to double or triple that with monthly deposits.

    In your case it would be the end of the month only on accounts that paid. You might need the contractor pro version.
     
    Last edited: Apr 24, 2012
  9. ashs inc

    ashs inc LawnSite Senior Member
    from alabama
    Posts: 598

    what ever happened?
     

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