Buying out partner

Discussion in 'Starting a Lawn Care Business' started by crzymow, Oct 4, 2005.

  1. crzymow

    crzymow LawnSite Senior Member
    from Pa
    Posts: 378

    I was wondering if anyone has an idea how to figure out how much a business is worth. My partner wants out and wants me to buy her out. To me a business like this is worth about what the equipment you have is worth if you were to sell it. We have about $30,000-35,000 worth of equipment and mow about 80 accounts. I'd say we gross about $70,000-75,000 a year. Since i own half the equipment already, I'd say i should pay her say $17,000 for that, and give her a little more for the customers. I'm not goin to go crazy though, because i brought alot of the customers to the business so why should i pay for them? Just curious to what any of you think. thanks..
     
  2. ajlandscaping

    ajlandscaping LawnSite Member
    Posts: 112

    giver 60 cents to the dollar for equipment she owns and like 1 to 2 months of net pay on income fo the accounts you service
     
  3. daveintoledo

    daveintoledo LawnSite Silver Member
    Posts: 2,587

    partnerships suck
     
  4. mikefromny

    mikefromny LawnSite Member
    Posts: 224

    how long have you been in business together?
     
  5. wrestlingcoach

    wrestlingcoach LawnSite Senior Member
    Posts: 251

    Just Bought My Partner Out At The End Of August, Now He Is A Valued Employee :)

    Anyway, Here Is What I Did..... Act Like You Are Selling The Entire Business

    1. Set A Price For All The Equipment And Parts, Tools As If You Could Liquidate Each Item Through The Paper
    2. Add In All Prepaid Items Such As Insurance (but Prorate The Amount That Is Left) ... This Is An Asset
    3. Add In All Accounts Receivable (another Asset)
    Add In Checking Account
    4. Subtract Any Accounts Payable And Liabilities ( Such As Owe Accountant $50)
    5. Goodwill - Now Here's The Tricky Part - How Much Is The Accounts Worth If You Could Sell Them In Advertising For A New Account , A New Account Could Cost Anywhere From $25 To $60 To Aquire If You Used The Newspaper/phonebook And So On
    * What I Did Was Use 10% Of The Estimated Gross For The Year As The Goodwill - We Estimated The Gross For The Year To Be $58,000 So I Used $5800 For The Goodwill
    **** For You If You Brought In Let's Say $20000 Of The Gross Sales Before You Merged And Everything Else Is Even Then Subtract That Part Out.

    Add And Subtract And Then Divide By 2 -- This Is The Number I Used To Buy Him Out
    I Personally Thought This Is The Most Fair Way In Doing It And I Had No Arguement From My Now "valued Employee"

    In My Case My Partner Had Family Problems And Really Didn't Put Much Into The Business Lately, He Just Didn't Want To Be There

    We Are Still Friends - Since 1st Grade - We Are Both 36 So I Needed To Do The Best Way For Us.



    Just Don't Forget A Contract And New Fed Id #, Change The Insurance Policies And So Forth


    Good Luck And Keep Us Informed
     
  6. Appalachian landscape

    Appalachian landscape LawnSite Senior Member
    Posts: 453

    what happens if you don't buy her out? Is there a law that says you owe your partner money if they don't want to be in the business any more? Is that equipment worth $30-$35k new or as is? $30k new is probably worth half, so $15k and if you own half then $7.5k goes to the partner and I would give one month worth of pay to her. NOT one month of the company's gross, just one month of pay. One month of the gross would include your pay and wouldn't be fair to you.
     
  7. crzymow

    crzymow LawnSite Senior Member
    from Pa
    Posts: 378

    I havent offered her a price yet, but I am thinking that she thinks it is worth more then I do from the way she has talked. I told her that she is more likely to get money from me, then if we were to sell the business to someone else. I figure the equipment we have if we sold it would be worth around $32,000, and i think that is on the high side. Here is a list of equipment we have
    2-36" hydro lesco mowers (3yrs old,4yrs old)
    1-48" hydro lesco mower (6 yrs old)
    1-60" Dixie Chopper mower (This year)
    1 16' 7,000# trailer we bought new this year
    1-12' trailer that is probably 10 years old
    1- Lesco leaf Vac 4yrs old
     
  8. crzymow

    crzymow LawnSite Senior Member
    from Pa
    Posts: 378

    I havent offered her a price yet, but I am thinking that she thinks it is worth more then I do from the way she has talked. I told her that she is more likely to get money from me, then if we were to sell the business to someone else. I figure the equipment we have if we sold it would be worth around $32,000, and i think that is on the high side. Here is a list of equipment we have
    2-36" hydro lesco mowers (3yrs old,4yrs old)
    1-48" hydro lesco mower (6 yrs old)
    1-60" Dixie Chopper mower (This year)
    1 16' 7,000# trailer we bought new this year
    1-12' trailer that is probably 10 years old
    1- Lesco leaf Vac 4yrs old
    1-little wonder leaf blower 4 yrs old
    2 stihl weed trimmer new this year
     
  9. crzymow

    crzymow LawnSite Senior Member
    from Pa
    Posts: 378

    I havent offered her a price yet, but I am thinking that she thinks it is worth more then I do from the way she has talked. I told her that she is more likely to get money from me, then if we were to sell the business to someone else. I figure the equipment we have if we sold it would be worth around $32,000, and i think that is on the high side. Here is a list of equipment we have
    2-36" hydro lesco mowers (3yrs old,4yrs old)
    1-48" hydro lesco mower (6 yrs old)
    1-60" Dixie Chopper mower (This year)
    1 16' 7,000# trailer we bought new this year
    1-12' trailer that is probably 10 years old
    1- Lesco leaf Vac 4yrs old
    1-little wonder leaf blower 4 yrs old
    2 stihl weed trimmer new this year
    2 stihl hedge trimmers 3 yrs old
    1- 5ton trailer, (needs work)
    1-2001 F-150 pickup 2wd
    1-lesco renovator 4 yrs old
    1-lesco 200gal sprayer
    1-lawn preporator (rock hound)
    2-lawnboy mowers new this year, but homeowner models
    1-1970 ford350 dumptruck, (NO LAUGHING)
    some other misc stuff worth maybe $1,500.00

    I am thinking of offering her like 22,000 for her half.
     
  10. ajlandscaping

    ajlandscaping LawnSite Member
    Posts: 112

    a good way i see to pay her off is split the cost of the purchased equipment in half and then from there giver her 60-70 cents to the dollar of when you purchased it new and give her like month and half of earned income being she only a partner in it
     

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