Expansions Too risky???

Discussion in 'Lawn Mowing' started by iowapride, Jan 10, 2003.

  1. iowapride

    iowapride LawnSite Member
    from Iowa
    Posts: 59

    I recently had a LCO from a neighboring town contact me about buying his company. One of my goals for 2003 was to expand my services to another town. (I currently offer services in 3) I am very excited about the opportunity, but I want to be smart and not jump into this.
    Basically I will brief you with what he had to offer. 2001 Exmark 60" deck with 13 bushel collection system 927hrs, WB snow blower, mounted sprayer and various other equipment. His total value of the equipment was $10000, with the Exmark and bagger valued at $7400. His gross yearly income was $30,000, including mowing, dethatching, leaf collection and snow removal. His main source of income was mowing. (53 customer/wk). I have heard nothing but good things about him in the past and he made a comment that a lot of his clients treated him like their grandson. He has only offered the business to me and if I am not interested he will continue to run his business this year. He just decided it was time for a change in his life so it isn't for any bad reasons or customer relationship problems.
    His asking price for equipment and accounts is $40,000. $10,00 for equip. and 1 year of gross income. The good things, he is the only LCO in the town and not a LCO in the next town to the west, which he didn't mow there, but there is opportunity for me. He only offered a small amount of services, hoping to expand on that. The negatives, no guaranteed customers(he is willing to help in the transition period), is it worth paying him a full years gross income to get the customers.
    We are still in the early stages so I have not seen his P&L or anything. Any advice or comments would be appreciated. Thanks!

    Steve
     
  2. Lawn-Scapes

    Lawn-Scapes LawnSite Silver Member
    Posts: 2,810

    That biz doesn't seem profitable. The price is way too high. Take a fraction of that cost and sink it in to advertising and you'll probably have more business than you can handle...
     
  3. xpnd

    xpnd LawnSite Senior Member
    Posts: 378

    In Tx we service our mowing customers 33 times a year. In Iowa, lets say 25. It could be more, I don't know but more makes it even worse than what I am reflecting. He is making most but not all of his money from mowing services. 50 customers a week X $25.00/service X 25 weeks = $31K per year. I was lazy and rounded down to 50 clients but I'm already over his annual gross and he does other things also to make money. Lets say 75% of his gross comes from mowing service. Thats $22.5K. Divide that by (50 customers X 25 weeks) = $18.00 per service. On certain issues I am out of step with the majority of the posters but my opinion on this is run away like mad. I think he is trying to sell you an anchor. Advertise in the next town you want to expand in, do it slower than you like but set a profitable price rate.
     
  4. hoagie

    hoagie LawnSite Member
    Posts: 222

    I agree... 30k is way low for a "gross".

    Mowing only, I have 15 regular customers done solo in 2 days and grossed 20k.
     
  5. bubble boy

    bubble boy LawnSite Bronze Member
    Posts: 1,020

    30000 gross with a Z? and including snow removal?

    50 houses, how big can they be to generate that?

    and if they are small why the Z?

    something doesn't add up.

    i'll be honest, i'd look at things more closely and with suspicion if his price was a quarter of what it is. for $40000, you'd be NUTS.

    spend ten on advertising, upgrade all your equipment and pocket the rest, you'll be WAY better off.
     
  6. stevo22

    stevo22 LawnSite Senior Member
    Posts: 344

    something is not adding up here...not sure what the median price goes for around your area but around here 53 yards would gross roughly around 65-75k...looks like his yards are extremely underpriced...once you took over and corrected the prices most of them would prob bail on you...i agree w/ the other post...spend a couple grand on some good ole advertising and get your own properties that you can set the price on...
     
  7. iowapride

    iowapride LawnSite Member
    from Iowa
    Posts: 59

    Thanks for everyones advice. I knew $40,000 was way too much for buying the business but I didn't know if I offered him half of that and made up for it with my other services and by expanding to the next town, if it would justify itself.
    Thanks again for the help .
     
  8. wriken

    wriken LawnSite Silver Member
    Posts: 2,154

    I would'nt offer anything, advertize and get it all or a big majority of it, even the next town. Thats my opinion though.
     
  9. iowapride

    iowapride LawnSite Member
    from Iowa
    Posts: 59

    I mentioned this in my earlier post but you might have missed it. If I don't buy him out the business is not for sale and he will continue to operate it.
     
  10. gogetter

    gogetter Banned
    Posts: 3,256

    No Way. None of those figures add up as already said. Only $30K gross for 50 lawns, AND he does more then just cutting? What are they, $15 lawns?
    What size are the lawns? They must be of decent size to be using a 60" Z on them.
    How many cuts do you get in each season in your area?
    Are all the customers on a signed contract (not that this would make them worth $30K, but just curious)?

    If you do a search here on buying a business, you'll see that they range anywhere from a couple months income to maybe six months income plus equipment. I don't recall seeing anyone paying a full years income though.
     

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