Help!!! I need a answer in 3 days...

Discussion in 'Starting a Lawn Care Business' started by The Cutting Edge, Aug 14, 2007.

  1. The Cutting Edge

    The Cutting Edge LawnSite Member
    Posts: 141

    I have been thinking of buying out a business that has been in the biz for three years, I was offered this company for 25,000.00. With this business I would be getting 40 accounts that are all within a 15 mile radius alot are in the same subdivision which brings in ruffly 6000.00 a month in mowing and also includes 60 inch exmark lazer z with 240 hours, 52 exmark turf tracer with 400 hours an older 48 inch exmark belt drive but runs great, 16ft trailer 1992 ford f250 120,000 miles on it, 2 stihl weedeaters bought this year, 1 stihl br340 blower, 1 redmax hedge trimmer, 1 stihl edger bought this year, pull behind aerater, honda push mower, a bunch of misc hand tools, and 3 wheel barrels. All of the equipment is in very good shape and the two newer exmarks are stihl under warranty!! The owner of the company is willing to work with myself and one guy on my crew for 1 month to show us how they run the routes and as well as introduce myself to a the clients and explain that I will be taking over the business. The owner has shown what the gross was for each month as well as gross for the months they did mulching which was around 22,000.00 this year. I know that my company can handle the work and it would be great for my business. I would also be getting the company number which I think is a big plus because they have done alot of advertising this year and are a pretty reputable company.. What would something like this be worth?? I have not bought out any companies before so I don't know what kind of price I should be paying... My company has been in business for a couple of years and all of my equipment is paid for and I have very little overhead.. So if you guys could give me some help I would greatly appreciate it. Thanks The Cutting Edge Landscaping and Lawncare.....

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  2. fiveoboy01

    fiveoboy01 LawnSite Silver Member
    Posts: 2,988

    For being an LCO, I simply don't like the idea of buying another business.

    25 THOUSAND dollars. Do you realize how much advertising you can do with even half of that?

    Enough to gain more than 40 accounts, I'll bet.

    But in my mind, that's not the largest problem. The bigger issue, is will you KEEP all 40 of those accounts? That's what would worry me, there is no guarantee I'd be keeping them all.
     
  3. westwind

    westwind LawnSite Senior Member
    Posts: 444

    You need to research how much it would cost you to increase your business the same size with out buying this guy out. Three years is not a very long time to say that this is an established company. Buying out a lawn care company is never as good as it sounds. My recc. would be to increase size in-house. Good luck.
     
  4. mdlwn1

    mdlwn1 LawnSite Silver Member
    Posts: 2,443

    Count on losing at LEAST 25% of the customers within a short period of time. How long has he had these customers? What makes them loyal to him? Can you service them the way he does? Do they improve your route density or hurt it? I bought someones business and quickly got rid of about half of the new customers as they were pita's that doubled my admin time. The half that I did keep added soo much to my route density that they more than made up for the ones I gave up.
     
  5. topsites

    topsites LawnSite Fanatic
    Posts: 21,654

    How does someone gross 6,000 a month just in mowing with 40 accounts and a 3 y.o. business, and why are they getting out if the money's that good, that's the question I would be asking, to myself. Because if things are as slow as they are here, he'll be lucky if someone gives him cash money for all of what the equipment is worth.
    The truck's worth 2, maybe 3 grand, and other than the Z that's likely the most expensive thing he owns.
    You don't want a Z until you've got 5-8 or more years in, please listen to me, that could be why he can't make it...
    It's a luxury few can afford, many think they need one or have to have one, but it's a luxury unless all you have are acre+ lots.

    Then, where are you going to get the 25g, see it's just bad news all around.
     
  6. jsf343

    jsf343 LawnSite Bronze Member
    Posts: 1,767

    I have bought before and in many cases it is worth it IF....

    1. the numbers line up. have your accountant go over his books with a fine tooth comb.
    2. don't let him place a time limit on ANYTHING, he is the seller, and if he wants to sell he needs to give the prospective buyer time to check everything out really well. will it fit with my routes, will I have the help to run all of these accounts, will they stay with me or go to one of his buddies, etc., etc.
    3. Are the accounts on contracts? if so that is good, if not that could be disastrous for you.
    4. will he sign a 1,2,or3 year no compete clause?
    5. have a good accountant and lawyer go over everything!!!
    6. always check the accounts yourself, try to imagine what they would be like in the worst conditions and worst time of the year. Anybody can do any accounts in the summer, it is the fall with leaves, and spring with wet lush grass that will make or break you.

    last for now, a good rule of thumb for price is usually a couple of weeks up to a couple of months gross for any account. Obviously the higher the price the better the account needs to be. (prime location, great price, contract, and so on)

    Another lco who is a very good resource on this whole topic is Rodfather. I know he has talked about this and done it a time or two and has some thoughts on it as do others as well.

    overall I would be very cautious, it seems like he is trying to dump and run for some reason. I know it sounds like a good deal but don't let emotions push you, check it out REALLY carefully especially the numbers. Don't let him push you to buy it that quick either, that seems a bit fishy.

    good luck,

    Jeff
     
  7. BQLC

    BQLC LawnSite Senior Member
    Posts: 574

    I would look at the equipment separate from the accounts determine what its worth. Then look at the accounts as if you were not getting the equipment although gaining 40 accounts sounds good it is doubtful that all will stick with for the long haul. As others have said have an accountant go over the numbers.
    Good Luck
     
  8. The Cutting Edge

    The Cutting Edge LawnSite Member
    Posts: 141

    Hey TOPSITES I have been in business for 3 years and I have 10 good accounts and I bring in 3,500 a month off those accounts with just mowing, I don't see why you think 6,000 a month for 40 accounts is not feasable. I as well have a Z and dont have 5-8 years under my belt in the biz.. I think things in Virginia are a little to slow if your not bringing in these types of numbers.... I have seen the revenue for the past two years broke down on a monthly bases and the numbers are there. As for why he is selling is because he is moving back to California. As far as the $ 25 stacks I have that saved from this year alone. I gross well over 170,000.00 a year but I am a full line Landsaping and Lawn care business, we do everthing from mowing to escavation. The money is not the problem, I was just wondering if you guys thought it was worth it and if any have done it in the past and how it went for them.
     
  9. westwind

    westwind LawnSite Senior Member
    Posts: 444

    Gross means nothing in this business, you should know that. If you have the money in hand then you really should not buy this business. Buy the equipment new yourself, and advertise. It seems like you are pushing to buy this guy out. You need to consider the advice on this forum. Many of us here have purchased companies in the past and are speaking from experience. That's why you posted this thread right?
     
  10. echeandia

    echeandia LawnSite Bronze Member
    Posts: 1,131

    One thing you guys never consider when valuing a company is goodwill. Goodwill includes brand, customer base, and intellectual capital. All you ever consider are fixed assets. Based on the way you guys think most service companies wouldn't be worth much.
     

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