Help selling my business

Discussion in 'Business Operations' started by Outdoor Images, Oct 8, 2013.

  1. Raymond S.

    Raymond S. LawnSite Senior Member
    Posts: 981

    So $230k in equipment, you're good with a sale price of $450k. Just being honest here, but why would someone pay $220k for a business that nets $40k? You said you have spent a lot on equipment to bring that net down but isn't that equipment needed to operate the business? I'm not trying to be an ass, just subjective. From a business standpoint I would never purchase a business with a model that has me working 5 1/2 years to pay it back. (In this industry.)
    I am currently selling my maintenance side of the business. Gross sales average $220k strictly mowing/plowing. 70% residential 30% commercial. Great long term properties. A newer pickup, Isuzu cabover, couple zero turns, plows, misc equipment. Sale price was my asking price of the equipment plus one year net of $87k. You may have double the volume of my business but you're reporting 1/2 the net and wanting 2 1/2 x the price...and I think I did quite well getting 1x net.
    I think the larger the business the harder the sell because it's such a big animal to feed right off the bat. You may be better off liquidating the equipment and splitting the accounts off in groups to a few companies. You could probably get more money when all is said and done.
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  2. Outdoor Images

    Outdoor Images LawnSite Member
    Posts: 12

    your probably right. I really dont know what to ask for thats why I wanted feedback. I was just going off what I have heard people suggest. I could always separate everything and give the trucks back to the dealer but I would have to have everything in place including buyers for each division to make it work. I might be better just raising my prices and picking up more accounts next season, and running a crew myself next year to increase profits. I am so busy with running the other end of the company though so I have very little time to cut grass.
     
  3. hackitdown

    hackitdown LawnSite Silver Member
    Posts: 2,501

    It sounds like you could comb through your accounts and drop the least profitable 20% or 30%. Sell a few trucks, and drop a crew or 2. Keep the best accounts, and make some $$.
     
  4. snomaha

    snomaha LawnSite Senior Member
    from midwest
    Posts: 893

    Negotiating an acquisition right now for lawn fertilization accounts. Agreed on 20% of gross revenue for the book of business/goodwill. Don't need much of the hard assets but will negotiate a discounted price after determining fair market value.
     
  5. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Posts: 1,544

    20% gross? Unless we are talking about a a micro business or its the most horibbly ran ever, you did very well. Congrats!
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  6. snomaha

    snomaha LawnSite Senior Member
    from midwest
    Posts: 893

    Small size business (400 customers) but financials look good - think he just wanted out? 1 year or less ROI - ill take that all day long.

    I would of paid more but he spoke first.
     
  7. Outdoor Images

    Outdoor Images LawnSite Member
    Posts: 12

    20% is really cheap, great deal. I would be happy with 60% of gross. Im telling the larger guys i gross 500k, give me about 250k and im gone.
     
  8. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Posts: 1,544

    Youre comparing your maintenance business to his application business. There is no comparison between the selling ratios. Maint will bring you a small fraction od what apps will bring.

    Again, what you are really selling is caah flow (or profit). Buyer needs to get his investment back in 3 years or less. At you net number, you will be lucky to bring in 100k for your accounts.
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  9. snomaha

    snomaha LawnSite Senior Member
    from midwest
    Posts: 893

    My experience too - I wouldn't buy maintenance/mowing accounts unless they were tied to higher margin reoccurring revenue. I want to be able to pay off the purchase with after tax profit in 3 years or less.

    We use a GP/direct labor ratio to measure labor efficiency(profit) - for every unloaded dollar of labor we spend in lawn fertilization we can generate 7-8 dollars of GP. Lucky to get above 2 on mowing.
     
  10. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Posts: 1,544

    Now why would you go and analyze things like this. You sound like a real businessman. LOL
     

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