HELP - Should I Buy This Lawn Business For Sale?

Discussion in 'Business Operations' started by nj78998, Dec 11, 2013.

  1. nj78998

    nj78998 LawnSite Member
    Posts: 9

    Lawn Business For Sale Question

    • Asking price $50K.
    • $150K gross rev this past season.
    • 160 customers... (equipment for sale too but I only want customers so $20K of equipment not part of sale price)
    • Last 3 yearly financial statements support income claim.
    • $10K up front and remaining balance paid out via 10% of income generated by clients every quarter (season runs March to November).

    QUESTIONS:

    Background - I have an existing lawn business that is 10 years old. This is one of my competitors.

    1) It's December and the season doesn't start until March. Asking for money upfront. Should only hand over anything upon a signed legal agreement and this upfront payment occurring in the month of March/late Feb just before the season begins, correct?

    2) Price per client would be $350 per customer as is - no changes. Seems high based on other posts I have seen as these are all recurring lawn and garden customers (mowing and weeding and lawn care programs). Sounds to me (from reading other posts) like I need to go through the client list and price per client should be a specific 1 month of revenue each - if that?

    3) What do you think about the proposed arrangement of $10K up front and the balance being paid out via 10% of whatever his customers bring in? Likely be a few years before paid back. And I would ensure the 10% payment comes from the profit his customers bring to the table.

    4) I would think that assuming 10% customer attrition upon hearing about the sale would occur. Before season begins I would like to have it be that the number of clients still engaged with the service be taken into consideration for the final sale price.

    For example 50% leave right at the start of the season so overall sale price be $25K then. $10K up front and $15K paid out over time.

    I would also like to have a 6 month "customer checkup".

    For example, 6 months after this agreement begins should there be an additional 25% of the clients jump ship (75% of the original 160 clients have now left) leave since the season began the final sale price should be $12500. With $10K down I only owe $2500 or the seller may owe me some money since there would have been a payment issued to him in between the start of the season and this 6 month checkup.

    Final analysis - $12500 for 40 clients at the 6 month mark.



    What are your thoughts and feedback?
     
  2. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 17,369

    Sounds too complicated. How much marketing would it take to get 160 more customers?
     
  3. Landrus2

    Landrus2 LawnSite Platinum Member
    Posts: 4,833

    You say you have existing bussiness how many days are you working on this bussiness.
     
  4. nj78998

    nj78998 LawnSite Member
    Posts: 9

    Thats what I have been thinking about since posting.

    How would you handle customer attrition? I mean obviously right from the start if any customers leave after hearing the business is sold no one would want to pay for those so the sale price should be adjusted.

    But when would you do another customer attrition analysis? Sometime in the next 60 days? 90 days? 6 months?

    I don't want to pay for customers who leave but at the same time I understand that the seller doesn't want to lose money if customers leave because of my service.
     
  5. nj78998

    nj78998 LawnSite Member
    Posts: 9

    Right now with existing business I work Mon - Fri for 12 hrs each day.
     
  6. Landrus2

    Landrus2 LawnSite Platinum Member
    Posts: 4,833

    Ok looks like you solo operation. You say you not going to buy equipment from the bussiness that is for sale
    Do you have equipment to take over the extra work
    You will need more help
    Best advice I can give you is wait till spring to jump on this
    His he going to b on board for any time I would ask for 3-6 months
     
  7. nj78998

    nj78998 LawnSite Member
    Posts: 9

    Yes, I have subscontractors for half the week to help make sure everything completed by end of week with my current business.

    Yes, I have all the equipment already to handle the work so no need for more.

    I am also okay on the help. I will have people ready to go as well because of the potentially massive growth factor.

    I was thinking the same thing - I can't/shouldn't do anything, if at all, until spring.

    I am just trying to figure out the price per customer that would be fair...

    - 1 month revenue for each customer based on last season?

    - a couple month's revenue for each customer based on last season?

    - just divide the sale price by the number of customers that actually return for more than 60 days? In this case that would be $350 per customer should no one quit after hearing about the sale and maybe the first month or so of service.
     
  8. jrs.landscaping

    jrs.landscaping LawnSite Silver Member
    from Maine
    Posts: 2,720

    Way too much money for a client list.......
    Posted via Mobile Device
     
  9. DEPENDABLE LANDSCAPING

    DEPENDABLE LANDSCAPING LawnSite Bronze Member
    Posts: 1,343

    150k gross
    160 customers
    That is less than 1,000 per client.
    Seems incredibly low.
    Posted via Mobile Device
     
  10. A. W. Landscapers  Inc.

    A. W. Landscapers Inc. LawnSite Bronze Member
    Posts: 1,287

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