How do you know what a business is worth?

Discussion in 'Business Operations' started by jc50292, Jun 29, 2005.

  1. jc50292

    jc50292 LawnSite Member
    Posts: 34

    I've been approached by one of my buddies(competitor) in this area about my buying his business. How do I know what it's worth? Here's what I know, and what I'm going to be getting:
    He currently has about 65K in revenue.
    He is including his trailer, Gravely 160, 2 weed eaters, 1 blower, 1 hedge trimmer in the deal.
    He had purchased another truck for his employee so that he could further expand the number of accounts he could handle, the employee decided he didn't want to work that hard, so he's out that money and his plans for expansion hit a wall. He and his wife are expecting their first child in about 6 months. He graduated in chemical engineering last year and had originally decided not to go into that field. He has now re-thought that and is currently looking for a position in that field.
    I tell you all that because my read is that he's doing fine with this business, but he's ready to get out due to the planned expansion with the long-time employee not working out...I think he's just frustrated but he says he's ready to use his degree. I know that I want to buy his business, I just don't know how to figure out what it's worth. I appreciate any help you can give me. :help:
     
  2. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    65K YTD? Per month? Total for the year? Be more specific and maybe we can help. How many accounts does that include. Is it just mowing? Are other premium services like fert, aerating, mulching, etc. a possibility with these accounts?

    Most important, how loyal are these customers?
     
  3. Drew Gemma

    Drew Gemma LawnSite Bronze Member
    Posts: 1,510

    give him 50% of the first 2 months work on only what you get paid for that way you only pay for those who stay. My experience is that after 2-3 weeks the ones you don't want you cut and the ones who don't want you leave. Only pay a % on the accounts.
     
  4. jc50292

    jc50292 LawnSite Member
    Posts: 34

    I don't know the answer to your question Rodfather, he told me that when it's all said and done this year, he'll have revenues of 65K.
    I'll try to get the answer on the other services.
    The customers are loyal. This guys customers love him...I'm apprehensive about that part as well, because I don't know how I'll be received by them.
     
  5. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    The key issue here is the "transition" stage. If you do buy him out, make absolute sure that he takes you around and personally introduces to you to everyone. that is key to retaining those clients.
     

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