How much is an established Lawn care company worth?

Discussion in 'Lawn Mowing' started by 537, Oct 2, 2008.

  1. 537

    537 LawnSite Member
    Posts: 6

    I started cutting about a year ago and I have intentionally taken it slow to learn this business( I am in it for the long haul). I only have 15 accounts but there is a local company for sale that has been in business for 3 years and has 55 accounts(3 commercial and 52 resindential). Of 55 accounts only 16 are under contract. The owner is more than willing to release financial records to verify income but I have no clue how to put a value on this company.(side note he is selling because he is moving 1000 miles away back to his wifes home town).

    Does anyone have a formula for figuring the value of an established lawn care company?

    I have purchased other companies where the price was based on annual sales volume or number of accounts under contract. I am not sure if either of these is appropriate for Lawn care.

    HELP!!!!!:hammerhead:
     
  2. ponyboy

    ponyboy LawnSite Bronze Member
    from ny
    Posts: 1,422

    oh boy here comes alot of diff views.
    i have 20 yrs exp and have bought several lcos i hate typeing but not a lot because of not having contracts, unless you pay him off in payments and based upon customer staying w you. usually equipment plus 1-3 months of lawn cutting. 3 years is not established how many are new this year, how many did he lose last year are they family and friends of his , are they willing to sign a contract with you i could go on you can pm your phone number and i could call you and give you some more advice. john
     
  3. 537

    537 LawnSite Member
    Posts: 6

    only a few new accounts this year lost 3 accounts in the last two years(according to his lawn pro sofware) Most of his accounts came from door to door flyers .
     
  4. 537

    537 LawnSite Member
    Posts: 6

    John not sure how to send you a pm usually there is a tab but not here.
    email me ( nd2hunt@yahoo.com ) and I will send you my number or send yours and I will call you
     
  5. J&R

    J&R LawnSite Senior Member
    Posts: 835

    3 times annual net profits.
     
  6. stevenf

    stevenf LawnSite Bronze Member
    Posts: 1,612

    I would offer the cost of 3 cuts for the contracted ones, then 2 for the non.
     
  7. plunkinberry

    plunkinberry LawnSite Member
    Posts: 3

    A lot of businesses will look at the value of contracts and assets (equipment, etc...), multiply it by 3 and that is the cost of the business. 55 accounts doesn't sound like a lot... is he a one-man operation?

    With only 16 of them under contract, I would begin the negotiation with something small. You should, theoretically, be able to pick up 16 new accounts, this time of year for next year, with a moderate advertising campaign. So, I wouldn't offer much more than that.

    If you are also considering the potential of the other accounts, I would consider some type of sliding scale because there are no guarantees that you will get those. Offer him a percentage (25% of the value of any contracts that you sign with his former clients by June 1 next year).
     
  8. 537

    537 LawnSite Member
    Posts: 6

    anymore suggestions
     
  9. brandtb1

    brandtb1 LawnSite Member
    Posts: 153

    Contracts are not that big in my area. I wish they were, but they are not the norm here. How profitable is the business? I would value the equipment on its own, and then place a value on the yards. I would say around 4 cuts if it looks like a good company. I like the payment plan, but on the sellers side of view, what if you piss someone off and they leave. Is it the sellers fault? I would take a good look at the price of the yards and make sure you can make it profitable.
     
  10. djchiodo3

    djchiodo3 LawnSite Senior Member
    Posts: 345

    Strive to be the best lawn company in your area and the people will seek you out. I have 140 lawns in one neighborhood. I started with one. Make sure every client is on contract. Base your monthly fee on one year's work(normal maintenance) divided by 12. When people look for you they turn out to be very loyal customers
     

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