How much this company worth?

Discussion in 'Starting a Lawn Care Business' started by I_am_a_beginner, Jan 12, 2014.

  1. spitfire3416

    spitfire3416 LawnSite Senior Member
    Posts: 518

    somewhere around $30k is fair if those numbers are accurate. i'm with what krazy kajun said though. don't underestimate the amount of work you can gain from advertising. $10k in marketing will get you A LOT of work. You can probably do around 40,000 postcards with that through EDDM.
     
  2. PK Mows

    PK Mows LawnSite Member
    Posts: 88

    I'd pay three cuts and wholesale valuation on equipment. Insanity to pay $50K for maintenance accounts.

    A. He goes out of business, those accounts are open for bidding anyway. He sells the business, he probably violates half his contracts and they're open for bidding.

    B. I promise you with $50K in advertising I pick up way, way more than $125K gross a year. $50K I hire a full-time salesman with lots of experience and sell $400K minimum in commercial. Just say it costs $20 to pick up a new residential maintenance account. $50K gets you 2500 residential accounts at lets say an average of $40, that's $2.7 million with 27 cuts a year. I spend about $16 to pick up a new maintenance account, insert your own numbers and see what you get.

    C. His company name has very little value with only 30 accounts and $125K, practically no value as far as I would be concerned unless it's a national franchise. The corporation is worthless as well unless it owns a few thousand shares of Apple or has a fully funded pension plan laying around. You can set up a Corp. in most States for what, a thousand bucks?

    I'm guessing this isn't a cash deal and that you'd be paying him out of receipts collected, some sort of percentage?
     
  3. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Posts: 4,261

    Id like to know more about his structure. That small a business and gross profits that high he's an unpaid employee or is including his pay in the final numbers. Either way that margin won't hold true for you since you are already busy and will need to hire to do this extra work. That's the first thing, second $12,000 is not anything to write about for equipment my last 2 mowers with collection systems and sales tax out the door were over $17,000 EACH. Id pass on the equipment and buy my own and let him deal with selling off his used stuff.
     
  4. whiffyspark

    whiffyspark LawnSite Fanatic
    Posts: 6,088

    17k a piece for mowers? Please tell me those are diesels
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  5. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Posts: 4,261

    Nope they would of cost us 20k a pop. We got Lazer xs fuel injection with red tech. One has 34hp with a 60 inch deck and the other has 38 hp with a 72 inch deck. And the track vac systems were 2500 each. But the 1.1 gallons of fuel I'm using and hour with speeds up to 11.5 mph is worth it to us.
     
  6. I_am_a_beginner

    I_am_a_beginner LawnSite Member
    Posts: 194

    $50K gets you 2500 residential accounts at lets say an average of $40, that's $2.7 million with 27 cuts a year.
    This is one of the stupidest comment I have ever read. Returns on spending money in advertising is not proportional. Doesnt mean for every dollar you spend you get a contract. This make no sens, 50k in advertising= 2.7 million$ in revenue, I am not alone in the marget, there is a **** load of other companies who do advertising too. Its impossible to get 2500 residential accounts. First, just getting all the contracts signed, to send the bills, to receive the bills I would need sellers, accountant, etc. I need to teach everyone how to do the job, I have to recruit them, I have to make sure they do everything correctly, I have to make follow up everyday. Thats just stupid.

    He is selling is company because he has a construction business. He is making alot of money with this company. He is 24 yrs old and he has a Aston Martin. He has 25 employees on the construction business. He had 3 to 4 employees in the mowing business. He is selling to get 100% dedicated to the construction business which is literally more $$$ than mowing grass. He do 78k in net revenue excluding is salary. He was not involve in day to day operations, he was in charge of gettint the contracts and dispatching job to his mowing leader. He was doing 100% commercial mowing accounts, I am not sure how many lawns he has to cut and how many he cuts per day/week, etc. The only thing I am sure for the moment is that he is grossing 125k and netting 78k without his own salary. He has 12k of trucks, mowers, etc. Saying this, how much would you pay if all contracts are undercontract for next year? I get the equipment, the contract signed and we pay from the ratio we keep at the end of the season.
     
  7. PK Mows

    PK Mows LawnSite Member
    Posts: 88

    It's hardly stupid. What you miss is the point I'm making, that spending $50 thousand dollars on $128K is way overpaying. I've owned businesses for about 28 years and have been in the Green Industry over 30. I opened my 4th Lawncare business, having sold the others, except the one I gave up in a divorce, less than 2 years ago and am currently closing in on 300 accounts, all organic, none bought. I've been there done that but you can choose to do whatever you like.

    The point is you have no idea what it costs to sign a new account. I do it for about $16, the average is somewhere between $10 and $50. $50,000 buys a whole lot more than $128,000 in new business. Let's say you have no idea how to spend advertising money and it costs you $100 to sign a new residential account. That's still 500 Customers with an annual income of $540,000 on 27 cuts and a $40 average.

    The lesson in this is how to value a service company that depends on open accounts. You determine the cost to acquire a similar amount of business and the second year return. 120 new residential accounts cut weekly for 27 weeks with an average of $40 is $129,600 just in mowing. Let's say you would spend $100 getting each of those new accounts. That's $12,000. $12,000 is less than $50,000.

    So what you're really doing is buying a business worth maybe $20,000 and paying $30,000 in interest in one year.

    "I am not sure how many lawns he has to cut and how many he cuts per day/week, etc. The only thing I am sure for the moment is that he is grossing 125k and netting 78k without his own salary."

    That statement right there, and you want to criticize anyone? You have no idea what the daily, weekly, monthly expense on these accounts are, no idea on their profitability? He makes $78,000 off of $128,000, has "3-4" employees doing all the labor and he does none of it? It sounds like this guy is a great salesman all right..... Good luck.
     
  8. whiffyspark

    whiffyspark LawnSite Fanatic
    Posts: 6,088

    You've got it all figured out. Why ask for help?

    And its hardly impossible to get 2500 residential accounts. Hardly
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  9. I_am_a_beginner

    I_am_a_beginner LawnSite Member
    Posts: 194

    Its not hardly, its impossible.

    I am not looking for at: let's say advices, I am trying to figure out how much would I play to get an increase in 78k$ gross profit for my next year. If I purchase this company, keeping my 2013 numbers, I will have gross profit of 228k$. We are looking to expand and I find this way a good way. Am I correct or not, this is what I am lloking for types of advice. I am not judging opinion, I am arguing to get as much opinions as possible. I am not Jesus and none of you either but arguing is the best way to get nearest truth of the best move to do. In 2013, I have done a advertising campaign of 3.5k$. We did great flyers and we sent them by post mail. We sent 2500 flyers and we nearly got 3k$ of contracts which is pure bull $hit. We want to have return on investement and I think, I THINK, that buying him out is the best way for me to get as much return on investment possible.
     
  10. whiffyspark

    whiffyspark LawnSite Fanatic
    Posts: 6,088

    Hold on a minute.

    You need to greatly increase how many flyers you send. 2500 is NOTHING. We send that out each week.

    Are you full service? Do you just now? Etc.

    73 is a cake walk. You can expand your services and everything else. Thats roughly 50 new mowing accounts @ $40 a yard

    You can pick up 50 accounts easily with 10k postcards or less
    Posted via Mobile Device
     

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