How much would you pay for this company.

Discussion in 'Lawn Mowing' started by willretire@40, Dec 19, 2009.

  1. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    Maybe that's whats left of your company but a company that is churning 1 mil a year in volume most likely has systems in place to keep the business running no matter who owns it. Therefore it is a money making machine and has value beyond the value of the equipment.
     
  2. xmorgans

    xmorgans LawnSite Member
    Posts: 3

    i would get more info:

    how many in a crew: what are workers paid in hour:
    how many lawns per crew/week

    what is total overhead before profit is made.. seems like there is alot

    be ready and know what your doing with no contracts, see if there is a upfront allowment to take over and money paid back to buyer if some clients quit in the first year.
     
  3. FYS777

    FYS777 LawnSite Silver Member
    Posts: 2,305

    maybe this is covered in misc, amount?
    Shop and yard area with fencing,
    mechanics
    cell phones for crews
     
  4. PTP

    PTP LawnSite Bronze Member
    from Tulsa
    Posts: 1,370

    If I were to buy a small company, say 30 lawns or so, equipment plus 1-4 months gross would be the top that I would pay. That is because there really is no package deal on the business. You are only buying a couple of things that are fairly easy to go out and get by yourself. They don't have much value other than their face value.

    However, a large, profitable company is worth more together than just the sum of it's parts. Let's say that you are servicing 1,000 lawns per week and are doing so in a professional, legitimate manner. You are not going to be able to operate that on a "leave money under the mat" sort of basis. You also cannot operate that out of your garage. You are going to need to be organized and have various systems in place in order to make your business work. It takes a different sort of a person to run a large business than to run a small one. Anyone can run a small business and the value of a small business is low. Not anyone can create a business that is large and profitable and therefore the accompanying value is much greater.

    Suppose that I created a business that did service 1000 lawns per week and that all of my equipment was worth $120,000 (current value, not new value). The lawns run an average of $35 each so that is $35,000 per week. Is the business only worth $155,000? What if I told you that the owner took home $200,000 after all expenses? Would that make the business worth more? That is only 20% or so and a very doable number. Actually, it is quite low. You think, "I certainly wouldn't pay premium for a company where the owner only nets 20%." But then you find out that the business can largely run itself without the owner present. The owner makes the large decisions in the business but the day to day operations (maintenance, advertising, billing, scheduling, mowing, customer sign up, etc.) are hands off for him. He can take off at any time for a week or two if he needs/wants to. Is this business still worth the equipment plus 1 week mowing? Of course not.

    So, the moral of this story is that a small, unsophisticated business is worth the sum of all of its parts - equipment plus customers. However, a larger, well run business will be worth significantly more than that because the sum of all of those parts working together is producing something that the small business cannot achieve. The more autonomous or semi-autonomous a business is, the greater value it will have.
     
  5. Lawn Man Dave

    Lawn Man Dave LawnSite Senior Member
    Posts: 420

    If you are getting new equipment every two years for that many accounts seems rather high considering someone would have that many crews.

    I have also never heard of someone spending 13k for that many door hangars and hanging them per season.


    If you do some searches on this and other lawn sites 90% of the people out there will tell you they are not going to pay alot for accounts because who knows how long they will stay will you. if you get $35 a cut for one and you pay $500 for it and he keeps you for a month was it worth it to you? Or if he or she is under contract and drops you at the end of the year and you make near what you paid for it was that worth it???

    If someone wants to pay 800k for a company that makes 300k a year.... you better hope you don't have many drop you before you can get your investment back.... that would be about 3 seasons if you did not expand any..... not to mention if all the equipment is junk and starts breaking down.

    Paying 800k is not a risk I would be willing to take....... Im not saying it is not worth that or more... just saying finding someone to pay that would be really hard...........
     
    Last edited: Dec 23, 2009
  6. topsites

    topsites LawnSite Fanatic
    Posts: 21,654

    Yeah but who cares, you ain't even got the money either so why even ask, as for what it separates
    the guys who said a dollar were evidently right on, dreaming while out working is one thing but this
    is 5 pages of wasted time and some might think nothing of it but I figure a lot of folks put real effort into it.

    The thing is someone wants 50 grand for something you really need to have that kind of money first,
    because banks usually don't just loan it to the next guy walks in with a nice credit rating either.
     
    Last edited: Dec 23, 2009
  7. arninglawns

    arninglawns LawnSite Member
    Posts: 68

    $13k for 100,000 door hangers is about right. My flyer distribution service charges $200 to print $400 to distribute 5000 flyers. At that rate, it would be $12k for 100,000. Maybe the extra grand would cover the extra cost of door hangers vs. flyers.

    I would like to spend at least 5% of gross on advertising, so I'd probably go for 300,000 to 500,000 flyers over the course of a year.

    And FWIW, we buy new equipment every year. You end up spending much less that way and have zero down time. Plus, people pay top dollar on eBay for 1 year old stuff.
     
  8. Lawn Man Dave

    Lawn Man Dave LawnSite Senior Member
    Posts: 420

    Now that I have tought about it I could see it being that much.... just depends on how much the final cost is and how much it costs to hang them.

    I know some are pretty cheap.... just depends on the area you live in I guess.
     
  9. AI Inc

    AI Inc LawnSite Fanatic
    Posts: 25,153

    Keep in mind , to keep that many customers , one is always advertising and always has a help wanted ad in the paper.
     
  10. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Posts: 4,909

    The type of person who would be buying that example company is not likely on lawnsite.

    Anyone who would make an offer like the examples here would be laughed at like a little kid.

    That example is "big boy world"
     

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