How much would you pay?

Discussion in 'Starting a Lawn Care Business' started by inhoc1618, Feb 21, 2006.

  1. inhoc1618

    inhoc1618 LawnSite Member
    Posts: 5

    Im thinking about purchasing an existing lawn care company. It would be my first. The purchase price for the equipment seems reasonable. But its the price of the customers that I am leery about. For 54 customers (and who knows how many will stay with me after the transfer + those that were leaving anyways) the owner is charging $6250. 75% are considered loyal customers of over 5 years. 20% of 4 years and the rest 3 years or less. I have seen all the payment schedules and know how much each customer is worth weekly, but how can I judge if im paying the right amount? What would you pay?
     
  2. BSDeality

    BSDeality LawnSite Silver Member
    Posts: 2,850

    what is the purchase cost compared to the revenue (per week)?
     
  3. inhoc1618

    inhoc1618 LawnSite Member
    Posts: 5

    1/10...$12,000 total cost including equipment. At 54 customers if I cut every week, $1247.00.
     
  4. BSDeality

    BSDeality LawnSite Silver Member
    Posts: 2,850

    I don't think I would pay more than $5k for the accounts (4 weeks gross). I'm not sure what the equipment is worth.
    How large are these accounts? have you gone to inspect them? if they are priced incorrectly you will have a hell of a time raising them (and keeping them). ~$23 average price leads me to believe they are 10x10' plots or they guy has low pricing. I would think more than twice about this
     
  5. inhoc1618

    inhoc1618 LawnSite Member
    Posts: 5

    I know the owner. I have been around it for a couple of years, just not involved in the company. The accounts are acurately priced. And yeah...he's a lowballer. But it is how he got most of his business. They are mostly residential. Why do you say $5000. Just something you threw out, or is there something behind that.
     
  6. CutNLawns

    CutNLawns LawnSite Member
    Posts: 184

    He is saying $5K which equals 4 weeks gross from the 54 accounts. Is there $7K worth of equipment?
     
  7. cgrappler135

    cgrappler135 LawnSite Member
    Posts: 193

    Seems fair if you know the guy and accounts. $6200 spent, if you cut all 7 months should make over $30,000 in a season but i'd wonder why he selling, but then again most accounts sell for only 1 full month billing and thats only $4900 so i wouldn t pay over that!!
     
  8. inhoc1618

    inhoc1618 LawnSite Member
    Posts: 5

    Well there is 5k worth of equipment, but there are several other things he is including, which brings the cost of the "bussiness assets" up from $6250 to 7k I will work out those details later. 3 yr old 52"/and an old but reliable 32" + blower edger whip trailer and accesssories. I have good sources that tell me its in good shape. So the standard asking price is 4 weeks gross? That is good info to have. Proposal is broken up into equipment $5,050 and "business assets" 7k, including his customer base $6250. Any other factors I should consider? The nature of the season in michigan will not give me 54 customers for 28 weeks. I am more likely to get 48-50 for 24-25. Should my potential gain be a factor in the negotiation or just in my interest in purchasing?
     
  9. OutdoorExtras

    OutdoorExtras LawnSite Member
    Posts: 76

    Try and work out an agreement where you only pay for customers who sign this years contract. Buy the equipment (If you think it's a good deal) and give the seller a deposit on the accounts with an agreement to pay a certain price for each account as they are signed. I would not realistically expect to get 48-50 out of 54 customers back from his list, just the number of people moving, buying their own equipment, losing their job etc; will cut that much off of most every ones cut list from one year to the next. A more realistic expectation would be to sign between 70-80% of the customers; many will shop around, have the neighborhood kid do it, etc.

    I have been out of the business for several years, but we normally averaged 26 cuts per season on irrigated lawns in Oakland county.
     
  10. firefightergw

    firefightergw LawnSite Gold Member
    from Texas
    Posts: 3,340

    Are you going to be doing all of this yourself or are you going to have payroll? If you are going to be doing them yourself, what kind of money to you need to take out of the gross to make a living? Do you have a second income? How close are these customers together? Have you seen his books to see what each customer cost, each mow cost? From a buyer's perspective, I would certainly look from it as far as what you could lose, not the potential.

    On the surface it looks good. You get 48 customers that pay you $23 a week = $1104 out of 24 week of the year = $26496. Your investment in equipment was $6K and for the customers $6K. There is an additional cost to the $26496 a year out of the initial $12K. What about gas, depreciation on equipment, the interest lost on the $12K had you kept it in an interest bearing account or the increase in cost if you plan on financing the $12K. Pull out ALL the figures before you decide to move on this.

    With any business there comes a point to where it is too big to do yourself and too small to keep up with it's growth. In my opinion, those owner's that figure out a way to make the transition create a very successful business, for those that can't or get tired, THEY SELL. Something to keep in mind.
     

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