Idea of purchasing small Lawn Care Co

Discussion in 'Business Operations' started by Nebraska, Jan 12, 2003.

  1. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    I am toying with the idea of purchasing a small lawn care company. Up until this point we have never even thought about this avenue of growth.

    Here is what I am looking at based upon a preliminary discussion over the phone.

    Gross Sales: $48k
    Net Profit: $40k
    1 person operation
    50 Residential Accounts w/ approximately 25 of them utilizing fertilization services.
    Mowing and Fertilization only on these accounts.

    He has equipment which he wants to be part of the deal. I'm not too fond of someone else's equipment. All equipment is less than 3 years old. 36 hydro skagg, 60" Lazer Z, 2 Redmax trimmers, 2 backpack blowers, Edger, Lesco Spreader, Backpack Sprayer, 16Ft H&H Trailer....and mentioned something about Groundskeeper Pro.

    Can provided Certified copies of P&L and Balance sheet.

    No written agreements with any of these customers.

    Is getting out of lawn care "because my wife and I are buying a tanning salon."

    Looking for $25k.

    Any REAL input as to additional questions, the next steps, etc...remember these numbers have not been verified. Advice from people who have experience purchasing another company only....please.
     
  2. John Allin

    John Allin LawnSite Bronze Member
    Posts: 1,489

    I'd be looking VERY close at the financials. Even with a one man operation - that profit is not reasonable, unless he doesn't charge his own time off at any rate (which, again - is not reasonable).

    Oh... and I do have some experience.....
     
  3. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    I know you do have ....a little....experience :)

    That is one of the things that immediately stuck out while on the phone taking notes.. I think the revenue / customer based upon customer type is reasonable...but the net IS questionable...His response was that is the net before "I paid myself & truck payment". I'm going to have him fax the finanancials to me.

    I'm not sure that it's worth the money even at $12k.....with an operation this small... I could use $12k for marketing and generate more revenue than that????
     
  4. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,712

    I'm with John. The numbers are fishy. I would trust nothing less than the approriate tax return for however he is structured.

    I'd pay only a percentage of the equipment value so it sold at a profit and about what it would cost to aquire an account through your normal means, maybe a little less. I wouldn't worry to much about the contract situation if he has paper or computer documentation of hopw long these people have been with him. Purchsed right they can be converted to contract and allow for some loss on general principal.
     
  5. Nebraska

    Nebraska LawnSite Senior Member
    Posts: 525

    I found this earlier this morning reading the paper. I guess what I am saying is that I can generate (past experience) 50 residential customers (generating that same amount of revenue) with less $ in marketing.

    From what you've advised I should:
    1. Get tax statement

    Have any of you bought something this small? If so what are the reasons and advantages?
     
  6. HBFOXJr

    HBFOXJr LawnSite Bronze Member
    Posts: 1,712

    I bought fert accounts (no equip) in spring 2002 because I wanted more accounts and advertising has been costly with erratic results. Although subject to attrition, you'll get that selling on your own or buying, but you get these with no effort just $. If you advertise you gotta go estimate and sell.

    These particular accounts fit my program exactly, work was priced closely to mine ( some more, some less) and it fattened up an area where I already had accounts. I didn't worry about the cheap accounts as i attempted to boost a few after aquiring and lost them. The deal was so fair I didn't care. A few more a a bit low but I didn't complain because the new route density negated that. And like I said some were more so that helped too.

    I wish I could find another 200-300 like this.
     
  7. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Only 8K in expenses? I don't think so:nono: Something doesn't jive, I'm afraid
     
  8. bruces

    bruces LawnSite Senior Member
    Posts: 648

    Look at his schedule C on his tax return. If he wrote off all of his equipment in prior years (no depreciation currently), works solo, and is really conscious of expenses, this might not be undoable.

    And if it is a schedule C, the profit is before any compensation to the owner.

    That is the way the accounting and tax return is done. The owner's salary is not an expense.

    Again, take a look at the financials and tax returns. If you have questions, ask the seller, ask the sellers accountant, and have your accountant look at the info until you are satisfied.
     
  9. PaulJ

    PaulJ LawnSite Bronze Member
    Posts: 1,776

    Nebraksa

    hey neighbor, What part of our great state are you is?

    you asked if anyone bought this small. Well I bought smaller in the fall of 2001.

    30 mowing accounts, about 20 fert "contacts for next season"
    36"Lesco gear w/sulky,bagger; 21" Airens; Echo trimmer, hand blower, hedge trimmer; Lesco spreader, push and backpack sprayers, trimmer trap; and an introduction to the customers.
    No contracts.
    All the equipment was in it's first season. I could use the equipment because most of what I had was homeowner stuff for the three lawns I was doing part time.

    Quess what I paid.
    Less than half the new price for the equipment.
    $2300

    I figure I just bought the equip. and took over his accounts to help the customers finish the season. Many were under priced. still are. Raised prices and lost about a third.
    I have no idea how he even paid for the equipment with what he was charging.

    Now I'm going out to put more fliers up tommorow.

    I don't realy have any advice, exept if you need to raise prices on the customers be ready to explain why you charge more. What extra do you do. "my expences are higher " might not cut it. Find out What he charges for specific jobs. If it's in line with what you would then it might be an OK transition.

    If you see a lawn that you would charge $20 for and he's only getting $10. Then your in trouble.

    Good Luck
     
  10. John Allin

    John Allin LawnSite Bronze Member
    Posts: 1,489

    That makes abit more sense..... and, if he didn't include what he should have drawn and didn't include the truck payment (as an expense), then he didn't make any money. He MIGHT have broke even.

    $25K is wayyyyyy too much.

    $12K is a stretch.

    $3 or $4K "feels" much closer - (and that's without seeing appropriate financials and is strictly a guesstimate - which should be taken with a grain of salt and at face value only).
     

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