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Just starting, is this a fair deal?

Discussion in 'Starting a Lawn Care Business' started by DR1, Jan 17, 2007.

  1. DR1

    DR1 LawnSite Member
    Posts: 8

    I'm just getting started in the business and would like to post an offer I was given to purchase someones equipment and accounts. I am trying to figure out if this sounds like a good deal or if I would be better off starting from scratch. This is my first post, thank you in advance for your replies.

    Price: $50,000
    Revenue: 2006 - over $130,000 w/ add-on services
    Employees: 2 would like to transfer to new owner
    Employee pay rate:$12/hr and $15/hr
    Location: Northern Virginia (within 25 mile radius)
    Accounts: 35
    Type: Approx. 80% residential 20% commercial
    Accounts status: all in very good standing
    Equipment: Well maintained
    48" deck walk behind
    36" same
    36" same
    21" push mower
    21" same
    1 walk behind blower
    2 back pack blowers
    2 string trimmers
    1 edger
    1 chain saw
    6'x12' trailer w/tail ramp
    misc. tools
    Truck 2000 F-250 (needs new engine) -my current vehicle can tow to start with.
    The two employees know the routes and customers. . The current owner is eager to accept a new job offer. He gave me an option to work out a payment plan with him.

    Thanks again,

    David Russell
    alt.email: russellru@gmail.com
  2. MarcSmith

    MarcSmith LawnSite Fanatic
    Posts: 7,157

    if you two employee work a full year 2080 hours they will be owned 56K since he listed revenue I asume that it prior to any expense. 35 accounts, unless they are really really huge could be done with a lot less, and you know about traffic in NOVA....25 miles can take over an hour in travel time.

    Are the accounts contracted? IE is their a peice of paper saying that this custoemr woudl agree to this service for this price.

    I'd want to see his books on his expenses....

    a 2000 F250 that needs an egine.....are you really sure all of his equipment is well maintained....Id consider asking a mechanic to take a look at the equipment....and Id let one of the employee's go....

    drive around with him to take a look at the properties. I still think he is very employee heavy....you plus 2 employee's is 120 hours each week on 35 properties....that 3.5 hours on each one on average....3 man crcews should be able to 15-20 1/2-3/4 acre lots a day....

    ask him what his NET is...IE how much did he pay himself or the business....

    of that 50K 10K is tied up in used equipment.....Honestly I would get a loan from the bank before I "worked a payment plan" with the current owner.
  3. DR1

    DR1 LawnSite Member
    Posts: 8

    I'm proceeding with caution. Thanks for giving me some quality advice.

  4. Runner

    Runner LawnSite Fanatic
    Posts: 13,494

    Go through the books. $130,00 with this little cutting power??? I'm sorry, but I am skeptical...VERY skeptical. Add on services, or not... Have him show the total income, the tax statements, the payroll, and the expense sheets (equipment, insurances, parts, fuel, etc.). He should have open books to a potential buyer - this is how ANY business is when it is sold, whether it be a restaurant, a factory, or whatever. If he refuses, then this guy isn't serious - he's a sham.
  5. Aspenlawn

    Aspenlawn LawnSite Member
    Posts: 11

    I am a bit skeptical as well.
    The revenue doesn't support 2 full timers plus you.
    Profit/loss statements for 5 years would be essential at a minimum.
    Propose a percentage based on renewal percentage.(i.e. 50% renewal=
    25K final price) see what reaction you get. That may just tell you everything you need to know.
    Please understand, it is still easier to assume existing accounts than to start new,but do not let someone overvalue what is truly available to you the new owner. I just purchased an existing business, I would be happy to share the fine print if you are interested.
  6. Aspenlawn

    Aspenlawn LawnSite Member
    Posts: 11

    Just to follow up a bit more, using the 2 full timers as your labor, you would have all of your time available for sales. You could easily double your revenue
    and maybe cut a decent profit. If you are a decent salesman, this is a fairly real goal. but a small marketing budget may be necessary.
    Just a thought.
  7. DR1

    DR1 LawnSite Member
    Posts: 8

    I'm getting a good idea about what to look for when we meet and I get to take a close look at the books and ask questions. I do happen to know one of the building owners that he has done work for, and it sounds like he has a good reputation. So that eased my nerves a little. I will be careful moving forward from here. I just did'nt know if this was one of those deals that you need to snatch up in a hurry or someone else will while you're grinding over the offer. Aspenlawn, if you were willing to share the fine print with me on your purchase, I would like to see how it was put together. I do remember him saying that the two workers did most of the labor and maintained the equipment.

    Thanks again you guys for passing down some wisdom.

    alt email: russellru@gmail.com
  8. CAG

    CAG LawnSite Senior Member
    from ct
    Posts: 344

    i agree that it doesn't sound right.. im thinking 80% comm with no sweeper,no leaf equip, only one truck ( no back up?? ), doing 130k with no ztr??.. if it's all true hes got some decent accounts!! but i would recommend that if everything works out hire both guys and figure out whos the best and let go the other then buy a ZTR.. good luck!!
  9. CAG

    CAG LawnSite Senior Member
    from ct
    Posts: 344

    i would also add that depending on the agreement i would go with the owner financing.. this way he would be more incline to help u maybe when a machine breaks, you have a estimate on a job, new leads on jobs and so on..
  10. DR1

    DR1 LawnSite Member
    Posts: 8

    That is a good point about the benifits of owner financing. Thanks.

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