Need opinion on buying existing business

Discussion in 'Starting a Lawn Care Business' started by Signature Services, Dec 24, 2003.

  1. Signature Services

    Signature Services LawnSite Member
    Posts: 43

    I have been working with a guy who has been in business for 4 years. I started last year. He has approximately $7800 worth of monthly business along with this equipment:
    6'x14' Haulmark
    48" Toro Z350 (mostly not working)
    52" Stander runs good
    2 Stihl trimmers
    2 Stihl BR420 blowers (one not working)
    1 Stihl straight stick edger.
    Along with miscellaneous tools and stuff.

    Here's the deal: $2000 per month to him for one year...plus I have to pay my expenses like insurance and fuel/repairs.

    What do you guys think????
     
  2. gogetter

    gogetter Banned
    Posts: 3,256

     
  3. Signature Services

    Signature Services LawnSite Member
    Posts: 43

    Gogetter, thanks for your opinion. I do have more info than what I originally posted. I work with him as a contract employee since April. I have known him for over 10 years. I know that he just signed a two year contract on one of the accounts that worth 54k for the two year period. ($2250/mo) along with other contracts that are negoiated yearly. SO, anything is possible and he will help me transition especially with repairs on the Stander and Toro.
     
  4. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Posts: 4,406

    You need to get a sheet of paper and add up the total value of the equipment and the accounts

    The trailer used I'm being nice is probably 2,000
    I’m not familiar with either mower but they both sound like belt walk behinds or you would of said hydros new walks behinds are 2-3 k each you said one doesn’t even work you gave no age on the other but I would say knock off at least 20% per year so it sounds like the pair of mowers are worth maybe 2500-3000 for both and that could be high
    Trimmers are both nice you didn’t mention the size but typically weed wackers are 275-325 new so lets be kind and say 500
    The back packs are what I use new is now 380 each one doesn’t work so I’m guessing they may be as old as the business at least one is so 100 for the older one and probably 225 for the newer running one
    The edger is basically a mid size wacker so 350 new is probably ball park used and they do see light use compared to the back packs and wackers so 300

    So that’s
    2,000
    2,500-3,000
    500
    100
    225
    300
    Plus probably 500 for hand tools

    Grand total 6000-6600 for equipment

    Next I wouldn't pay more then 1 months income for accounts even if they are under contract they can still break them example don’t come back on my lawn ever again! what are you gona do sue them to mow their lawn or send them a breach of contract bill then when they don’t pay sue them for firing you think about it you may be on the right side but it doesn’t mean you will win. Plus do you have time for court I would think you have a buissness to run.

    So ill-use your figure 7800 for accounts
    So grand total 14,000-14,500 for the business and you never mentioned the truck are you buying one or is he letting you use his

    2000 times 12 months is 24,000 id say he wants about 10 k more then its worth if I was to use my math my business is 80-90 k with the 3 trucks if I used his it would be 175,000 you can see there is a big difference and weather you have seen him interact with customers or not there is bound to be a relationship there with each of them some couldn’t care less who does their lawn some love him to death and few may hate him and are waiting to the season ends you know what I mean some people you always please others can never be pleased so brace your self for losing a few accounts. Hope IV been of help
     
  5. Signature Services

    Signature Services LawnSite Member
    Posts: 43

    Kelly, your advice is very helpful. Maybe I keep forgetting to say everthing I have....
    Toro is a riding, out front mower (similar to Walker)
    Stander is a ride on, standing up mower both have hydro steering@zero radius.
    You know the Stihl stuff. By the way, only 1 blower doesn't work. The other one does.
    Some Lesco spreader and older lesco products.
    I have a 97 GMC 1500 that I will use.

    Keep the opinions and advice rolling in. The idea is for me to buy this come January.
     
  6. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    I havnt seen you say yet, is the $7800 paid over all 12 months? Are you working all those months as well(im assuming yes)? Assuming he is grossing $50/hour, that would put the hours worked near 40...so you could do his accounts yourself without any employees. Say for instance your expenses run you $1800 per mo--without wages,(which i believe is high) that leaves you with approximately $50k gross income for 2004. Then think about the following year...no payments and it looks even better.

    Personally, i think buying accounts for one months pay is BS. Mine (the relationships ive built) are worth more than that any day of the week. You can tell that i would pay his price.;)
     
  7. Signature Services

    Signature Services LawnSite Member
    Posts: 43

    Well, all your advice is helpful but my seller just changed the deal.

    He want to sub the work out to me for 90% of what he charges customer. Example: $1000/month account I would do the work at my convenience and use all his equipment and bill him $900.

    Now what do you think? And yes, all accounts are signed to a 12 month cycle.
     
  8. Kelly's Landscaping

    Kelly's Landscaping LawnSite Platinum Member
    Posts: 4,406

    I'm guessing the 10/90 split is after expenses. That aside you want a new mower who’s paying for it. It sounds like you may run in to some sticky problems down the road. I can see his point of veiw he has an investment and gets a monthly dividend what I would want to know more about is. When something breaks who gets the bill and if you have a customer come up to you and asks to sign you up are you gona keep the client or give it to your friend who isn’t in the field and gets to keep it then if there is a falling out
     
  9. Signature Services

    Signature Services LawnSite Member
    Posts: 43

    You know, after today I am seriously rethinking what to do. The Toro won't pick a leaf and that's all I needed. I can't get it to work. I think I should just open slowly by myself and save for a walk behind or borrow money for a Walker brand mower. I can't stand broken-down equipment.
     
  10. Turf Technologies

    Turf Technologies LawnSite Senior Member
    from Florida
    Posts: 590

    I did that, had my own truck use his tralier and equipment. I collect 50% of what I did. ONly paid gas for my truck. Wasnt a bad deal.
     

Share This Page