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Need some help...thinking of buying a business

Discussion in 'Starting a Lawn Care Business' started by bigpoppa85, Jul 15, 2013.

  1. bigpoppa85

    bigpoppa85 LawnSite Member
    Posts: 14

    Hi everyone I'm a long time lurker but finally registered,

    I'm thinking of buying a lawn maintenance business (with a little tree trimming).

    Here's the basics:
    Gross revenue:
    2010- 105,000
    2011- 135,000
    2012- 148,000
    2013- on pace for over 150k

    Profit on schedule C
    2012 -on tax extension.

    He has the equipment valued at 15k. I have it around 8,000.

    Accounts re 75% commercial.
    He's asking 100 k. With an earn out (if any customers leave within 12 months, I subtract tht properties % of revenue and I pay him that amount less than 100,000.

    This business is located in the plains states.

    Is this reasonable? I'm thinking his price is too much. Thoughts? I don't currently have a lawn business, but I have 8 years exp in residential and commercial mowing.
  2. Sprinkler Buddy

    Sprinkler Buddy LawnSite Bronze Member
    from Florida
    Posts: 1,187

    With your mowing experience, I would just start building your own lawn service and not buy any accounts. Trying to do both and the cost and overhead of doing both, insurance, etc... for tree work most likely would be a problem.

    We don't own our customers and the headaches you would have when they start dropping isn't worth it to me. I haven't heard of any buying a lawn business that was glad they did so. The few I know personally that have bought accounts wish they hadn't later down the road.
  3. GreenUtah

    GreenUtah LawnSite Senior Member
    from SLC, UT
    Posts: 866

    A couple of things jump out at me with these numbers. Starting with the 48% profit margin on 15k/8k worth of equipment. Unless there is basically NO competition in the market, even for a one man band, those numbers (profit percentage) would be hard to come by.

    That suggests accounting errors or worse to me. I think I'd want a detailed look at expenses (to see what's missing) with my accountant before making a commitment.

    Beyond that, 2.5 times net plus equipment with fallouts and whatever other liabilities and assets (like branding..if a significant effort has been put into it, for example) considered is fairly common practice. So if those are actual profit numbers (verified), he'd actually be asking on the low side.

    Of course what something is worth is always determined on what a buyer will pay, as shown consistently across our industry and all business, for that matter. But I'd go have a second and even third look at expenses.

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