Offered to purchase existing business....

Discussion in 'General Industry Discussions' started by ToddS, Sep 12, 2007.

  1. ToddS

    ToddS LawnSite Member
    Posts: 58

    is it worth it. This is what he is offering:

    2005 Isuzu truck $23,000
    2007 52'SCAG Wild Car 25 hp with 217 hrs- $6,000
    2007 42' SCAG Z Cat 19 hp with 210 hrs- $5,000
    2 EBZ 8000 Red Max Blowers- $600
    1 Little Wonder 8hp Heavy Duty Roll Blower $600
    1 Red Max Edger $150
    1 Red Max Weed Eater $150
    1 Stihl Hedge Trimmer $150
    Oil Filters, Spark Plugs Air Filters, Blades $1,100

    Cutsomer List $25,000

    Total 61,900.00

    The customer list is 38 customers mixed of residential and business. Most year round accounts, but none on contract. He has had these act for over 10 years. Accounts produce $6,539.00/month before over head etc.

    Simple question. Is it worth this price?

    Please keep in mind that I already have 89 of my own accounts and was not looking for more unless an opportunity presented itself. Never bought a business just satrted mine from scratch, but if I can add more accounts and revenue then why not at least look.

    Meeting with him again on Friday to go over more questions that I have, but thought I would ask for some input from others.

    Thanks in advance!!
     
  2. ED'S LAWNCARE

    ED'S LAWNCARE LawnSite Senior Member
    Posts: 361

    60k advertising will give you way more than 38 accts. Why buy them? Especially when there is no guarantee that they will stay with you.
     
  3. P.Services

    P.Services LawnSite Fanatic
    Posts: 6,322

    man that is a great deal! think of it as getting a new truck with a TON of extra stuff. i would go for it for sure.
     
  4. The Cutting Edge

    The Cutting Edge LawnSite Member
    Posts: 141

    I personally think that is too much.... I recently bought a company out and with this company I got 40 accounts all with contracts with a revenue of almost 6,000.00 a month, 1992 Ford F250, 2007 Exmark 60" with 202 hours, 2007 Exmark 52" TT with 240 hours, 2004 Exmark 48" Metro with 600 hours, 16' open trailer, Blue Bird areator, 2 Stihl Fs 100's, 2 Stihl Kombi systems with all the attachments, Redmax hedge trimmer, Stihl Edger, Stihl Br420 blower, Stihl 200T chainsaw, 3 wheelbarrels, Lesco spreader, Stihl gas powered sprayer, about 50 different hand tools, and the original owner stayed on with me for 1 month for the transition to introduce me to clients and run the routes with me. I only paid 24,000.00 for all of this, maybe I got a hell of a deal but you should only pay 1 months revenue for the accounts and make sure you get a no compete agreement for 5 years and 100 miles.
     
  5. Dunn's

    Dunn's LawnSite Bronze Member
    Posts: 1,534

    what is with people thinking their accounts are worth more than what they bring in a year and don't even have contracts. Dee Dee Dee is all can I say.
     
  6. lifetree

    lifetree LawnSite Fanatic
    Posts: 5,369

    Sounds like a rip off, to me !!
     
  7. cpel2004

    cpel2004 LawnSite Bronze Member
    Posts: 1,415

    In buying a service business many sellers like to talk about what there over all gross is, because its usually alot larger number than what they are actually netting. Net is what I would focus on. I haven't read anything that would make me believe that his accounts would be worth that type of money. (Example)If I wanted to I could go out and low ball and get alot of accounts, package them up do a couple of landscaping job to pad my overall number, etc and sell them off. For the new buyer they think there getting gold but what they are really buying is more labor, more equipment, more problems and negative net, net balance. It would cost you more in labor, overhead and time than what the accounts are really worth.

    Many of these guys consult with business brokers and most "brokers" will tell you anything you want, just to get the listing. In my region this is why we have some many crazy asking prices.

    Immigration has alot to do with it also. Here in Florida many foreigners buy business just so they can enter into this country. I don't know exactly how it works but it does. For the average business I wouldn't pay more than 3 months earnings. Keep in mind you may lose over 25-35 percent of your clients, just because they dont like.

    I think buying of business is a great way to grow your business but its not for everyone. There are many hidden variables that you must take into account.
     
  8. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Posts: 7,547

    about 10 years ago I got 14 customers for free.The owner went around one day with me and said I was taking over the business. None cancelled, and I still have 3 of them to this day.

    The price of that business looks good. The equipment is fair priced, and about 4 months for the customers. I find it funny that people will ask what you can get for $61,000 in advertizing. Does no one see the equipment?
     
  9. ED'S LAWNCARE

    ED'S LAWNCARE LawnSite Senior Member
    Posts: 361

    Yes I see the equiptment, but do you really need all that for only 38 more accts? You shouldn't buy equiptment until you do need it. To spend over 20k for a customer list with no contracts and no guarrantee that they will stay with you is a high gamble. It could be just me I don't like throwing my money away.
     
  10. lawnspecialties

    lawnspecialties LawnSite Silver Member
    Posts: 2,513

    $25,000 for a customer list that generates $6500/month? NO.

    The equipment isn't priced too bad (is the Isuzu diesel or gas?) if they are in VERY good shape. But honestly, if I was buying all that equipment from someone, $6500/month worth of accounts ought to be thrown in there for free.
     

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