Purchasing an existing Gardening/Maintenance Business

Discussion in 'General Industry Discussions' started by MowinginEureka, Apr 4, 2008.

  1. MowinginEureka

    MowinginEureka LawnSite Member
    Posts: 238

    Hi. My name is Neil. I have worked for a gardening/maintenance/landscaping company for 1 year. I was approached last week by my boss with the opportunity to purchase said business. I will only be purchasing the maintenance/gardening aspect of it because I do not have the ability or experience to get a contractors license to be able to utilize the landscaping portion much. I have been mucking about banks and the local SBA office getting the purchase process started. Does anyone have any advice or information that might be useful to me? I am looking for information on getting my spray license currently. I have worked here for 1 year and have a good grasp with the clientèle and area. I also am wondering if anyone would be willing to put up what they paid for their businesses and what the sales figures were when they took over. I am personally buying a business that has been around for quite a long time. I don't want to give specifics yet because it's not on the open market. It has 50 maintenance/mowing type accounts. Almost all of these account are full service, like spraying, pruning, mowing, hedge trimming, planting, etc... before expenses my half of the company brings in 115,000. After, it brings in a bit over 50,000. This includes my wages and one other employee. Without those wages, because the other employee is quitting. It brings in approx. 90,000. I will of course have to hire another employee which will bring it more down near 70,000. The purchase price I have negotiated is 135,000. That includes a fully decked out Walker mower, my choice of either a 90 gas manual F250 with aluminum dump bed, or a diesel 93 F250 automatic with aluminum dump bed. A 12ft? trailer. And sets(being 2) of toro mowers, stihl trimmers, stihl hedge trimmers, stihl blowers, and a handful of hand tools, a power trim edger and some spraying/fertilizing equipment. I am sure to be leaving something out. My main issue is getting the SBA loan. I am working on that with my bank. How does this all sound? I would appreciate any and all help in this area. Thanks. - Neil
     
  2. MowinginEureka

    MowinginEureka LawnSite Member
    Posts: 238

    bump bump bumpity bump
     
  3. JohnnyRoyale

    JohnnyRoyale LawnSite Senior Member
    Posts: 616

    Personally, I wouldnt be interested in the equipment as it sounds dated, and it seems like the price for the business is high. I'm sure if you shop your equipment needs, you can roll out new equipment for an attractive monthly lease rate.

    Secondly, i would approach the seller, and work out terms on the purchase of the business. Maybe give him a downstroke and something monthly. If he trusted you in the care of the properties as an employee, i'm sure he won't object to financing this move. Plus, banks and SBA's arent there to fund LCO's unless you know someone on the inside. Especially with the numbers your giving us.

    The contracts alone aren't worth more than the paper they're written on unless the clients are happy with YOUR work and are willing to stay on for the long haul. We just took over a 200K portfolio, for 20K, with payment terms, and we met with all the clients prior to the transaction. If any client bails on us, we bail on the payments.

    Over the years I have taken over a number of small companies to increase my revenue and business and have never paid more than 10% for the contracts alone. And thats for base contracts-whats guaranteed, whats on paper, not the extras that may or may not come.

    What you have to consider is why the guy is selling, client payment histories, ...etc. This also dictates your payment price for the company. You definetely do not want to assume any of this guys liabilities either.

    If possible, I would stage the transaction as if you were a silent partner in the original company, and you are parting ways and you will be taking over the maintenance side of the operation under a new company name. Some clients dont like the idea of being sold, and this approach may circumvent any issues to that respect.

    Bottom line is, if you want it bad enough, you'll have to get creative with financing and your approaches and at the end of the day you have to make money. Good luck, hope this helps you and let me know if you need any other advice. I'm interested in seeing how this pans out for you as 15 years ago I had the same proposal made to me by my boss and I got creative enough to make it happen and today were grossing just over 2.5M/year and loving every minute and dollar of it.
     
  4. Atlantic Lawn

    Atlantic Lawn LawnSite Senior Member
    Male, from Outer Banks NC
    Posts: 940

    Very good advice above, are you the Licensed Applicator for the spray and fert. programs or will that be subbed out ?
     
  5. MowinginEureka

    MowinginEureka LawnSite Member
    Posts: 238

    I will be applying for my Spray License very soon, we are going to work out something where he can continue spraying until I get it. As far as I have seen and heard from people it was a decent deal. But I do understand what you mean about the contracts. Client Payment Histories? I dunno. The thing is, I think why it is that high is because of the name and reputation of the business. It is the oldest gardening business in the area. 39 years in business going on 40. The accounts are very loyal, mostly older people. The equipment is not dated. The equipment is between brand new to 2 years old and well maintained. I should know, I usually maintain them. The Walker has like 100 hours on it. They are commercial units. The mowers have honda engines. etc... He will not carry a note. He is retiring. Health problems. He has Bone Spurs in his shoulder and is going in for surgery in June. His wife has a cancerous growth that is being removed Monday...He's ready to get out of the game which is why I was able to negotiate a lower price. Equipment and clients notwithstanding. What I am purchasing is mainly the name and reputation of the company. Plus I have talked to the local SBA and they seem to think it possible as well as my loan officer at my bank. But. I dunno. So you are telling me 200k worth of contracts is only worth 20k? That would still make this company without the name worth 40k...anyways. I do appreciate the advice and will take it into consideration. I just surely am not seeing anything like the numbers you are talking about available here, let alone heard of.
     
  6. JohnnyRoyale

    JohnnyRoyale LawnSite Senior Member
    Posts: 616

    How do you come up with 40K if your contracts are worth 115k? Old clients are nice, but people don't live forever, and at your numbers, you better hope they live at least another 5 years, because thats what its going to take you finally turn a profit. Forget about taking into account the cost of having to replace the equipment at that point in your business carreer. What you have to realize is that its April and ask yourself how many other guys are in line to jump at this opportunity-probably not many. Secondly, what's going to happen to these clients when he doesn't show up in the spring and he hasn't sold the company. As I mentioned earlier, you can duplicate his equipment for a small monthly lease rate and go from there. I'm not suggesting you go after his clients directly, but reality is, they're worth zero to him if he cant sell his business to anyone else, and they'll have to go elsewhere to get serviced anyways. Paying him 40K for everything, including equipment is being generous, and in my opinion isn't a bad deal...130K is just ridiculous-remember...its friggen lawn maintenance. But then again, you seem to have it figured out and it all makes perfect sense to you-so knock your socks off, good luck with your new venture.
     
  7. MowinginEureka

    MowinginEureka LawnSite Member
    Posts: 238

    Its not that I seem to have it all figured out. I thought i did. I have spoken to the SBA and my loan officer at the bank. When I look at other business like this for sale, it seems to be comparable. Other gardening businesses that make about half this much but have only been in business for 10 years with no Walker I see being sold for 70k. Generally I have been told at least that you want to make enough a year to pay off the business in 3-5 years. At 50-70k a year that puts me at 2-3 years. That is if I were to put all money made back into the business. I mean if I could find a business like that for 20k that would be great...
     
  8. JohnnyRoyale

    JohnnyRoyale LawnSite Senior Member
    Posts: 616

    Is that 50-70 net profits AFTER all your expenses as well as your salary?
     
  9. JohnnyRoyale

    JohnnyRoyale LawnSite Senior Member
    Posts: 616

    Disregard last post-i read further into your post and got the answer.

    Don't get me wrong, I hope you take the plunge into business. It can be very rewarding if you make calculated moves and work your butt off. It wont be easy initially, and you're going to have to make some sacrifices, and by buying an established business, you hope to have taken a few years off the growing pain stage. Have any of these loan people given you repayment terms, or have they discussed cash flow with you? How do you plan to fund this operation? What will happen if you can't come up with the payment at the end of the month for whatever reason? What about insurance? His costs to operate arent nessisarily going to equal your costs. Your going to have to start somewhere, and my last suggestion to you is to not show the seller how eager you are to pay his price. Put on a poker face, position him so he has to take your offer, whatever it is, and however crazy it may sound to you. Your in the drivers seat here...remember that, tell him that his company is worth 0 if he doesnt sell it, and your doing him a favor and the right thing by buying it VS scooping the contracts from him when he doesnt show up in the spring. By the sounds of it he has other pressing issues to deal with anyways. Lastly, think of how nice it would be to pay off your entry fee after your first year or even sooner. Good Luck.
     
  10. Rcgm

    Rcgm LawnSite Senior Member
    from Indiana
    Posts: 314

    I agree with Johnny. I have been doing this for 14 years and would not give that guy that kind of money for that business if I was a multi millionaire. Not saying I know all but I built my business from the hatch back of a mustang and a 21 inch lawn boy. What I am getting at just like Johnny said customers in the green business come and go quick and are not worth the paper they sign. What I have found out in my 14 years in business is customer to customer contact is a big key. People pass away, lowballers, family members start lawn business they let you go. Companys get sold and the new company has there company they have been using for years and let you go.People lose there jobs and can't afford you know more and so on. I would go purchase a truck and equipment spend some top dollars on advertising and would still be well under his asking price. Do some research on how to get customers rather than buy that business. I would also get a little more knowledge of the business under my belt before I went for Chemical license. I just think being in the business for 1 year is a little early to start to want to apply chemical.Just my 2 cents.

    RCGM
    Brad
     

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