Purchasing of Another Company

Discussion in 'Pesticide & Herbicide Application' started by way to grow, Mar 13, 2005.

  1. way to grow

    way to grow LawnSite Member
    Posts: 46

    I have been in the fertilizing business for just over one year now. My partner has been doing it for about 4-5 years. We have built our company to about 1000 customers. We have about 75 mowing accounts, all of which we've been "subbing-out". We just got an unofficial offer from a large company(NOT TGCL). They opened up business here not too long ago and are having a hard time increasing their customer base. The offer is $2 to every $1 we made last year in revenue. I have heard stories (probably myths) of companies selling to larger companies for 3 to 5 times the revenue made the previous year. Is $3 too much to ask? Just right? What do you think? Thanks for your help - I don't really know anyone else to go to with this question.
  2. pema

    pema LawnSite Member
    Posts: 54

    1000 customers for 1 year is incredible. Not sure what your Average reveune per customer is but based on my ARPC your looking at becoming a Millionaire overnite?

    You'll need to consider several factors before deciding to sell.

    1) How much have you invested in getting those 1000 accounts?
    2) What are you going to do after you sell? (No compete will be part of the deal so are you going to be able to return to the work force?)
    3) Do you want to wait another year or two and build your revenue even higher and get 3X that rate?

    I'd take it only because I'm an old fart and would enjoy early retirement.
  3. DiscoveryLawn

    DiscoveryLawn LawnSite Senior Member
    Posts: 408

    Way to grow,

    How did you get to 1000 customers in one year?

    If you are growing that quickly, I would grow a couple more years or until your growth slows, then sell.

  4. Ric

    Ric LawnSite Fanatic
    Posts: 11,956

    Way to Grow

    Industry standard is 100% of Gross yearly sales. Of course this is of reoccurring revue (contracts). My age is listed on my license and is public information. I believe big companies have profiled me and I get a lot of calls asking if I am interested in selling. Highest offer so far had been TG at 120%.
  5. thomsoutdoor

    thomsoutdoor LawnSite Platinum Member
    Posts: 4,443

    If I can do half of what you did my first year I will be thrilled. I have been cutting for 15 years this is my first year doing applications. Legally that is. I am curious when you sell your business how much you would have to pay in taxes. Thanks for some inspiration !
  6. MIDWEST25

    MIDWEST25 LawnSite Member
    Posts: 97

    2 or 3 dollars per revenue dollar is absurd.tell them to call me,I'll sell for 2.3 and be gone.I worked for tgcl and sat in on a few buyouts and $1.25 per $1.00 is the most I've seen.If SCotts is as high as you say please call Midwest Lawn and Tree in Independence,Missouri and I'll fish alot
  7. Ric

    Ric LawnSite Fanatic
    Posts: 11,956

    "Buying income" is the term used by corporate business for buying accounts. TG/CL is in a acquisition mode right now due to the recent CEO shake up. They are interested in impressing the stock market and their bankers with a increased gross sale figurer. They will hide acquisition costs under capital investment to cook the books so to speak.

    Now any time you sell a business deal, Look at both sides of the coin whether you are buying or selling. Ask the question of yourself "what in it for the other party?" In the case of Buying and Selling Account at any price, the question should be, "How long does it take to show a return on that investment". At 125% it will take several years to turn a profit. Now there are several other factor involved here that I will not go into. However 125% is a high price for accounts and a long term pay back. I seriously don't think a large corporation will go much more than 125% of a years gross. Remember they are not purchasing good will or branded name, only accounts.
  8. Green Dreams

    Green Dreams LawnSite Senior Member
    from Texas
    Posts: 593

    I'll take 1.2 mil to go away. Pay me now or pay me later....lol.
  9. ns400r

    ns400r LawnSite Member
    Posts: 110

    Ric, I agree, Ive never hear of a major turf company going over 125-130% We have been offered around that amount, but seeing we only do 200k a year thats not even $250k for my business, To sign a no compete for 5 years well, in that 5 years I will make almost 2x's that staying where I am.

    Now if I was offered $3 or more dollars on the dollar, well that would be hard to turn down. Unless that came with a 10 year no compete.
  10. Ric

    Ric LawnSite Fanatic
    Posts: 11,956


    Most non competes can not be over 2 years or cover the Territory out side your service area, to hold up in court. They also can not exclude you from working for another company in your present service area. Non Competes have been discussed here before. You may want to do a search to see what others have said about them.

    Now There is always a loop hole in these non competes as well as any contract. So you could jam a sharp stick in their eye if you are so inclined.

    Now Selling out accounts can be a way of doing business and in fact is by professional business builders. They take the money and use it to start up again in another market area that they have researched and do it all over again. They may even change business. Next time going into venting routes or pressure washing etc. This of course takes a lot of confidants in ones self.

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