Selling a business and working for the new owner, How much and how to??

Discussion in 'Business Operations' started by vermonta, Mar 14, 2008.

  1. vermonta

    vermonta LawnSite Member
    from Vermont
    Posts: 87

    A good friend of mine is in the same business as I am , basically in lawn maintenance in summer and plow in winter.

    He has been approached by a local business man who wants to get into this business. He is also one of my friends customers.

    The buyer wants to buy him out and have him run it for him. They are thinking maybe not plowing but have my friend get a cdl and work in the winter driving oil delivery truck for another one of his businesses.

    My friend is not sure on how to proceed. He likes the idea because he said he would still be doing what he likes doing, (at least in the summer) and most importantly he would have a steadier paycheck all year and usually weekends off.

    I told him to join here, but not sure if he did, so I thought I would ask in here.
    Any help on how to price it, ideas? suggestion? what to watch for? ask for? negotiate for?

    All would be a help. He is having a meeting with the prospective buyer on Monday the 17'th

    I would like to buy him out myself but I don't think I could swing it and can't offer some of the perks this guy can.

    Thanks in advance for any help you can give us
  2. vermonta

    vermonta LawnSite Member
    from Vermont
    Posts: 87

    I see many have looked. No suggestions?? :confused:I'm surprised? :confused:I thought maybe it didn't correctly post or something or is everybody just to busy.

    My book keeper tells me I should make him an offer and we will see if we can make it workable. She thinks we can. But I am more reserved than she is. If she can crunch the numbers so they can work for both of us, I will do it though.:weightlifter:

    So now my question might be what advice/suggestions do any of you have for ME:)

    How do I determine value etc. Anybody???:waving:
  3. chrisludwig

    chrisludwig LawnSite Member
    Posts: 39


    Value of a company like this not set in stone. For starters, you have no idea of knowing how good the relationship is with the outgoing owner and his customers. So you would have no way of knowing how many of those accounts would actually stay with you if you took over. Since this is a friend of yours he may not have these issues. But be cautious of it. Since the current owner is going to stay on board as an employee this will help greatly with account retention, as long as he is doing a good job.

    If your friend sells to the business man, he may be shocked at the amount of cut in pay he will recieve for doing the same work. And also the loss of freedom of being your own boss.

    You may want to work out a percentage payoff price. Such as paying 33% gross profit from the gained accounts over 2-4 years. This way you are not paying anything for accounts that don't stay with you. The upside of this for the seller is you can also give him a percentage of any new services you sell to his client base. So he may get more if you have added services that he does not currently provide.

    I hope this helps a little. Good luck.
  4. vermonta

    vermonta LawnSite Member
    from Vermont
    Posts: 87

    Thanks for the reply but it is now a done deal. :cry::cry:

    I asked him to meet with me and my book keeper for two reasons

    1. To see if it was a possibility for me to buy him out

    2. If not, so he could counter offer the other guy with a better deal armed with better information.

    I found out he had much more debt than I thought so it wasn't worth it for me and the equipment wasn't worth any where near what he owed.
    He didn't listen to my book keeper and make a counter offer but took what the guy gave him. He will be hurting financially for years to come. He started work for the guy today.
    It makes me sick if I think about it to much.:dizzy::dizzy::cry::cry:

    But, It wasn't my decision.

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