Selling My Business Question

Discussion in 'Business Operations' started by HB Lawn, Sep 18, 2010.

  1. HB Lawn

    HB Lawn LawnSite Member
    Posts: 199

    If I were to sell my business, how would I know what price to start at?
    Is there a formula? Is it the price of the equipment and customers or is it just the equipment? Please help. Thank you in advance.:confused:
     
  2. Bunton Guy

    Bunton Guy LawnSite Bronze Member
    Posts: 1,743

    Are they all under contract or word of mouth. If not under contract that kills the asking price right there.

    The couple i've bought out I paid 1 months worth of gross of each client. Give them the option of buying all or none of the equipment at fair market price.
     
  3. starry night

    starry night LawnSite Silver Member
    Posts: 2,544

    Doesn't matter if the customers are under contract or not. You can't sell the contract because the customer is only obligated to you and NOT to the new buyer of your business.

    Let me correct myself. You CAN sell the contract but it is worthless to the buyer except as a referral.
     
  4. Bunton Guy

    Bunton Guy LawnSite Bronze Member
    Posts: 1,743

    I understand and agree that contracts are non transferable unless noted in the contract its self...but the notion that the customer signed one gives you a little more comfort that they are in it for the long haul verses the ones that never signed a contract and could hire 10 different companies the following year.
     
  5. seabee24

    seabee24 LawnSite Senior Member
    Posts: 619

    Price it for what you think it's worth. Honestly no one can tell you. I have paid 1 month in the past, I have paid way more also,

    I would never sell my accou t list for less than 20% of the total income for the year. 1 month would be like 10-12% percent. Really I think I would ask 35% if you had a really tight route. The owner will want some guarantees or ask for your help in signing them...
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  6. soloscaperman

    soloscaperman LawnSite Gold Member
    Posts: 3,045

    The guys in my area sell it for 3-6 cuts. Usually if an LCO knows a lot of other buddy LCO's he gets the biggest bid or hands them to the closes guy that he likes. It's a risk.
     
  7. HB Lawn

    HB Lawn LawnSite Member
    Posts: 199

    OK, thanks for your help.

    Now lets turn the tables around. Lets say a guy wants to sell his business
    (equipment and customers). He's pulling in about $7,500 a month and has about $15,000 in equipment, including trailer. Equipment is mostly 6-8 months old. What would be a fair price for someone to offer him?
     
  8. seabee24

    seabee24 LawnSite Senior Member
    Posts: 619

    depends on the equiptment.

    A equiptment is worth what its worth. i would never pay more than 75% of its new cost, other wise you would be better to go buy it brand new and get the full warranty. from there you just have to figure out what percentage of its life has already been used and what you would pay. the kicker is, if he wants alot of the equiptment and will not sepeate it from the accounts...then you might be stuck. just depends on alot. is that 15k what he paid new? or what its worth now?


    B. customers - it makes no difference to me how much you "bring in per month" i could bring in 100k, but have 90k just in labor - so where is the profit? unless you really think that the old owner is just screwed up the production rates for one reason or another.

    but if that 7500 per month shows profitablity, shows the proper amount of man hours, uses minimal fuel, minimal equiptment,minimal travel expenses (these are all dirrect expenses for each account) then i would be willing to pay top dollar. if the owner would help sign them up, even work for 6 weeks, i would be willing to go as much as 20,000 - again that would be for sign customers, 6 weeks of the old owner helping out, and all the numbers would have to work. 7500 billed out for me would have to be 1 man 5 days a week. if these accounts required more than that to make the 7500, then id say his numbers are too low
     
  9. HB Lawn

    HB Lawn LawnSite Member
    Posts: 199

    $15,000 is what the equipment cost new. Like I said, it's about 6 to 8 months old.

    The $7,500 is gross monthly. Trying to get P&L from him, as well as other paperwork.
     
  10. seabee24

    seabee24 LawnSite Senior Member
    Posts: 619

    7500 gross is fine, but whats the net? thats what the real question is.... do you think you want to buy accounts that gross 7500 and have a cost to servcie of 7000? again, how many man hours went into it?

    you do have to stand back and realize that some, not all ways, but sometimes the old owner messed up his own prodcution, so if you think you can do it faster or cheaper, than you still might have a good deal

    i would figure that 20% of the customers will end up not using your service, so thats 7500 x 80% = 6000 gross

    no matter how good you make the transaction some customers will just choose to break the cycle and they know someone already.

    you also have to realize that people sell out for a reason, and that generally its either lack of money (profit) or the work is just so demanding they dont care to do it. the result those issues get passed on to the customer and the work suffers. so customers may drop right away, some will stick it out till the end of the year. the result is, you think you have 30 customers, but really 6 are unhappy and they have already made up their mind to switch reguardless of selling that company or not. I have already be awarded new customers for next year because the people are not happy now. i ask why not switch now, ..."im just gonna let them finish the season" - that then becomes your problem
     

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