Selling my Company

Discussion in 'Lawn Mowing' started by Scaper28, Jan 15, 2008.

  1. Scaper28

    Scaper28 LawnSite Member
    Posts: 14

    I read a thread about how much my customers are worth when selling a lawn care business, but I'm still not 100% convinced on what to charge. I have heard to silly rule of they are worth 3 mowings:dizzy:. That is fine if I'm just selling my customers. But a fully functional company that I've put everything into?! I've heard anywhere between 3 months of gross income up to a full season's gross income plus whatever equipment is worth. I plan to list it for the 3 months of gross plus equipment, but am I getting the true value? Any input would be great. Thanks.
     
  2. grass-scapes

    grass-scapes LawnSite Bronze Member
    Posts: 1,552

    I would think you would have a difficult time selling your clients if the new owner doesn't make any money at all the first full year. You could set up structured payments for the clients quarterly while retaining an interest in the company until full payment is received. You have plenty of options there.

    You will hear people say that the clients are under no obligation to stay with the new owner. Bull. If you are selling the company, and the custmoers signed with the company, then the new owner of the company shouldn't have any issues.
     
  3. ponyboy

    ponyboy LawnSite Bronze Member
    from ny
    Posts: 1,422

    you never get the true value any othe type of business that you buy you ususally expect not to make any money for the first two years so why should you give away a business that makes you x amount of dollars for a fraction of x?? if it a fully functional co w/o you ask a year gross plus equipment and take two years to get paid off plus intrest, you can always go lower. if you are desprate to sell its up to you but your life's work and pride has to be worth something. why are you selling
     
  4. brucec32

    brucec32 LawnSite Platinum Member
    Posts: 4,403

    Many factors involved here.

    It is worth at the lowest the value of the business assets. But it may be worth far more.

    One method of valuation is to say its worth the present value of the future flow of income from the business (excluding your value in salary deducted from profits). The discount rate to use in that calculation is all over the place, so it's a pretty wide span.

    So, for example, if you "net" $100K/year from this business, but an equivilent manager would cost $60,000 to hire, plus $10,000 in benefits and payroll stuff, then the cash flow is only $30K from the business. Using a discount rate of at least .20 (any less and they'd rather just invest it in the market and sleep late) that is something like $150,000. Then subtract out for the risk, the attrition of customers, etc. I personally wouldn't pay $150,000 to earn $30K

    You then have to deduct for intangibles, such as how much of the value is due to YOU as a manager and person your customers prefer dealing with. A good manager is hard to find, so that's probably considerable. So it may really only be worth the value of the equipment plus the value of the accounts.

    If you are selling the accounts, they're worth different things to different folks. If a guy can go find new residential customers for say $50 each, on average, they're worth something around that. If he has to spend $1,000/ea, then they're worth something around that.

    Some people will overpay for a business, because they need it as a "job". That doesn't mean that someone will overpay for yours. So anecdotal evidence of what someone else paid is not always valuable. I'm sure some here may know of rules of thumb for this specific business.

    There is much uncertainty when buying a business, so expect people to then discount accordingly for that uncertainty. The more you can do to convince them what they are buying is real, and will last, the more you will get.

    We're also entering a likely recession period. Anyone savvy will factor this into their offer as well.
     
  5. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    Different sized businesses are attractive to different buyers and this will have a great effect of how much you can get for it. Also how developed is your company? Is it truly a functioning moneymaking machine that can function without you? Or is it a job you own. A simple litmus test is if you left tonight and you came back in 3 months would your crew still be running and would you have money in the bank? That's a business that has value.
     
  6. jiggz

    jiggz LawnSite Senior Member
    from jerz
    Posts: 646

    cosign..

    I would also like to add..Make sure you really know what your doing when selling the company, think about it verry hard!! I dont know your situation ..But a real quick story for you,,My buddys company had about 400 customers with 1 crew 4 people including himself..When he sold it.the deal was something around 2 months of total sales (((dont go by that!!))) thats not my point... Anyhoo looking back, he really wishes he just had one of the crew guys run it for him..would have givin him alot of free money every week..his new bisness venture isnt going soo great....Make sure this isnt just a quick decision.. Good luck man
     
  7. Grits

    Grits LawnSite Silver Member
    from Florida
    Posts: 2,994

    A company is worth whatever someone is willing to pay.
     
  8. Jason

    Jason LawnSite Senior Member
    Posts: 256

    Where in Livingston Co. are you located?
     
  9. meets1

    meets1 LawnSite Gold Member
    Posts: 3,787

    Sell it. Remember, buyer and seller both have to agree that the price is right.
     
  10. Military Lawns

    Military Lawns LawnSite Senior Member
    from Florida
    Posts: 321

    This is the best way to sum of the value of any purchase!

    DJ-
     

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