should I buy this business for $60,000

Discussion in 'Business Operations' started by danillac, Feb 6, 2013.

  1. danillac

    danillac LawnSite Member
    Posts: 10

    Equipment total is $37,000.
    2003 60" ex mark rider
    2004 60" ex mark rider
    2010 60" ex mark rider
    2004 44" toro walk behind
    Small toro push mower
    2 echo weed whips almost new
    2 echo backpack blowers almost new
    200 gallon lesco liquid sprayer with 200' hose
    20' open lawn trailer with gas tank holders, blower holders and weed whip holders
    2003 f350 crew cab 130'000 miles, great truck.
    boss v-plow
    All of his lawn care accounts (24) that totalled a little over $100,000 last year. All are in a pretty close radius. 5 or 6 businesses, 5 or 6 townhomes and apartments, and 12 residential. He had one main employee that makes $17/hr, $25,000 total last year. another I would replacef with myself.
    How often do prior accounts that signed contracts with old owner re-sign with new owner? I look at that as the main variable that makes this worth it or not. He would keep the "Lawn" in his "Lawn and Landscape" name and pass all Lawncare stuff to me. He wants the Landscape business and masonry. I should Probably offer him $50,000 max is what I am thinking?
    Any other experience with buying pre existing businesses out there?
    He says he is selling to concentrate on landscaping and masonry and would tell accounts that employees are taking over so service would be the same as it always has been.
    Thoughts? I am in Minnesota so we mow May-October. contracts are for April - November, with some plow accounts
     
  2. ETPRO

    ETPRO LawnSite Senior Member
    Posts: 311

    Sounds like a pretty good deal to me. Haven't personally purchased an existing business, but have been contacted in regards to purchasing an existing business. Tip: Spend $300 get an attorney to draw up some paperwork stating the seller must abide by a 5 year non-competition clause. It would suck for him to open back up into lawn care next year and siphon your customers away from you.

    As far as the customers, I would first make sure he has the jobs priced right, to see if they are worth keeping. (Which off of your gross numbers sounds like they probably are.) And then make sure the accounts are secure. If you are purchasing "accounts" they better be on paper and contractually held. If it is a verbal agreement, I don't see that there is anything to purchase. GET IT IN WRITING. Again, when it comes to accounts, there is nothing to buy if it is not in writing. Protects you and them.
     
  3. ETPRO

    ETPRO LawnSite Senior Member
    Posts: 311

    I also might add, there is probably quite a bit more that an attorney would advise to go into such paperwork.
     
  4. roeslandscaping

    roeslandscaping LawnSite Member
    Posts: 181

    They way i look at, from my mistakes in the past, is to buy the equipment. Dont pay for the accounts right away. Because you arent promised the lawns. If you get the lawns he offers, i would pay him a certain percent for the first month. I Just recently bought a snow removal business, and i paid for the equipment and nothing else. I told him that if i get the accounts, he can have 25% of what I make from those accounts the first year.
     
  5. ETPRO

    ETPRO LawnSite Senior Member
    Posts: 311

    That sounds like the way to go. Don't know if I could part with 25%. Hope that is just returning accounts. Still make sure he has a non comp clause if you are going to give him a commission of what you did, you don't want him double dipping.
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  6. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,281

    Id offer him 37000$, and go from there. Id bet he would take 47000$
     
  7. djagusch

    djagusch LawnSite Platinum Member
    from MN
    Posts: 4,171

    In mn and I saw his add before. I'm north metro so don't worry about me wanting it.

    Equipment value, I'm guessing a lot is in the truck and plow. Do you run a biz already? Do you need the equipment? Seems like a lot of equipment compared to gross sales. If you already have the equipment value it at quick sale price this spring or for the Fahey auction. Trucks in mn are pretty overpriced so be careful on the value of that.

    After you value the equipment correctly I would consider that the up front money.

    Now look at his net and gross. Is he charging sales tax? If not take that off the gross sales total. Offer a % or gross sales monthly until you pay xyz amount. The % is what you think you can pay and still run the biz properly. Xyz amount is the amount you agree to pay for the accounts, "blue sky" etc. Have it set up so xyz is paid in 2 to 3 yrs also.

    So in his numbers pay $37k for the equipment. Then $23k over the next 3 yrs. The $23k would be paid on a schedule of 8% of gross sales would work.

    Now you would need to make sure the numbers work, make sure values are correct. But it would be a safer risk for you and he would be motovated to make it work.
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  8. zimmatic

    zimmatic LawnSite Senior Member
    Posts: 409

    djagusch is correct,

    I offered him 15% of gross first year and 8% second year and he declined for the accounts only. I ddint need the equipment.

    One other Item I would put in is-- any extra work you sell above and beyond than the previous services would not be inculded in the payment calculations. I.E. prior owner mowed grass, you bought company and now mow grass and start sprinkler system. Sprinkler system income would be yours and not part of payment calcualtions on gross reveune for payment schedule.

    Good Luck
     
  9. danillac

    danillac LawnSite Member
    Posts: 10

    I was told by somebody else not on this site that a lawn care company in MN is worth equipment plus 1 months worth of accounts. (makes this deal worth $37,000 plus $12,000) You think this is close to true? He said this guy is charging too much but not really. Saying I could make a lot of money, threw out a number of $60,000/yr. probably high.

    THoughts?
     
  10. danillac

    danillac LawnSite Member
    Posts: 10

    Oh yeah. There is a no-compete for three years.
     

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