Talked to owner about co.

Discussion in 'Business Operations' started by BZS MAN, Apr 1, 2004.

  1. BZS MAN

    BZS MAN LawnSite Member
    Posts: 13

    Well talked to the owner of the lawn care co. that is for sale. He is extremely nice and willing to help the new owner make the transition as painless as possible. First off the net of $80k wasn't correct, after looking at his records he only nets mid $40k which he brought to my attention. His shop is very tidy and clean. His employees seem very loyal and professional, and his equipment has been well maintained. There is a lot of equipment that goes with the business that he did not list. He has almost 3 backup parts for any part you can think of on the mowers. He has landed a few more accounts since the business has been listed and they sound nice. He has probably around $45k in equipment and a well established name in the community. He will stay on to help with questions, he and the employees will sign a no competition clause, and he will even help me get some accounts that had a 5 year contract that will be coming up for bid again next spring. What would you pay for a company like this?:confused:
     
  2. Mdirrigation

    Mdirrigation LawnSite Silver Member
    Posts: 2,774

    Well if he is only netting 40 K I wouldnt want to pay much.
    Seriously , he probably wants out because he can get a job with out the headaches and make 40 K . Sounds like way too much overhead in my opinion.
     
  3. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

  4. MacLawnCo

    MacLawnCo LawnSite Bronze Member
    Posts: 1,847

    Look, Net is what is left after all business expenses... including owners salary. If the business' books reflect this accurate accounting practice, then the owner could be bringing home some nice change since he would be getting salary plus 40k profit. If he is doing it any other way, then his books are skewed... no ifs, ands, or buts about it.

    Personally, i would be willing to pay him a small multiple of his net asuming his books were acurate.
     
  5. jajwrigh

    jajwrigh LawnSite Bronze Member
    Male, from Martinsville, IN
    Posts: 1,405

    net = gross - expenses
     
  6. Turf Medic

    Turf Medic LawnSite Bronze Member
    Posts: 1,073

    IMO if the equipment is in fact worth 45k, the 100k price tag would be an excellent deal. I'm probably going to get torched for this, established business don't seem to have any value on this forum. If he is running a sole proprieter, the 40k, might be all he is taking home including both profit and salary. However he may be paying some of his personal expenses out of the business ie truck, cell phone, travel expenses (vacation), health & life insurance, and taxes. I can't remember if your earlier post mentioned snow removal, if he doesn't do that, it would be something you could possibly add to increase the $$ to the bottom line. Or if you have no desire to do snow and he isn't currently doing it, 40k (especially if it is net) for 8 to 9 months a year in downtown Nebraska isn't anything to be ashamed of. Will he help with financing? I would make sure you have an accountant look over the books and YOUR lawyer write the contracts and non-compete.
     
  7. newleaflandscape

    newleaflandscape LawnSite Senior Member
    Posts: 348

    Non competes are meaningless. I have heard of so many guys that have went into those agreements and the contracts were not worth crap. Our state law says that a non compete can only last like two or three years. Which means this guy could shut down and open back up in two years even if you had a great contract. I myself signed a non compete for my past employer and when I quit I was able to void it in a matter of weeks. And he had a lawyer draw it up. Just saying if you are worried about it I wouldnt rely on a non compete.
     
  8. SodKing

    SodKing LawnSite Bronze Member
    Posts: 1,648

    There are tax advantages when buying a business if you minimize the assets cost and maximize the payment for a non-compete. Ask your accountant.
     
  9. Lawn-Scapes

    Lawn-Scapes LawnSite Silver Member
    Posts: 2,810

    Well... what's the scoop?
     
  10. BZS MAN

    BZS MAN LawnSite Member
    Posts: 13

    Agreed upon a price of $81,000. Since my last post he has landed a total of $25,000 to his net...yes that is net not gross.
    Bought some more equipment, $3,000 dollars worth of push mowers. We are now in the paper work stage going to start looking at financial records and payrolls. Everything looks awesome so far. Thanks everyone for your posts it helped me tremendously while writing up offers.
     

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