Thinking about buying a guy out/need some advice

Discussion in 'Lawn Mowing' started by JeffW0011, Mar 5, 2011.

  1. JeffW0011

    JeffW0011 LawnSite Member
    Posts: 178

    Hey Guys,

    I am thinking about buying a guy out. Aside from a few pieces of equipment I may buy on the side at market value the deal basically consists of his business identity (which I won't be using) his existing accounts, phone number, his domain name transferred to me, his good will, etc.

    We have met a few times and I like the guy....We had a few good talks and exchanged several e-mails. I have checked hs business out fairly in depth and from everything I can see he has a good reputation, on the surface his operation appears to be professional and well marketed, etc. His financials look alright...Of course everyone is going to have there own overhead and costs of doing business etc, I see some areas I could probably be a little more efficient than him but all and all it looks like a decent operation and based on information I have learned his customers seem to like him and he has a good name in the local community.

    We are kind of stalled out in negotiations...the main problem is he doesn't want to come off of his client list. Obviously, I need to see that to make a decision to move forward. I would be involving an investor to move this deal forward and I really need to show them client list as well.

    His contention is that: he has nothing to hide but he is not giving me a list of names, addresses and pricing and an in depth history regarding each account until the very last thing before a deal is ready to be signed. He has given me his total sales, an approximate breakdown what the % of services are toward total sales. Example 50% mowing, 20% lawn applications, etc. The basic areas/neighborhoods the customers are located.

    It's my first time buying a business and his first time selling one so I think we both are a little uncertain how best to proceed. And I mean I certainly see his point and I would be reluctant to hand him this information at this point if the situation was reversed. Bottomline is I don't think my investor will consider this further until he see's this client list and I don't think this guy is budging from his position either. He can't see any reason why my investor needs to know the specefic details about the client list until we are very close to a deal and thinks we should be able to decide to move forward based on the information he has provided. He insists that revealing that information is the very last step and that he will also require some earnest money that would be applied toward the sale to do so.

    What do you guys think? Can any of you who have bought and sold lawn care businesses offer any insight into the standard operating procedure in these types of negotiations?

    Thanks
     
  2. IndyEarthScapes

    IndyEarthScapes LawnSite Member
    Posts: 12

    Tell him you will sign a no compete clause. I have done this and is the way it should be. You should definitely be allowed to see it and talk to the customers with him before completing the deal. What if none of his customers will resign with a new guy? What if all his revenue was generated as a sub and he no longer has that contract? Both unlikely but you need to protect yourself. There is usually more than one reason someone is selling a profitable business.
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  3. JeffW0011

    JeffW0011 LawnSite Member
    Posts: 178

    I am already inbusiness and we are competing in the exact same market. I don't know how I can sign a non compete. I told him I was more than willing to sign some sort of "hands off" agreement and he kind of scoffed at that. His position is once I have this information what's to stop me from pursuing these customers at a lower price...he says he isn't very concerned about losing any of these while he is in business but if he sells to someone else he doesn't want the client base becoming some free for all.

    He has several reasons for selling that all seem very plausible.

    He has told me what % of the account were subcontract etc. I really don't get the feeling he is trying to screw me or anything...I think he is just hesitant to give me the list..

    In a typical transaction like this when would the client list normally be made available??
     
  4. bobw

    bobw LawnSite Senior Member
    Posts: 807

    See if he can print out a report from his accounting system that shows the revenue by client; then before he gives you the print out, he tears the column of client information off the report. That way, you see the details you want and he is not giving you the details he is trying to protect.
     
  5. kilgoja

    kilgoja LawnSite Senior Member
    Posts: 944

    if it were me i would talk to every customer he has and make sure everyone of them were gonna use you after you get the business from him...if not then i wouldn't buy it...take him with you and both of you talk to the customers...why pay for them and then half of them run off and use someone else?...and if any of them aren't gonna keep you then deduct the price you are paying for the business accordingly...i would never buy a business without first talking to every customer i was buying and knowing if they were gonna want to use me for their lawncare...otherwise you will get screwed over big time...it's been said on lawnsite a bunch of times...people buy accounts and then half or more of them end up not using them for service
     
    Last edited: Mar 5, 2011
  6. Roger

    Roger LawnSite Fanatic
    Posts: 5,916

    What structure do you have for the buyout? Is the equipment and facilities peeled off as a separate part of the business, with its own price tag? And, are the client list, client information separated out? Or, is everything rolled into one package?

    What part of the business is most important to you, the equipment, or the client list?
     
  7. torotorotoro

    torotorotoro LawnSite Senior Member
    Posts: 510

    here is some advise from somone who has sold and bought back.the last thing you will see is the client list. when i sold i first tried to sell to a friend.and stupid me i gave him the entire customer list. surprise a week later he was no longer interested but i caught him mowing two of my lawns.i managed to sell to someone else for .62 cents on the dollar but this guy almost blew it for me. what you need now is to see the numbers. you will verify the customers right before you close the deal.as far as meeting all the customers now that is a stupid idea.if you buy and take over his accounts do a good job and they will keep you suck and they wont. one peice of advise dont tell yourself you will do a better job managing and make more $ then he did. plan on worse case and price your buy offer accordingly. and have a contract that protects you. mabey one third of the purchase price in a escrow account untill all he has told you pans out.get a good lawyer they are worth there weight in gold.if the price is right dont be afraid to go for it. let me know how it goes.
     
  8. Buddy Buds

    Buddy Buds LawnSite Member
    Posts: 146

    If you buy him out he would need to sign the no compete contract for at least 5 years.
     
  9. kilgoja

    kilgoja LawnSite Senior Member
    Posts: 944

    it's not a dumb idea to talk with the customers beforehand...some may know the guy that is selling or be friends of his family or whatever so that is the only reason they were using him...the person buying on the other hand is not their friend and doesn't know them personally so they may not use him...not saying all of them wouldn't but i would check first to be sure and to make sure things were gonna go smoothly
     
  10. gene gls

    gene gls LawnSite Gold Member
    Posts: 3,206

    I don't blame the business owner for being skiddish about his customer locations. I spent 5 years trying to sell my business. There are a lot of wacky folks out there. I was hopeing my main man would take it over but he finially decided he wasn't interested. I ended up down sizing 2 times before I finially sold. First time I sold 25 of my best accounts , 50,000.00 gross yearly,to one of the guys that hemmed and hawed about buying me out for 3 years. He had a comerical account directly behind my best commerical account. I ended up selling for the price of 2 mowings. At the same time I gave 15 low end accounts to a friend that was in the area in exchange for doing my mothers property for one season. I ended up getting the shaft from my "friend", he never showed up, even once. Second time down sizing, I just gave 12 accounts to another friend that was in the area of the accounts. When I finially sold the landscaping business I put a price on my equipment that he wanted and asked for one mowing from the customers that went with him for the season. I showed him around all the properties 3 times before he decided to buy. I also gave him a print out of my contract and a 2 year history report for each of the customers. He ended up looseing 2 accounts the first month for doing crappy work. In the end, he is a typical BS'er. I expect him to loose half of the accounts due to shoddy work.
     

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