What's the business worth. 500k revenue

Discussion in 'Business Operations' started by Riverstonelc, Jan 4, 2013.

  1. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    My whole life I never heard 7 years.

    It has always been 2 to 3 years. And the 3 years was reserved for a special to die for to good to be true must have business.
     
  2. EagleLandscape

    EagleLandscape LawnSite Platinum Member
    Male, from Garland, Texas
    Posts: 4,347

    Who in the world is dumb enough to make an investment right now that has a 7 year return?

    That's ridiculous, and even more ridiculous in this economy.

    If you are taking a little north of 100k home each year, go ahead and deduct 50k-80k for salary and normal living expenses. So let's just say the company's true profit is around 40k then /yr. Business valuation is going to be around 80k-120k, including equipment.

    No one with more than 100k to spend, or the financial stability to get a loan for said amount, is going to pay any more than that for a company, aaaaaaannnnddd.... they would be wise to ask you (the seller) for a 50% seller finance carry for 3 years approx.

    Your maintenance accounts are under 12 month contract I assume, so there is the possibility the customers won't like the new owner and not renew once the current contract expires. And because of the small size of the company, I assume you are driving all of the landscape/hardscape installs. if you are driving all of the landscape and hardscape installs, I would actually deduct that amount of annual sales from the revenue number and revisit the formula above.

    Here is the problem. Your company does not run on it's own, due to its medium size. You are the driving force behind it, and that's what brings the value to the company. once you leave/sell, the company's ability to produce the same sales is greatly diminished. Unless the new owner can sell more, but then you arent entitled to his greater ability of sales, and should not realize an increased value for something that others created.

    take my comments for what they are worth. I've purchased 4 companies, and looked at about 100. Possibly the value could be 1 years net profit after officers salary is accounted for, and the fire-sale value of the assets. Hope this helps.
     
  3. knox gsl

    knox gsl LawnSite Platinum Member
    Posts: 4,924

    Riverstone PM sent
     
  4. wbw

    wbw LawnSite Fanatic
    Posts: 5,456

    Good point. I sell my customers for between $1350 and $1500 each. If I were to buy customers I would never pay more than $500 for them and then the seller would have to carry some of the financing.
     
  5. Efficiency

    Efficiency LawnSite Bronze Member
    from zone 6
    Posts: 1,544

    Id buy at 2-3 x NET and would sell 3-4 x EBITDA
    Posted via Mobile Device
     
  6. grassmasterswilson

    grassmasterswilson LawnSite Platinum Member
    from nc
    Posts: 4,537

    Was told mowing accounts around $0.30 per gross dollar and applications at $1.00-1.25 per gross dollar. Would not know how to price landscaping since jobs may not be reoccurring income.
     

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