Worth the Headache??? HELP!!!

Discussion in 'Pesticide & Herbicide Application' started by bj351, May 27, 2008.

  1. bj351

    bj351 LawnSite Member
    Posts: 68

    Im looking into buying out a local spraying company just dont know if it is worth it or not. Company is has been established for 10+ years. Currently has around 60 accounts, ranging from 2 to 6 treatments a year. Currently turning down work and has a good possibility for growth. Gross income last year was down about 500 dollars to right aroung 17,000. Asking 7000.00 for the accounts, and spraying equipment on an 85 dodge flat bed truck. Any help would be appreciated.
     
  2. tlg

    tlg LawnSite Senior Member
    Posts: 645

    Not to be critical but, a ten year old company with 60 accounts that's turning down work and doing 17k gross is a nightmare in progress. Red flags jump all over for me on this company. What have they been doing for the last 10 years???? Why are they turning down work? Why can't they or he do more work? Is there more work available? There are lots of questions that need to be answered here you really need to check this operation out well. Oh yea, why is the possibility for growth good now? If past growth is the indicator turn around and never look back! I would think the spray rig is in good shape from lack of use! Just kidding. A 10 year old spray rig is a 10 year old rig. If it was maintained well it has value. If not it's gonna cost you to repair it. A 23 year old Dodge flat bed ????? Unless this truck came from a museum 10 years ago I would say it's worth about 400 bucks at the scrapyard. Give a little more info on this deal. Ask some questions? I would really like to hear the parameter's of this company. So far , I'm passing on this one.
     
  3. RigglePLC

    RigglePLC LawnSite Fanatic
    Posts: 11,785

    Do you mean he is selling for 41 percent of annual sales? Well worth it. You pay him and next year you make $17,000, less a few expenses. Pay back your loan from the proceeds. You have paid for your investment. And all the following years--the profits flow to you. And he is throwing in a spray truck--sweet! You could buy a truck for $20,000, of course.

    How are you going to finance the purchase? Will he take payments of say $1000 a month for 8 months? Take a careful look at his books and all the information you can get. Does he pay his suppliers on time? Do his customers feel satisfied? What is cancelation rate? What is customer turnover rate? Will he help you get a smooth transition? Are the lawns measured correctly? Tight route or spread out? Does the company depend mainly on his personality and friendly relationship with the customers? Can you yourself satisfy his former customers? Offer them some kind of incentive to stay with you as you begin next year.
     
  4. Ric

    Ric LawnSite Fanatic
    Posts: 11,946

    $17,000 divided by 60 accounts = $283.33 per year per account average. assuming 6 treatments on all accounts that $ 283.33 divided by 6 = $ 47.22 per application. So now the question is what does a round cost you and what size properties are you going to be treating.

    We really can't give you an answer until all the facts are in. Another consideration is the Market. Is there room for expansion?? Are these accounts in prime neighborhoods? Factor in a 10% account loss when running your numbers because that is a very standard loss when buying accounts.

    Now I know some people jump at what looks good and do OK. But by running all the numbers you can make a much wiser business decision. Yes I have purchased Accounts who's numbers weren't perfect, But I was also buying a chance to increase my business in the right neighborhood. At the time I was full service and up sold many of those accounts to full service. So there are many factors to look at.

    BTW I only do Fert & Squirt today. But I network with others selling their service so I can close on a customer offering a full service package. When customer are unhappy with there present yard, they like to change out all service providers. Networking with good service providers helps my business grow.
     
  5. Frank Fescue

    Frank Fescue LawnSite Senior Member
    Posts: 705

    drive around and look at these lawns, see what shape they are in. ask for his record and see how long these people have been customers, and make sure these arent just "names" hes giving you, or people who have had one treatment. a good way for a guy to sell what he calls a business and make it look like its worth more than it is is to sign up a bunch of new accounts "FREE APP" and pass along these people as customers to you. ask why he's selling, make sure its valid reason and not because hes about to be busted for illegal apps or whatever.

    i'd take the spray equipment and 85 dodge flatbed as a loss. if the guy is using a 23 year old truck he either never uses it, or he doesn't put much time or effort into his company.

    sounds like a crafty guy whos probably trying to screw you.
     
  6. Grandview

    Grandview LawnSite Gold Member
    from WI
    Posts: 3,251

    I would check the lawns also and what he is charging. He might be charging to little. If you raise your rates too much you will loose most of the account. 17,000.00 is two weeks work.
     
  7. mow2nd

    mow2nd LawnSite Senior Member
    Posts: 603

    10 years and only 60 accounts? I sold my mowing business last spring and started a pesticide business and went from 0 to 140+ accounts in 1 year. Which is actually behind schedule, I had hoped for 200 by now, but the drought killed me last fall.

    Man I would never buy somebody's business. I laughed all the way to the bank when I sold my mowing business............From what I've heard that guy has lost almost half the yards he got from me. Mainly because he sucks, but nothing is guaranteed.
     
  8. Ric

    Ric LawnSite Fanatic
    Posts: 11,946

    BJ

    While this deal doesn't look perfect by any means. Some times you are purchasing OPPERTUNITY. Look at the total picture, is there room for expansion and are these accounts in the right market.

    Quick story: I purchased 25 year round mowing accounts paying $50 a month in Sept. I mowed them once a month over the winter and raised their price just before rainy season. They dropped like flies but I made good money for very little work. I ended up keeping about 5 good accounts that were up sold to full service.
     
  9. bj351

    bj351 LawnSite Member
    Posts: 68

    thanks for the help guys. still tossing it around. its actually a woman that owns this spraying business and ive known her for several years. shes a little older and it just satisfied with the accounts she had. been doing the same ones for years. sounds cheap enough but i dont figure the truck for being worth much. i believe there is room for expansion because i think people would rather deal with a smaller company vs. a chemlawn or lawn doctor. just dont know if i wouldnt be better to spend 1000-2000 dollars on a couple tanks and a sprayer and start that way. solicit my service to current mowing customers. no guarantee either way but there wouldnt be such a risk just buying my own equipment.
     

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