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Aquisition of a new business

Discussion in 'Business Operations' started by guntruck, Sep 13, 2001.

  1. guntruck

    guntruck LawnSite Senior Member
    Messages: 527

    Gentleman, i would like some advice and views on my opportunity. A friend (lawnsite member) Is selling his business and i am a bit interested only if it can greatly benefit me and only if there is some certainty with the accounts. The business is a "real" business, registered, insured, and legit. Being sold is 28 accounts 12 of which are only bi-weekly, the other 19 look to be weekly(28 cuts). The gross is approx. $19,000 for the season, and NONE of the accounts are on a contract or anything of the sort. The owner states he can see if they will sign but this late in the season im doubtful. The $20,000 is based on cutting only no mulch hedge trimming etc. Now originally the price of 10-12k was thrown out by the owner just for the accounts, personally i was shocked!! It seemed enormously out of touch for 28 non-contracted accounts with no gurantee. I was thinking if i were to persue this endeavor, to offer him the money i would pay for the equipment now, offer a small amount now for the accounts so i could finish up the season with the new accounts and have it in writing drawn by my lawyer stating the remainder of what i would pay would be paid to him in June 1st of 2002 ............IF.............ALL the accounts renewed for that season. If only half renewed he would only get half the original amount, if none renew he gets nothing. OR i was maybe contemplating paying him a monthly fee for the accountns for a specific amount of time for the accounts and if any were dropped for any reason then his percentage would also drop so i would not be losing. I know this fella and like him, but make no mistake, business is business and im not gonna lose. Fortunately im not pressed at all and i dont NEED these it is just a nice expansion of my company and im already working in the area. If anyone can give some advice or more importantly what you might be willing to pay for JUST the accounts i would greatly appreciate it. This is our first year and i think we have done extremely well, we are ready for more work and this is a good opportunity. Thank You!!! Everyone
  2. gusbuster

    gusbuster LawnSite Bronze Member
    Messages: 1,931

    Friends and business don't mix.

    As what to offer, offer what you feel is right based on what you know of the accounts.

    I can't put you down the right path since we cut all year. Routes are sold differntly here.

    Good luck though.
  3. bruces

    bruces LawnSite Senior Member
    Messages: 648

    If you can agree on a price for the accounts and equipment I would offer him the following:

    Pay for the equipment now.

    Pay for the accounts based on a percentage of revenues from the accounts for the balance of this season and part of this season up to the total amount to be paid for the accounts.

    If the accounts drop you for any reason, or don't renew for next year, you stop paying for those accounts. This will give him more incentive to help you keep the accounts.

    For example, if you agree on 3 weeks fees for the accounts, pay him 10 or 15% of the revenue collected on the accounts each month until each account is paid for. If the account drops you, you stop paying for that account.

    This will keep you from paying for business you don't retain
    If you retain the business, the seller gets his money.

    This way you won't pay for "blue sky".
  4. thelawnguy

    thelawnguy LawnSite Silver Member
    Messages: 2,411

    In my market that biz would be worth the equipment value only with the customers thrown in as an enticement for quick sale.

    IMO the bi-weekly accounts are a detriment maybe he should pay you to take them off his hands.
  5. syzer

    syzer LawnSite Bronze Member
    Messages: 1,272

  6. syzer

    syzer LawnSite Bronze Member
    Messages: 1,272

    Im too lazy to fix the messed up forumla but its supposed to be 40 a cut for the missing value and total is 18,000.00.
  7. LoneStarLawn

    LoneStarLawn LawnSite Bronze Member
    Messages: 1,415

    I'm not really an expert on this, but I would think the revenue of 1/2 month to 2 months would be accurate. I know that is a big difference between the min. and max., but I think other variables play a factor like location, etc. so you would need to determine that within that range.

    I would pay on a payment plan since they are not contracted.

    1st month--- pay 20% of <b>total agreed upon</b> .

    2nd month--- subtract the percentage that has not stayed from the total agreed upon</b> and then pay 30% of that amount.

    3rd month--- do the same with the second month but pay the remaining 50%.

    I hope that makes since.
  8. I'm with thelawnguy on this one.

    With season comming to an end, even giving him 2 cuts worth to him for the customers is too much.

  9. syzer

    syzer LawnSite Bronze Member
    Messages: 1,272

    Anyone else have any opinions?
  10. gogetter

    gogetter Banned
    Messages: 3,256

    I only started this season and I'm only part time, so take my opinion for what it's worth (not much!).
    But I do read LS.com religiously, and some other sites occasionally.

    I have heard mentioned before that selling a lawn business for HALF of it's total earnings in a year is not uncommon. That would put you at $9,000 for this business.
    However, seeing as these are not contracted accounts, and nearly half of the accounts are bi-weekly which is trouble in itself, seems to me that the business should be worth a good bit less then half of the yearly earnings.
    I myself probably wouldn't pay more then $3 or $4 thousand tops for the accounts, and then whatever the equipment is worth based on visually inspecting it.

    Keep in mind that those bi-weeklys are going to either have to be double cut (at least), or bagged in order to make those clippings dissapear. And if you try to sell the customers on weekly service, they may drop you. Just something to consider.

    Good luck and keep up posted.


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