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Business Purchase - Opinion

threemt

LawnSite Member
Location
Detroit, MI
Hello all. I am in Afghanistan with the Navy. I will be returning to Michigan in May and need work. I was on Craigslist and found someone selling a Turnkey lawn maintenance and snow removal company. I was wondering if some of you business owners could look over the current negotiations and tell me what you think.
Here is what is included:
1. 2006 Ford F-250 4x4 (40,000 miles)
2. 2006 Well Cargo 20’ Enclosed Trailer
3. 2006 Warren V-Box Spreader
4. 2006 Boss 8' Blade Snow Plow
5. 60” 2005 Lesco Z-Turn Riding Lawn Mower (new engine 2008)
6. 2008 - 48” eXmark Metro Walk-Behind Lawn Mower
7. 2008 - 36” eXmark Metro Walk-Behind Lawn Mower
8. RedMax BCZ2600SU Weed Whip
9. RedMax EB7001RH Back Pack Blower
10. Stihl Weed Whip
11. Stihl Stick Edger
12. Miscellaneous Tools (i.e. shovels, rakes, axes, wrenches, hand tools, etc..) that may or may not be part of the Asset Purchase Agreement
13. Customer accounts - about 70. Avg weekly GROSS is $1600

We cut grass in MI from April through October. The Snow plow business has 5 commercial accounts. This is where I think the most expansion could happen.
Here is the deal:
Total purchase price of $45,000
$22,500 cash
$22,500 owner financed at 8% for 5 years.

The company has a professional logo, established client based ( I verified all clients are 3+ yrs) and room for expansion. There are also two other Lesco walk behinds that need work. My plan is to have them repaired and run two crews. I will be one crew until the company gets to the point where it is profitable enough without me running a route.

Any and all opinions are appreciated@!!
Mike in Michigan
 

DoetschOutdoor

LawnSite Bronze Member
Location
S. IL
It sounds like okay of a deal but why are they getting out with all that newer equipment and why are 70 accounts only grossing $1700 a week....? Thats barely over $20 a yard. Do you have a truck or any equipment that you could use and not have to buy from him? Accounts under strong written contracts? How much experience do you have in maintaining 70 accounts?
 
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threemt

LawnSite Member
Location
Detroit, MI
Thank you for the response. Here is what I know:
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[I][B]why are they getting out[/B][/I]
Full time Ford Engineer, owns a restaurant and 33 rentals. He wants to simplify. He also had a partner that ran this side of the business...poorly. He cut him lose and tried himself for 2 years.
HTML:
[B]70 accounts only grossing $1700 a week[/B]
That is avg. It has full weeks and skip weeks. I also believe that is low and also a source of raising more revenue. Michigan economy is bad, but there is room for price increases (with continued excellent service).
HTML:
[B][I]Do you have a truck or any equipment that you could use and not have to buy from him?[/I][/B]
No. I need the equipment. Based on the numbers, it seems like a fair price.
HTML:
[B][I]Accounts under strong written contracts?[/I][/B]
No. This is something I will institute for Commercial accounts. The residential accounts are 3+ years old. Some 10 years.
HTML:
[B][I]How much experience do you have in maintaining 70 accounts[/I][/B]
None, but I have run two businesses. I know the businesses are different, but I have 23 years of military leadership, corporate experience and 5 years as an entrepreneur. There will be a learning curve, no doubt, but I think I can handle it. I will be an owner/operator for the first year minimum.
 

TexasFire221

LawnSite Senior Member
Location
Texas
If you have done your research and feel it is a fair price then its your call. I bought my business in Jan. of 2008 off craigslist. Only equipment and accounts though. You can count on 50% of the accounts gone once the business goes to you if not under a contract, however this is a great place to start. When I bought my business I paid $4,200.00 and was grossing very little at about $2,000/month with a handfull of accounts and a full time firefighting career. In 2009 I was grossing between $5000.00-$14,000/month with $500 worth of advertizing a year and an added Holiday Lighting Business. I think its a great way to get started and get you going without having to start from scratch. Go for it guy.
 

lawnlandscape

LawnSite Senior Member
Location
Midwest
Based on just looking at the equipment, the asking price, and the fact that its on craigslist makes this look like its completely BS. Just the equipment is worth more then the asking price. I would buy everything, sell it, make a bundle.

That is not even counting the customers u would be getting right off the bat.

I think Texas was lucky to find an honest seller on CL. If you are seriously interested, don't by it without checking it out more. That's what this seller is hoping someone does. Take the money and run. That's why he has such a low price, he wants someone to bite fast. :nono:
 

DoetschOutdoor

LawnSite Bronze Member
Location
S. IL
I thought the same think lawnlandscape...thats why I was wondering why he was getting out with a strong number of accounts and all fairly new equipment. The equipment alone is worth alot of the asking price. It sounds like THREEMT has good knowledge though so he needs to check it out thoroughly and let us know what happens.
 

lawnlandscape

LawnSite Senior Member
Location
Midwest
I thought the same think lawnlandscape...thats why I was wondering why he was getting out with a strong number of accounts and all fairly new equipment. The equipment alone is worth alot of the asking price. It sounds like THREEMT has good knowledge though so he needs to check it out thoroughly and let us know what happens.
If it is on the up-and-up (and I would be surprised if it is) maybe hes trying to get our of it, because hes not making any money charging $20 per lawn.

He is probably charging $1 per 1,000 for grass cutting, and he needs to sell it before the bank takes his house :) :hammerhead:
 
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threemt

LawnSite Member
Location
Detroit, MI
Thank you guys. And it is definitely caveat emptor, let the buyer beware. I have been talking with the seller for the better part of a month, my Uncle has seen all of the equipment, started it and inspected for damage and I have seen all of the financial.
The reasons for selling are that he started this business with a partner in 2006. They obtained most of the accounts by buying two other routes. He then proceeded to by all of the equipment in his own name. He works full time for Ford and runs a restaurant. He also manages an apartment and 33 rental homes. His partner was supposed to run this buisiness. His partner turned out to be fiscally irresponsible so they parted ways last March. He took the business over, cleaned up the books, cut out the non-profitable sections and now he wants to sell. He just has no time to RUN the business anymore. His business are running him and he wants to spend more time with his family.

I am not saying he is not pulling the wool over my eyes, but part of the contract is to allow me to store extra equipment in his warehouse. It would be real hard to look me in the eye every day if he screwed me. I guess that is the way I look at it.
Like I said, Caveat Emptor. But, Thank you. I verified my suspicions that 'on paper' this is a real good deal. I like the fact that he under charges some. That means there is room to increase revenue without adding accounts.

Gratefully,
Michigan Mike
 

lawnlandscape

LawnSite Senior Member
Location
Midwest
Thank you guys. And it is definitely caveat emptor, let the buyer beware. I have been talking with the seller for the better part of a month, my Uncle has seen all of the equipment, started it and inspected for damage and I have seen all of the financial.
The reasons for selling are that he started this business with a partner in 2006. They obtained most of the accounts by buying two other routes. He then proceeded to by all of the equipment in his own name. He works full time for Ford and runs a restaurant. He also manages an apartment and 33 rental homes. His partner was supposed to run this buisiness. His partner turned out to be fiscally irresponsible so they parted ways last March. He took the business over, cleaned up the books, cut out the non-profitable sections and now he wants to sell. He just has no time to RUN the business anymore. His business are running him and he wants to spend more time with his family.

I am not saying he is not pulling the wool over my eyes, but part of the contract is to allow me to store extra equipment in his warehouse. It would be real hard to look me in the eye every day if he screwed me. I guess that is the way I look at it.
Like I said, Caveat Emptor. But, Thank you. I verified my suspicions that 'on paper' this is a real good deal. I like the fact that he under charges some. That means there is room to increase revenue without adding accounts.

Gratefully,
Michigan Mike


WoW sounds like a very busy guy. And let this sorry be a little lesson for those who are thinking about starting a business with a partner. No matter how your relationship is with that person now, its almost never a good idea to start a business with a partner. We all know a story or 2 about one that worked out great, but they are the minority.

If you did all your homework, its its on the up-n-up, it sounds like a steal to me.
 
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threemt

LawnSite Member
Location
Detroit, MI
Thanks for all the help. I bought the company. I am now the proud owner and I am still in Afghanistan! Yikes. I have two cousins (2nd) that I am going to ask start the routes for me until I get back. One is in college and the other leaves for the Navy in June. Question for you guys is, what do you pay this type of help? I will 1099 both of them. I tried to search, but the internet here is SOOOO SLOW.

Again, thanks for the help. This site has been a windfall of information.
 
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