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Buying an Established Business?

NEWINNJ

LawnSite Member
Location
RANDOLPH, NJ
I have been approached by a guy selling his side busniess which consists of 90+ accounts and various equipment. I have no idea what he is asking but I do know that he MUST sell the business due to a a regular career change. He has called me and wants to set up a meeting. What should I be asking and how do I begin to figure out how much his accounts are worth? The equipment I can probably figure out. Any help appreciated. More info to follow as I get it. Thanks
 

65hoss

LawnSite Fanatic
Location
Memphis, TN
Based on taxes, I might sell you mine. uggh.


That is a tough question to answer is the reason you haven't got answers yet. Also, most people are working at this point during the day and will not be around until tonight.

Don't just take his word, see his tax returns. Check out the real revenue. You want a non compete clause and TLC between him and the current customers. I've got to run, but others can help more later today.
 

wojo23323

LawnSite Senior Member
Location
Chesapeake, VA
20%-30% of gross revenue. Like Hoss said, get to know all customers before purchase. Try to arrange a payment plan, that way if any customers are lost for any reason you can adjust the price.
 

justmjc

LawnSite Senior Member
Location
michigan
20-25% of the annual income shown on the books. I met with a guy that claimed he had 85K in income, but could only verify 60K. I didn't buy it, but some poor schmuck did. Remember, you are purchasing a perferred customer list, not guaranteed customers. There is nothing holding these customers from switching.

So, set it up like this. 20-25% of EACH account that you land. 1,000 down, or something low risk, with payments each month for X years. Explain to him that neither him nor you can guarantee customer retention because of lack of iron clad contracts. He's selling a perferred customer list, that's all. To put anymore down than stated about is just crazy. Being that the business has 90 accounts, I would venture to say that it is not self run. It may be established, but not self sufficient without you being present to operate it. Get a non compete clause for 5 years or longer. Good luck, I'm sure others can add as well to my opinion.

PS. About the guy that was selling the business I looked at buying, he sent me a message stating that he'd get a ceace and desist order against me. He gave me all the account information, the pricing, the estimated time to do the work, all the information i need to verify whether this was a good purchase. But he sold the accounts, and I sent my advertisment to them, offering them an option to look at my service. I signed up 1 so far. Anyways, I explained to him that he's selling a preferred customer list, without contracts. I'm breaking no laws advertising to his former clients. His contract is with the guy that purchased his business, not with me. He made himself fair game as soon as he offered this information in attempts to sell this business.
 

2Sam2233

LawnSite Member
Location
HEART OF DIXIE
I purchased an exisiting business a couple of years ago. This will be my 3rd year full time. The approach I took was I sat down with the guy to determine price for each account and the number of times cut per year. Then I calculated an annual gross. I paid about 30% for the biz including equipment. Before we made the transaction I went with the guy to all the clients and met them to let them know what the plan was and to make sure they would stick with me (as long as quality was good). I only had one or two that decided to let relatives do the job. I have never regretted the decision. It was the best way to get into the biz in a full time capacity and be able to support the family.

I hope this helps.

Mike
 

rodfather

LawnSite Fanatic
Location
Clinton, NJ
Originally posted by 65hoss
Based on taxes, I might sell you mine. uggh.
I hear ya Eric...I feel like I'm up the proverbial creek without sufficient means of locomotion...lol
 
OP
N

NEWINNJ

LawnSite Member
Location
RANDOLPH, NJ
First of all thanks for all the great info. Here's more info I got from the guy today. Will be meeting with him Friday. Business is comprised of 90 full maintenance accounts (cutting. trimming, some fertilizer, and pruning of bushes). He wants 18,500 for the accounts and 50,000 for equipment(see list below). Account value was based on 8 weeks gross which seems ok to me but equipment seems high.

2001 F450 Dump truck with 19,000 miles
2002 US cargo 8x16 enclosed trailer
99 walker 42" deck 1350 hours
2002 scag 48" WB Belt hopurs unknown
21" Bobcat
Leaf Vac and Loader
Plus various trimmers, edgers, blowers,etc

Please let me know what you think
 
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