Buying business

Discussion in 'Lawn Mowing' started by clc2003, Oct 10, 2006.

  1. clc2003

    clc2003 LawnSite Senior Member
    from Ia
    Messages: 284

    I was approached by a fellow competitor who I know personally to see if I would be interested in buying him out. His Father is in the garbage business and so is he. Now he bought out another garbage company and no longer has time to do both. One of the problems is that he doesn't want to sell any equipment, just his client list. He said he would sign a no compete clause, but I don't know if I will be able to keep clients on list for next season and that bothers me alot since there is only 2-3 weeks left in the season. I won't get a real chance to prove my work this year and I sure don't want to sign on dotted line and come next spring not have any customers and still owe for business. I offered him a pro rated system stating that if next spring any customers deciding not to go with me the value of the business would drop and so would the purchase price. He did not go for that and he said that he would take me around to introduce me to clients but there is no guarantee of returning for next season. I told him then that the customers would need to sign a contract for next season and he wasn't too sure about that either. He told me that the only benefit for them would be to lock into a price that would cover them in case of gas prices spiking again. My problem with that is if gas gets out of hand I would need to have the ability to charge a fuel surcharge. Sorry so long but I am not sure what to do. I am interested in trying to expand my business and this is a great way since my market is overcrowded with contractors and not enough work. I need to get bigger or else I am gonna have to get a part time job. I just don't want to make a mistake and screw myself. PLEASE HELP!!

    P.S. Sorry so long
  2. huh

    huh LawnSite Senior Member
    from Lubbock
    Messages: 251

    the very FIRST thing I would ask myself is how long have he and his father owned the second "waste disposal" company that they bought

    if they bought it months ago and he continued to work until the "season" is over then I would be VERY nervous...he knows EXACTLY what the business is like just as you do....yet he will not work a deal based on how many clients stay with you :confused: when selling so soon before the season if he will sign a no compete then why the concern over customers signing a fresh contract :confused:

    now if he and his father JUST bought the "refuse relocation" company I would still wonder WHY NOT SELLING ANY much equipment does he have....if just enough for taking care of his house and maybe a spare set that is one thing......but if he is loaded with equipment that is an issue to me

    did you ask to buy the equipment....what did he say?

    did you ask him what the plans for the equipment were?

    has he offered the "business" to other LCOs that you know of?

    how many clients does he have to sell you?

    how long has he been servicing them?.....if just 1 or two years they would be worth a LOT less to me

    what is his reputation around town....if he is top notch his clients might be more apt to stay....if he is blow-n-go I would count on them shopping around next spring

    are there any other LCOs in your area you trust to ask if he has approached them...WITHOUT THEM GOING BEHIND YOU TO MAKE A DEAL WITH HIM

    are you prepared to take on the amount of clients he is selling and do what it takes YOU to keep them?

    do you know any of his clients to be able to say screw him I will just go make a bid to them?....since he is REALLY leaving the business

    the way I would approach it is to first find out EXACTLY what he will do with the equipment....if he does not have a direct answer RUN

    If he says I want to sell the equipment seperate....MAKE A GOOD OFFER THEN AND THERE ON SOME ITEMS....if he ham haws around and says he is not ready to sell it yet he is LYING

    if he passes those test the next thing I would do is start talking about the no compete involving people BESIDES a lil brother or a sister or an uncle that might be waiting until he "sells the business" and they go cherry pick a few of the best with his cut rate equipment....after all it would not be HIM competing......i am sure he will say no way to this.....but if he is keeping the equipment it is not to admire and dream of his past days is for SOMEONE to use it......WHO!!!:confused:

    I am sure he will say no to that and it would probably not be legally binding...but it is a way to "sniff him".....YOU could bind him to sell the equipment out of town....or state NONE of his equipment (with serial number listed) will be used on ANY of his existing clients property for 5+ years....that could be binding

    if he can "pass" all of that then YOU need to use your knowledge of the industry in your area.....what is YOUR yearly turnover on clients.....what is his.....YOU KNOW SOME OF HIS WILL NOT STAY no matter what

    I would be very skeptical.....and with 2-3 weeks left unless you REALLY REALLY feel some other LCOs would be chomping at the bit to BUY NOW it would be very tempting to just wait and see what happens.....I would bet you see him out there cutting again next year.....if not can you sell yourself to get his clients without buying him out?

    you need to ask him a LOT more questions....and get firm answers because right now all I see is someone balking at EVERYTHING you KNOW they would ask for if they were in your shoes

    hell you could even call the people him and his dad bought the "disposal" company from and ask them what type of negociators he and his dad were.....if they were cut throat and ask for a lot of no compete protections and wanted firm contracts in place for each client and low balled or offered a percentage over the year......why would they now balk at offering the same to someone else buying a SERVICE COMPANY from them :confused:

    and lastly how much of a difference would adding even 50% of his clients make as far as you GROWING your business and profits.....if adding clients fast (even paying a premium) will really make a difference for your PROFITS then you need to consider it more.......maybe the money spent on AN AGRESSIVE marketing campagin will pay off as much or more....without your cash tied up over the slow winter

    sounds like something to ask WAY more questions about and to wait and see what happens for 2-3 weeks....unless you really believe you need to chit or get off of the pot NOW

    hope any of that helped :) :usflag:
  3. huh

    huh LawnSite Senior Member
    from Lubbock
    Messages: 251

    also what is the price he is wanting....does it even seam close to fair

    I would also drop a few things on him as "man I'm not sure I can afford it I HAD BEEN SAVING FOR A BIG SPRING ADD CAMPAIGN"

    or "man I was considering dropping a few of my PITA clients and going to work at this pretty good job I was offered"

    provided of course you can be convincing.....see how he reacts to this.....if it is surprising to him then he might be for real......if he is ho hum about it then I would bet he will find a way to have his equipment making money next year....if he looks deer in headlights like "damn i thought i had you all set up and if i don't dump this on you NOW i will just end up watching clients go somewhere else next year with me getting nothing for them" ........THAT IS WHEN YOU GO FOR THE THROAT......BECAUSE HE HAS NO OTHER PLAN THAN YOU
  4. Liquidfast

    Liquidfast LawnSite Senior Member
    from Ontario
    Messages: 739

    Not selling his equipment? RED FLAG. If he is not committing to his new biz venture, he surely isnt committed to quitting the lawn biz for good. Sounds to me like a bunch of new customers will be popping up next season....a few thousand hand delivered fliers would be alot cheaper than buying customers and hoping they stay around.
  5. clc2003

    clc2003 LawnSite Senior Member
    from Ia
    Messages: 284

    Thanks guys for your input. The reason he isn't selling his equipment is because he only has one ztr and he will use it for his acreage. As far as other equipment, it is all small engine stuff, push mower, trimmers, snow blowers, etc. I forgot to add we are also talking about his snow removal accounts as well as mowing. We have rolled the idea around about putting in one of his plow trucks in the deal. So there isn't any "excessive" amounts of equipment that would make me feel suspicious. I also came up with the idea of buying the snow removal with the truck this fall for X amount of dollars with exclusive rights to the mowing next spring. If customers are still there and willing to come over with me then we will seal the deal. Another perk for me is that he is willing to sell on contract. It works well for me and he is offering a lower interest rate. There is no early buyout penalty and I could also get rid of my old plow truck and get some money out of it with out spending it up front on another truck.
  6. Down2EarthLawns

    Down2EarthLawns LawnSite Member
    Messages: 191

    If it is merely the customer contract issue. I suggest buying out for the value of remaining contracts only. Not a dollar more than they are worth to him for this season. This way he can get out with his final payments in tact, and you can gain most, if not all, of his customer base for the next season. Providing they are as happy with you as they were with him. If he is committed to his new venture, he will not loose anything, and there is only the investment of guaranteed gross income for you. Win/Win.
  7. yrdandgardenhandyman

    yrdandgardenhandyman LawnSite Senior Member
    from midwest
    Messages: 953

    The guy said he was willing to sign a non compete. He approached me too but I'm just not ready annnnnd from the figures he gave me he is grossly underpriced. I already know some of his clients and will be doing a flyer campaign next spring. Not targeting his clients. Just the areas. I have a full time third shift job that I'm trying to leave but as Cooper said, the area is a bit saturated with lowballers. Cooper isn't one and I hope I'm not. Cooper does have better equipment than I do, for now but........ well, he seems like a good guy but I think he IS one of the competitors who prices right and does good work. So he is one for me to watch and learn from. I think Cooper left from the same place I work so he knows why I want out. :laugh:

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