Buying out a business! Need advice!

Discussion in 'Lawn Mowing' started by PrimeGreen Lawn, May 31, 2001.

  1. PrimeGreen Lawn

    PrimeGreen Lawn LawnSite Member
    Messages: 170

    Just had a meeting last night with the owner of a very well established business.
    This guy just wants to get out and only wants $$ for his equipment. Basically he has 2 3/4 ton trucks (3 and 5 years old), 16' open trailor, 20' enclosed trailor. 2 new walk behinds, 2 ztr's. Plus he's probally going to throw in snowblowers, trimmers, blowers, you know......

    I already have my established lawn care with 55-60 weekly lawns. This man is basically handing me 45+ ALL COMMERCIAL accounts with tons of room for expandsion. Yes, employees come with it also. With his two crews, and my one, I will somehow need to merge these together. I will be dropping many of my small residents (I hate to do that, but....) to free up time for the transition. The owner is going to be more than helpful with the transition, and even offered his assistance on bidding and getting new contracts.

    What do you all think of this, and anything you would be concerned with.

    Also, one of the ZTR's is a John Deere F620 with 400 hrs. How does this compare with my Lazers?

    Thanks for the input.

    Scott Harris
  2. Getmow

    Getmow LawnSite Senior Member
    from VA
    Messages: 445

    What is the equipment worth?
    How long has he had the accounts?
    How much time is left on their contracts?
    What is his gross for the past 2-3 years?
    What was his net for the same time?
    What "systems"are in place in his business?
    will they merge with your business style?

    Look at the books,equipment,take a deep breath then JUMP!
  3. :p
  4. ScottH

    ScottH LawnSite Member
    Messages: 60

    To Try and keep this brief;

    I would advise you check the whole transaction over with a good business attorney. A little money and caution upfront may save you a lot of aggrevation, time, and money later on.

    Some things to consider.

    A key question is are you buying the business or the assets. if you're buying the "business" be very careful. many things can creep out of the woodwork to become major problems. It also is important as to how his business is set up ie sole proprietor, corporation etc.

    You mentioned employees coming along with the deal. You should verify that all- read that as every last cent- payroll taxes are paid as well as any amounts owed employees are paid. Does he pay in arears,ie every other week for prior periods work. if so, you may owe them 2 weeks pay when you start. Are there any unresolved workcomp claims, suits etc.

    Equipment, with the exception of titled vehicles, is easy to sale. However, if he owes money on the eqpt and doesnt pay it off, you may have to pay any loan balance or give up eqpt.

    If you buy the business you also owe the trade creditors. Like his last 2 months gas bills, machine repairs, etc.

    This is only the tip of the iceburg in terms of issues. Hopefully the owner is a good guy. But, for your protection, I would highly recommend spending some money with an attorney. He can draw up a solid agreement and verify that these any the others that i know i missed are addressed.

    And, if your wondering, I was a banker in a previous life.

    Good luck!!!
  5. sheppard

    sheppard LawnSite Senior Member
    Messages: 542

    Read the previous comments- all of them seem well thought out. Am doing the same thing myself. Here is my 2 cents: Why does the man want out of the business? Have any of the employees been arrested recently? Do they all get along? Do any of the other employees have more seniority over your people? Will the new employees have immediate access to credit cards, cash, checks? Check out all their histories on the internet. How often has the other man's business been robbed? How many claims has he filed recently for missing equipment?

    It is my natural nature to be suspicous- hope I didn't come across as too gloomy.

  6. John from OH

    John from OH LawnSite Member
    Messages: 144

    Something doesn't add up. Don't be blinded by this deal. Lets walk thru the numbers. $145,000 gross, $80,000-$90,000 net(Maybe this number is really gross profit?). 2 crews, assuming 4 employees? 30% overhead eats up $43,500, industry average of 40% for payroll and another $58,000 is gone. Thats put the true net at about $43,500. Now, assuming he paid himself $43,500, there is no true profit in the business. Run his numbers thru your accounting system and be honest about them. The picture may or may not be as good as it sounds. How loyal will the will the customers be? How much will you have to increase profits to pay for the deal? Does he have any outstanding debt or pending legal action. If he's approached you and not put the business up for sale "on the market" there is a reason he is selling and you owe it to yourself to find out why. I bought a business like this a long time ago and what I ended up with beared little resemblance to what I paid for.

    Out of curiosity, if he has 2 crews and you have one and all crews presently do the work, why would you drop any of your current customers?
  7. Lawn DOG

    Lawn DOG LawnSite Senior Member
    Messages: 276

    Take a look at the profit & loss statments of the past 3 yrs(minimum).
    Plus you have gotten alot of good advice in some of the other post. I would be suspiciuos of a business man who has worked so hard for something and is proposing this sort of deal. He didn't get where he is from giving it away.

    Remember: If it sounds too good to be true it probably is! :rolleyes:
  8. David Gretzmier

    David Gretzmier LawnSite Gold Member
    Messages: 3,645

    lessee- #1 you need a covenant not to compete from the previous owner. that keeps him from stealing any customers back.
    #2- buy the accounts and equipment, not the business.
    #3- make sure he pays off any loans on the stuff you buy- if he takes your $$ and quits paying payments, they could repo the stuff.
    #4- the numbers do seem fluffy. 145k from 2 crews is possible, if he was working full time on one with helpers and 2 helpers on another, not too good of profit there.
    #5- do it and good luck- you are buying sales for free, try to make them profitable. the equipment at wholesale is gravy. If your too busy and swamped after transition, raise all your prices 10 %. it'll trim out some folks, raise your profit , and give you time to think.
  9. Lawn-Scapes

    Lawn-Scapes LawnSite Silver Member
    Messages: 2,810


    All the previous advice is great... Be thorough.. attorney and contract is a must. I sold my business in Florida to a friend and still had an attorney.

    Want to add to Davids list:

    #6- Any accounts you plan on dropping... Send my way! :) Seriously, I'm in Westminster also and have time to fill.

    Good Luck!!!
  10. kris

    kris LawnSite Bronze Member
    from nowhere
    Messages: 1,578

    I believe he said no money for the accounts... take the good advice that has been posted here...mainly...SEE A LAWYER.... sounds like a good deal to me. Good luck and let us know how this works out.

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