Co-Owner wants out of business?

Discussion in 'Lawn Mowing' started by NBurke3652, Nov 14, 2007.

  1. NBurke3652

    NBurke3652 LawnSite Member
    Messages: 24

    I have been in a partnership with one of my buddies that I went to school with for almost two years now and he already wants out. We don't have a huge business but we have grown substantially over this past year. My buddy wants me to buy him out and I was wondering if anyone can tell me how to determine what half of my business is worth. We have about 24residential accounts and 8 commercial accounts and none of those have contracts. Our equipmnet is :
    - 16' trailer (Bought in middle of 2007) BOUGHT BRAND NEW
    - 52" scag hydro WB 19 horse ( Bought in beginning of 2007) BOUGHT BRAND NEW
    - 36" Scag Belt Drive WB ( Bought used for $1300 in Beginning of 2007)
    - Stihl Back Pack Blower (Bought Used end of 2007 for $225)
    - Echo Trimmer (Bought New middle of 2007 for $270)

    Basically what I am trying to figure out is the amount I should be paying for his half of the accounts and the equipment while taking the depreciation of the equipment and the fact that we have no contracts into consideration.

    Also for the year of 2007 we have been using my truck and only my truck to work in. The only compensation from the business is gas on working days. Nothing to me personally for using my truck.( KBB Value on truck is $8,400.)

    If someone could help me out I would greatly appreciate it.

  2. Nosmo

    Nosmo LawnSite Bronze Member
    Messages: 1,216

    Well I used to do income taxes in the 1980's up to and including 1990 so this is what I would advise right off the top of my head.

    Let some of our members give you some prices on the equipment -- what they think it may be worth. You know what income the accounts are bringing in . Half of the future income is already yours and the other half is what you need to negotiate with him. I'd get my tax man or your CPA to recommend what to offer him for the accounts.

    Now as far as your pickup your tax man needs to handle the depreciation or mileage as was done last year. Or if you are not sure let him know what agreement you two had about your truck.

    When your get some estimates on the equipment take all these figures to your tax man or CPA . Let him combine
    what he thinks is a good offer for the other man's share.

    I don't believe I'd offer him a full 50% on either the accounts or the equipment. He is the one wanting out -- let's see how badly he is wanting to do something new.

  3. wbw

    wbw LawnSite Fanatic
    Messages: 6,079

    One of you puts a value on half. The other decides whether he wants to buy or sell at that price. If he over values it you sell, if he under values it you buy. Good Luck!
  4. supercuts

    supercuts LawnSite Silver Member
    Messages: 2,808

    you should only be looking at equiptment, if he wants money for the accounts, let him sell half of them. once he does, you simply call and explain the situation to customer after they are sold. all that equiptment is new, so you looking to pony up nearly half of the new cost. obviously it is used, and if you were to sell it, your not getting new cost. i agree fully with wbw.

    you should be getting some compensation for the use of your truck. that can be a bargining piont
  5. dcondon

    dcondon LawnSite Silver Member
    Messages: 2,246

    I sure would not be buying the accounts. If you have good relations with your customers they are going to be staying with you anyways.
  6. NBurke3652

    NBurke3652 LawnSite Member
    Messages: 24

    I for got to mention the he is expecting me to pay him $9000.00. About $4,300.00 for half the equipment and $4,700.00 for our accounts. I think this is way too much considering none of our yards are guranteed each year.
  7. delphied

    delphied LawnSite Silver Member
    Messages: 2,067

    I think half of what he has invested would be a good offer and nothing for the accounts since he wants out. If that didnt fly, offer an extra 1000. You need to get out clean if you can and keep your friend but you cant give what his first offer is IMHO. In other words, 4300 to 5300 bucks.
  8. Lordtimothy

    Lordtimothy LawnSite Member
    Messages: 171

    How good of friend is he?? Don't be a huge jackass if it comes down to it. Good friend is worth more than a few hundred or thousand. I wouldn't give him the 9000 he wants but a reasonable price.

  9. Albery's Lawn & Tractor

    Albery's Lawn & Tractor LawnSite Bronze Member
    Messages: 1,674

    Value of ALL USED Equip:
    Trailer: $1,500
    Scag Hydro: $3,500
    Scag 36": $900
    Blower: $150
    Trimmer: $175

    TOTAL: $6,225, So if your gonna pay half thats only $3,112.50

    The equipment is used period, it doesn't matter what you paid for it new.

    What did your accounts NET this year? Say you guys Net $25K COMBINED, or $12.5K each. I'd offer 20% ($2,500), but thats only cause he's a friend.

    Offer $5,612.50 and see what he says.
  10. Mowing Freak

    Mowing Freak LawnSite Senior Member
    from S.E. Ks
    Messages: 459

    Most all of these ideas are good. Here is something else to think about. What did he bring into the business? You have to take that into consideration. If you brought the majority of equipment then you need to walk away with the majority of it. It sounds like you were the majority person in the business as you had the truck. As far as lawns, I wouldn't pay for them as like you said there is no 100% guarantee you will get them next year. Even if there was 100% guarantee I wouldn't pay him for them as you are now responsible for 100% of expenses. I agree with the depreciation on the equipment then give him half of that or maybe a little more. If he says "Well, your going to get the lawns and make money with this stuff next year!" I would tell him "Well stick around and help me do it then!" I would remind him that you provided the truck, etc., etc., and that you are going to be responsible for 100% of upkeep and maintenance plus the money you will have to pay him. Something else you will have to keep in mind is if you have to hire somebody to replace him.

Share This Page