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How do you value a lawn business? Looking to buy!!

Discussion in 'Business Operations' started by dgollar1, Nov 7, 2013.

  1. dgollar1

    dgollar1 LawnSite Member
    Messages: 11

    Hello everyone,

    My family and I will be moving to Florida next spring and I'm looking to continue/ expland my existing lawn business. I looked on Craigslist at some businesses for sale and the asking prices are all over the place, $5,000 - $150,000. Some asking prices are equal to 1 years revenue. So I make no money the first year? Is this typical? What other quesitons should I be asking? Any advice in this area would be greatly appreciated.

    Thanks in advance.
  2. A. W. Landscapers  Inc.

    A. W. Landscapers Inc. LawnSite Bronze Member
    Messages: 1,285

    You are going to see prices that appear to be "all over the place" because no two businesses are alike and some people have no idea how to place a valuation on their "business". Some "businesses" have been established longer than others, some have more clients, some have better clients, some have higher paying clients, some aren't really "businesses", some have crappy equipment, some have top of the line equipment, some may be very profitable, some may be in serious financial trouble, some may be run really well, some may be a complete mess, some have huge liabilities, etc. All these things and more need to be considered when placing a valuation on a company.

    Many people place too high a valuation on their business and many "businesses" for sale are not worth much more than the value of the equipment. This is because the "business" is incapable of running if the owner doesn't show up to do all the work himself/herself. If the owner doesn't go out and sell, sales don't increase. If the owner doesn't go out and mow, no lawns get mowed. These types of "businesses" will usually be advertised as having "huge growth potential". It has "huge growth potential" because someone needs to come in and takeover the operations and grow this into an actual business. A true business runs whether the owner is present or not.

    Many small "businesses" are just very elaborate jobs. This is because the owner spends most of his/her time doing job related tasks…they spend their time working in their business and not on their business. The result is a business that never really progresses…it never really moves out of the startup phase where the owner's presence is vital to the success of the company.

    If you can't find an established business that is worth purchasing, you might want to consider starting your own business and looking into the possibility of purchasing accounts as one way of growing your customer base.

    There is some good info in this thread on buying accounts http://www.lawnsite.com/showthread.php?t=414769

    Buying a business is a lot more involved than giving a guy cash and getting a truck, trailer, mowing equipment and a list of addresses where the guy has been mowing lawn.
  3. RonWin

    RonWin LawnSite Senior Member
    Messages: 689

    I have never believed in buying someone's accounts. You don't know if they will keep you, you don't know if they are making money from the account, special request?, certain days they want it done? Expect it to be done a certain way? Too many unknown variables. If you are trying to build a business then build a business. Don't waste your time trying to build someone else's where they left off. I think trying to sell customers as one is exiting the business is scummy. It's a disservice to the customer and puts them in an awkward situation. The customer is not going to chose the guy who bought out the previous lawn guy, they are going to choose the BEST lawn guy. Might as well save your money and start up your business the right way.
    Posted via Mobile Device
  4. TheLugNutZ

    TheLugNutZ LawnSite Senior Member
    Messages: 410

    I was going to buy about 30 accounts from someone to start this spring. After days and days and weeks and weeks of research and crunching numbers (mainly to make sure i could continue to pay bills if i left my current job) I decided not to puchase the accounts/equipment and rather to start aquiring accounts and equipment myself/gradually over the next year.

    I am aquiring all of the REQUIRED equipment to get started for the spring this winter and I plan on starting part time next sping (just nights/weekends) while keeping my current 9 to 5. Then hopefully the following spring Ill have enough business to go to part time (2 days a week) at my 9 to 5 and transition into landscaping as a more full time thing.

    Good luck with whatever you end up deciding on.
  5. WPLC

    WPLC LawnSite Member
    from USA
    Messages: 196

    If I were you, I would buy an established business, that already has employees doing the work. This way, they won't even notice the change, and all you have to do is take care of the business side of it. The above posters are right. If you just buy 30 or so accounts, more than likely you will lose half of them the first year.
  6. WPLC

    WPLC LawnSite Member
    from USA
    Messages: 196

    Buying accounts/businesses, is the fastest way to grow..
  7. guitarman2420

    guitarman2420 LawnSite Senior Member
    Male, from Midlothian, VA
    Messages: 617

    Most businesses will be validated at 3 - 5 X their profit after taxes. It's just a rule of thumb. If the owner is paying himself/herself a salary, you can add that in there to. The key factor in buying someone elses business, is are you actually buying a business, or just someone's hobby or job? What happens when the owner walks away - is he or she the company? Most wise buyers would have as part of the purchase that the present owner stays on in some capacity for at least a year to transition to the new owner and of course make sure you have a non-compete clause, or he will come after the same customers he just left! I've seen that happen.
  8. RonWin

    RonWin LawnSite Senior Member
    Messages: 689

    There isn't these types of businesses for sale. Why would there be? If the owner doesn't have to do anything besides manage payroll and accounts receivable then why would he give up his established business? The type of people selling their business is hacks that couldn't cut it or low ballers looking to make a cheap buck which they failed to do so in the first place. Legit Ament successful businesses don't sell their business when it's as easy as you made it sound. They hang onto them or pass them onto family. Let's be real here, there's no point in buying someone else's accounts because they failed in the first place for any given number of reasons. Buying accounts/businesses is the fastest way to set yourself up for failure in this type of industry. Also the fastest way to NOT brand yourself which in the end us the most important thing your after. To create a brand that is YOURS , not someone else's who most likely failed or gave up on this tough career.
    Posted via Mobile Device
  9. WPLC

    WPLC LawnSite Member
    from USA
    Messages: 196

    There are plenty of established businesses that are sold. Not sure what rock you live under. BTW it's more than payroll and account receivable. The owner has to quote, deal with customer relationships, etc. My friend sold his established business for over 700k. Now he has a normal job and is set for life. Running a big business is stressful, especially if you plow snow, because a certain amount of work is required to be done in a specific time period. If you can make a lot of money from selling the business and go to a less stressful job, why wouldn't you? Employees also can be a pain in the ass and if you buy an established business, you are already branded. And I wouldn't call selling a business giving up. More like going on to other opportunities.
  10. HenryB

    HenryB LawnSite Bronze Member
    Messages: 1,848

    Good quote here.

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