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How much would you pay for this company.

Discussion in 'Lawn Mowing' started by willretire@40, Dec 19, 2009.

  1. Brick One Lawns

    Brick One Lawns LawnSite Member
    Messages: 64

    wow... 1 cut lol. There is a formula you can look up online. You have to use real proven numbers though. Sign a full disclosure and have them show you tax records. No company that large does their own taxes. Also, bank statements. Take a look at those. The equipment isn't worth maybe 10-20% retail for everything to the last shovel. But you didn't ask how to do it.. you asked how much would I pay... $885,000.00 given the numbers you put out there to include everything. I wouldn't pay it all up front.

    I would give him 33% up front and the remainder would be paid with net profits after my new additional MODEST $35k salary and also the remainder would be dependent on the attrition rate. so potentially 885k but not guaranteed. And that's a very low offer.

    I would probably fire all employees and bring in my own crews as well. The owner and some foremen would be required to stay on board for 6 months with a company this large.
  2. arninglawns

    arninglawns LawnSite Member
    Messages: 68

    Basically, you would need to settle on a cap rate. I would guess that a reasonable cap rate for a lawn biz with solid numbers would be somewhere in the neighborhood of 25%. If the net profits after everything, including your salary IF you decide you must work in this business, are $300,000, then I would say offer no more than $1.2M. Ideally, you would want to leverage 75% or more with the bank's money so that your return will be higher and your money is available to buy more companies. For example, if you paid $1.2M cash and profits are $300k, your getting a 25% ROI (thus the cap rate). If you borrow 75% of the purchase price ($900,000) at 10% interest, your interest payments will be $90,000 and net cashflow will be reduced to $210,000. But, since you only have $300,000 of your money invested, your ROI is 70%. Getting a 70% annual return on your investments is how you retire @ 40.

    Going forward, you might try to streamline this operation as much as possible and add new customers to the bottom line. Let's say you reduce expenses by 10%, or $70,000 and add 100 customers, or $30,000 profit for a total addition of $100,000 net profit. Now your net profit before interest is $400,000. Divided by that same 25% cap rate, your business is now worth $1.6M. Sell it for 1.6, pay off the 900k loan and your $300k investment turned in to $700,000, all while earning you $210k a year.
  3. Lawn Man Dave

    Lawn Man Dave LawnSite Senior Member
    Messages: 420

    The rule of thumb I have seen is this.....

    Fair market value of equipment, then like the cost of 1 cut all the way up to a months worth of cuts depending if the customer is under contract or not...

    Employees are not worth anything when selling really..... who knows if you will like them or if they will like you or even stick around. they may be over paid and you may not be willing to pay them that much and they may leave ect ect.

    If I was to buy one the equipment is what I would be looking at in the deal... now if it was the beginning of the year and the customers knew I was buying it and signed a contract agreeing to stay will me the rest of the year then I would put an offer in but make sure that at the end of the year I would have the money I have invested paid off plus then some... enough to make it worth my while......

    Id also want to see his dollar figures going out... as in how much he is spending..... if I could stream line it more and make more profit then that would be worth looking into more.... if it is pretty much perfected then that would affect my offer some.

    No way I would offer 1.2 million or anything close...... hard to really give a descent figure on what it is worth, to many variables like above not to mention condition of equipment, employee pay/benefits ect ect.

    If it was proven that this person was making 300k then I would be around what I would think of offering........ Gross mean's nothing to me...... unless a monkey runs the company it should be fairly streamlined and may not have a ton of room for improvement..... Assuming that it is running fairly well I would want my money back pretty fast. If everything fell apart with it after a year I would have my money back....... instead of loosing say 900k.

    Id also want the owner to say on for X amount of time to help with the transition and pay him X amount to do it. Lastly I would have my lawyer looking over everything along with my accountant and all documents’ the company has would be theirs to review including bank and tax statements.

    I really think anything over 3XX,XXX is not smart from a business stand point.
    Last edited: Dec 22, 2009
  4. arninglawns

    arninglawns LawnSite Member
    Messages: 68

    Seriously, you think your business is worth the price of one to four mowings?
  5. AI Inc

    AI Inc LawnSite Fanatic
    Messages: 26,970

    Try selling yours , see what its worth. A lot of folks here are going to be quite surprised come retirement time if their buss is their only retirement plan.
  6. AI Inc

    AI Inc LawnSite Fanatic
    Messages: 26,970

    Once ya take away the equitment, all ya got left is a bunch of uneducated employees and a bunch of people that pay you to do something they can do themselves but just dont want to.
  7. Lawn Man Dave

    Lawn Man Dave LawnSite Senior Member
    Messages: 420

    Yep, this is why the equipment is the only thing of real value...


    There was a local that sold his biz for 100k, it pulled in about 250k.... all commercial all under contract....

    He sold with it 4 flat bet truck with gooseneck trailors and 4 twin engine 72 inch Dixie Choppers on each.... a good chunk of that 100k was for the equipment....

    What something is worth is one thing... what someone is willing to pay for it is another....... you may think your truck is worth say 30k but that only matter's if someone is willing to pay you 30k for it.........

    I don't have my retierment tied up in selling everything....... I plan to give it all to my son if he want's it... if not then Ill figure it out when I get there but when I retire I iwill be set before that day comes... If I do sell everything Ill only count on getting money out of the equipment............
  8. willretire@40

    willretire@40 LawnSite Bronze Member
    from VA
    Messages: 1,390

    99.9% of the members up here would never reach 1000 lawns a week, but yet some are saying why pay for a company of this size.

    1000 lawns a week x $35 x 30 weeks = $1,050,000
    Employee pay per crew per lawn = $13.20 x 1000 lawns x 30 weeks = $396,000
    Fuel $2 per lawn = $2000 x 30 weeks = $60,000
    Door hangers printed and delivered 100,000 a season =$13k
    Equipment renewed every 2 years including trucks $8,000 a year= $60,000
    biz Insurance and truck insurance $15k
    office help $50k
    credit card fees $23k
    subtotal $617,000
    plus 20% for misc $123,400
    Total $740,400
    plus $80k for taxes

    Final Total $820,400
    Owner profit $230,000

    Rough numbers
  9. arninglawns

    arninglawns LawnSite Member
    Messages: 68

    I was referring to a business. Sounds like you are talking about a job. A business makes a profit whether the owner is present or not. A job is something you go do every day. You do not have to sell your businesses to retire, retirement means you do nothing, but your investments have enough cash flow to cover your bills and then some. If I could invest $300,000 and it returned $300,000 annually, I'd do it every day and twice on Sunday. I'm more concerned about the customers and the profit margin, whereas you are more concerned about the equipment, because you are interested in working.
  10. willretire@40

    willretire@40 LawnSite Bronze Member
    from VA
    Messages: 1,390

    This company is not real. I was just trying to see where people was on this subject. Like I said before so many people on here act like you should only pay a few bucks for each account. Now there are companies out there doing more then 1,000 lawns a week. I know of one that is doing atleast 5,000 if not 6k-8k lawns a week. It can be done and profits can be good. This thread helps seperate real business people from the average lawn boy IMO.

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