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Looking at buying an existing Septic Installation and Excavation Co.??

Discussion in 'Heavy Equipment & Pavement' started by TXTom, Mar 30, 2006.

  1. TXTom

    TXTom LawnSite Member
    Messages: 74

    I am looking at an existing Septic/Excavation Co. that the owner wants to get out of in the next 2-3yrs. This company has been around for 15yrs. They have a good customer base in Septic, and they have a few builders that they clear lots and excavate for regularly. I have been going over the books and the company doesn't really do that well. The current owner is in his early 60's and has had some health issues in the past few years and his wife has had similar problems. His last decent year was 2000. The years since have been break even or loss. He has fairly new equipment. All of these have been purchased new in the last 4 years
    Cat Track Loader $90k
    Peterbilt Dump Truck $80k
    2- Terex Tractors Loader/Backhoe with 1000lb hammers
    Pintle trailer for 46k lbs Track Loader.

    He also has a couple of Bobcats, a Vermeer Rock Saw, and a Hydromulcher.

    He has a good employee base with some employess that have been around for 10 years. He is trying to move away from the Septic business and do more excavation and underground utilities. He is currently doing his first underground wastewater install for a new 20 acre subdivision.

    Is anyone willing to discuss their business with me so that I can get a better handle on the potential of a business like this and what his numbers should look like? I am a home builder and I do not think I will have any trouble transitioning into this type of business. I would like be able to grow this over the next 20 years into a leading excavation/underground utility company. Please let me know if you are willing to discuss the potential or expected income of a decent excavation co. I will be happy to give you a call.

  2. ksss

    ksss LawnSite Fanatic
    Messages: 7,162

    I don't know if any of us can really help you out. Without knowing the specifics of your market down there everything said would be just speculative. General things to think about if it were me: I would start to form a plan on how you would turn things around to make it profitable. If your not very familiar with the excavation scene in the area I would educate yourself quickly. If you have all his numbers see if you can see where his money is going (all that new iron sounds like a likely source). I would try to make his current employees feel comfortable with an impending change of ownership. If they have been around for 10 years you are likely to need their knowledge base. The last thing you would want is to hire new employees while taking over an established business. I would also plan on how to maintain his current customers. This may mean the orignal owner stays on for a year to help build bridges and complete the transition. You will need those existing customers to help cash flow this until your able make the changes you need to make it more successful. Before deciding on what equipment you need or don't need, first figure out what your mission statement is then decide what equipment you need to get you there. Several other things if you get serious get a good lawyer and CPA to work out a stratagy on how to complete the purchase that gives you max. security and tax benifits.
  3. Gravel Rat

    Gravel Rat LawnSite Fanatic
    Messages: 9,544

    I can see why he wants to get out of septic systems as they are getting more regulated. Like here for example you need to go get certified to install a septic system now the schooling was 4 grand. Its to take the blame off the inspectors and put it onto the contractor if the system fails 4 years from now and the home owner has a poo geyser in the front yard.

    This venture you might not want to get involved with if his books don't look good there is a reason which is the market probably isn't there to support that. The pipe crew I worked with on a local project all they had was a Case 4x4 backhoe and 4 guys and 2 P/Us they use outside contractors to haul in the material. These guys were fast and good they have many years of experience in it.

    To do pipe work all you need is a excavator and a rubber tired backhoe I don't know why that guy bought track machines they are not used. A decent 4x4 backhoe for moving material around and a excavator for the heavy digging and plumbed for a breaker if needed.
  4. TXTom

    TXTom LawnSite Member
    Messages: 74

    Thanks for the replies. The current owner plans to stay around for the next 2-3 years phasing himself out and myself in. I will continue to build houses during this time so Income from the new business won't be an issue.

    The track loader is used for lot clearing and grading. It is also used for setting septic tanks on sites where access is impossible with the standard delivery boom.

    I plan to keep all of the current employees and make the transition as smooth as possible. I may even offer a "buy in" to his top guy. I do not have a septic installer license. In Texas, it is a 3 year process that includes an apprenticeship, field time, and testing. The top guy has a license. Keep the suggestions coming. I am well connected in the home building industry. I know lots of other builders and subcontractors that could become my new customers.

  5. gammon landscaping

    gammon landscaping LawnSite Senior Member
    Messages: 553

    i would offer to pay his top man his wages and give him a 10-20% share in the company in which he would get a quarterly check for his portion of the projected profts. so that he does not resent you and this would make him highly motavated to be sucsessful. he knows the job and the buesness so he will most likely be you key to sucesess
  6. AWJ Services

    AWJ Services LawnSite Platinum Member
    from Ga
    Messages: 4,281

    One key point is net worth of the company and it's assets.

    Does he own everything?
    Any outstanding debt?

    It is strange that he is not offering it too his top guy.

    I have seen situations like this were the owner is promising long time employees the right too purchase the business as a means of keeping them interested in working.

    I would definitely look at talking too the employees first.
  7. Construct'O

    Construct'O LawnSite Bronze Member
    from Sw Iowa
    Messages: 1,387

    If you buy company you need more then one guy with the license. Good to have number one man in charge when your gone,but you need someone to be number two man also.

    Plus it would be nice for you to be able to get your license( in septic installer license) you can"t always depend on help ,no matter how good or faithful they are.Who knows he might get sick then what???????? Something to think about!
  8. TXTom

    TXTom LawnSite Member
    Messages: 74

    When he hired the "top guy" several years ago he hoped he would become a potential buyer. Unfortunately, the top guy is better with plans/equipment than people. And they both have agreed that he is not the right person to run the company and generate sales. I am definitely going to get a Septic License if I pursue this. The current owner will stay around for at least 2-3 years in some capacity. I think I would offer the top guy a percentage of the business if he will stick around for 3 years. I would start paying his profit share quarterly, and then give him full ownership of his interest at 3 years. That way I won't get stuck without a license and I will have him around to get things going. I would prefer that he just continue working as long as he likes maybe another 10-15 years. The older equipment is paid for the recent purchase from the past few years still have some payments. I would factor all of this in when deciding on a purchase price. We haven't discussed a price yet. I have known the owner for several years and I have employed his company on several jobs. This is one of those situations where it will be a win-win for both of us, or we won't do it. Thanks for all of the suggestions. Keep them coming. What do you think customer base and reputation are worth? It is easy to put a tag on the equipment, the other aspects are harder to value. I have heard of transactions where 1-2 years earnigs are added to the asset value. Any one have experience pricing an existing business?


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