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Need Info Guys......buying Out Another Business

Discussion in 'Lawn Mowing' started by sjw1176, Mar 24, 2006.

  1. sjw1176

    sjw1176 LawnSite Member
    from ny
    Messages: 13

    curious to see what you guys think this lawn service is worth. he claims he has 40 to 50 lawn and snow accounts which grossed 50k last year. what do you guys think a fair offer is for me to give.
    I'm going to meet with him tomorrow to review some financial statements,i just wanna get some ideas

  2. OnMyOwn

    OnMyOwn LawnSite Senior Member
    Messages: 372

    That seems like a high quantity of accounts for such a low y/e gross sales figure. I would be curious if he is a lowball-pricer. If so, be careful not to pay too much for a client base that is resistent to increased prices, or up-selling.

    Regarding purchase price: no more than (2) x monthly sales, assuming he has current contract agreements with the clients. If he does not have agreements, he has very little to offer.
  3. sheshovel

    sheshovel LawnSite Fanatic
    Messages: 5,112

    Anybody can make up a financial statement..make sure the accounts are real and under contract as was mentioned above.That is not alot of accounts for such a high yield
  4. webami

    webami LawnSite Member
    Messages: 16

    Also be aware that the contracts may allow for the customer to "opt out" with only 30 days notice. Nothing is guaranteed. IF you do buy this guy, it is recommended to see if the current owner would stay on and provide "consultation" to you to ease the transition. I would also recommend if you do buy out this guy that you immediately go and make contact with the people who you have just purchased their contracts. IMO it's not what you know as much as it is who you know.
  5. sjw1176

    sjw1176 LawnSite Member
    from ny
    Messages: 13

    shoot me some numbers guys what do u think its worth.......................
  6. lawncuttinfoo

    lawncuttinfoo LawnSite Bronze Member
    Messages: 1,010

    Don't give him a number give him a percentage. Make it a percentage of all his past customers that renew with you. (You get 100% of new sign ups) Total it monthly and pay him monthly. That way if customers bail you do not owe the guy for work you don't have.

    I bought a business from some friends this way, I paid them 50% of my monthly sales for one year from customers they had previously.

    From what I read here, I got a bum deal, but it worked out for me, its 4 years later and I still have them all, so that averages out to a 10% loss per year on those contracts.
  7. lawnwizards

    lawnwizards LawnSite Silver Member
    Messages: 2,439

    wow! 50%? thats really steep to pay... i'm glad things worked out for you though...as far as the original poster. i'd go with 10% of all contracted customers and i'd want the guy to take me to all customers and let me meet them... oh yea, what kind of equipment is included in the sale?
  8. Precision

    Precision LawnSite Silver Member
    Messages: 2,995

    lets do the math.

    50 accts
    $50k gross
    that is $1000 per acct
    in your area I am gonna guess 25 cuts
    so $40 per mow (which I kinda doubt)
    probably more like $25 per mow and some add on work to make the difference

    My offer price would be $50 per acct and $25 for each account still there after 90 days. plus equipment

    So $2500 plus up to $1250 more at 90 days, plus depreciated value of equipment.

    However I would want to see the properties and accompany him on the route for at least one cut and use his equipment.
  9. DennisF

    DennisF LawnSite Bronze Member
    from Florida
    Messages: 1,381

    Don't pay more than one month of gross revenue from all of the accounts. There is no guarantee that the accounts will stick with you after you buy the business.

    Don't buy any of his equipment that is more than 2 years old. You can buy used ZTR's with less than 1000 hours on them for $4000-$5000.

    Handheld equipment (edgers, trimmmers, blowers etc) can be bought new for $300-$400 each.

    Don't put too much faith in his financial statements. Financial statements don't tell you much about customer satisfaction with the service he has provided in the past. Try to talk with some of his customers to see if they are happy with the service. If they seem to be happy with him then he has probably done a good job running the business and most of them would remain with you after the business changes hands. Still...you can expect 5-10% to jump ship.
  10. Insometry

    Insometry LawnSite Member
    from Kansas
    Messages: 43

    Good advice guys. :)

    I would also make sure he isn't driving all over the place. Alot of companies in the 50k range tend to overdrive their routes and fail to price their stops accordingly.

    FIND OUT WHY HE IS SELLING! Get to the heart of the issue.

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