new business

Discussion in 'Business Operations' started by alanRC51, Oct 26, 2003.

  1. alanRC51

    alanRC51 LawnSite Member
    Messages: 8

    I posted this in the correct forum but got no response so I'm re-posting it here.

    My wife and I have been looking for a business to get into. Our engineering jobs will be gone soon and after 300 resumes I got one interview and it turned out to be for an entry level position paying $24K per year! For a variety of reasons we have settled on lawn care. A good friend of mine is selling his business and we are considering buying it. He wants 60K for the business which we can do. He will take 40 down and the rest in payments. We will get the following: 2000 ford F250 superduty extended cab long bed V10 towing package (worth $17,900 retail) / a 30 ft enclosed trailer (purchased 2 years ago for $6,000) / 4 mowers (2 zero turn lescos and 2 walk behinds) / 4 string trimmers / 2 blowers / 270 accounts of which 8 are commercial. The business grosses about $140,000 per year and he can pay himself a bit over $1000.00 per week. He has never advertized or made any real effort to grow the business. I have lots of business experience although not in lawncare. I plan to try to grow the business by half the first year through direct mail, television and a realtor network I have built from my real estate investing business. Is 60K too much for this business?
  2. promower

    promower LawnSite Bronze Member
    Messages: 1,233

    If you do a search on this topic you should get some info. One thig that always comes up considering buying a buisness is check his taxes. See if that was how much he was really making. Personally I would not buy a buisness I have found that the work is not real hard to find. If you are really serious about it you may want to contact his accounts and tell them the situation and if they would still be interested in service under new ownership.
    Best of luck
  3. Colorado Mowerboy

    Colorado Mowerboy LawnSite Member
    Messages: 30

    I have a couple of questions, how does he on an average do 54 yards a day with one truck. I gross twice that amount with half of the accounts. If the numbers are true and real, I don't see anything wrong with buying an established company to get you started, like you say you can grow from there. And yes, some of those accounts are going to leave.
  4. lbmd1

    lbmd1 LawnSite Senior Member
    Messages: 462

    I'm with Colorado. Too many accounts, not much revenue per customer. Comes out to around $500 per customer per year. And with your extended mowing season at say 40 cuts, that comes to $12.50 a cut. We do almost a quarter million with around 90 accounts. About $2700 per customer on average per season on only 25 cuts a year. Alot of our income is based on spring and fall clean ups, pruning, mulching and such which I'm not sure or not whether you guys in FL do that sort of thing. The numbers don't add up too well. Paying himself a $1000 a week is also questionable. I 'd do a little more digging.

  5. alanRC51

    alanRC51 LawnSite Member
    Messages: 8

    He doesn't have much revenue per customer because he does no pruning,mulching,aerating,spraying or anything else. He just cuts grass. He told me today that doing anything else is a waste of time and effort. I really don't believe that. I think in terms of maximizing my profits. He has two trucks but only runs both in the summer. I have watched him do 15 yards in my subdivision in an hour. Kind of a slash and burn thing. He says he does about 50 yards per day. I know he makes good money. He has 2 trucks and a new car that are all paid for as well as a boat and 5 houses. I only have 3 houses and I'm an engineer. He doesn't pay himself $1000.00 per week. He simply said that I would be able to if I wanted. He charges $10.00 for most yards. $15.00 if you have a corner lot like mine. He also does not use contracts. He only cuts when they need it. He didn't cut my grass or any of my neighbors grass once last winter. I would estimate that he cut my grass about 20 times last year. About every other week. There are a lot of old people here and they get pissed if you cut their grass too often. They think you are trying to rip them off. :rolleyes: My CPA is going to go over his books this week and I should have a clearer picture then.
  6. Rustic Goat

    Rustic Goat LawnSite Bronze Member
    Messages: 1,194

    First, put the 'friendship' completely aside.
    His honesty may equal Moses, but then again . . . . . . . .
    Business is business, period.
    Unless you can PROVE every claim being made about the business, then it's just words. Proof, by the way, is not just looking at a sheet of paper printed up for you to look at. It's actually going over the books and possibly tax returns to get the black and white of the business's financial standing.

    You listed vehicle and equipment, do you receive clear title to all, or are you taking over payments?

    This time of year is presently between (for the most part) cutting seasons. Are next years accounts already on signed contracts, or are you going to have to nail them down yourself.

    Any amount financed with current owner should be payable as a percentage of profits from next years business until agreed amount is paid off.

    You MUST get a lawyer to draw up the financial/business agreement to cover both sides, and it needs to include at least a 5 year non-compete agreement to be signed by present owner.

    Best wishes
  7. alanRC51

    alanRC51 LawnSite Member
    Messages: 8

    I have his tax returns. I get clear title to all of the equipment (the truck is paid for). He wants a 2 year no compete. I would have to retain the customers myself since he has none of them on contract. It's sort of a mixed bag.
  8. Rustic Goat

    Rustic Goat LawnSite Bronze Member
    Messages: 1,194

    Need to get more opinions posted here guys, esp. after alanRC51's last post, which for me, raises some major concerns.

    No lock on next years customers brings the value of the business WAY down as far as I see.
    Seller may want a 2 year non-compete, but that doesn't mean a buyer should. 2 year is not enough, plus it brings up what I'd see as the seller's actual intent in selling = quick profit at buyer's expense, take a break from the industry, then get right back in to it, as your new competition.

    Those two factors now make the buy out seem over priced, that's JMO.
  9. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Messages: 1,912

    If you have the $$ .... n want to get jump right into a going concern .... I would contact a local business broker n see if other companies are going for sale ..... I would NOT buy anything untill March .... I would ONLY buy a "Turn-Key" .... employees in place ... established customer base

    If you are truely into get this particular deal .... I would suggest working with him a few weeks -months to see how he operates .... ideally it would be smart to work with a larger outfit 1 year

    I do understand how so many cutters down here operate this way .... I see em doing it .... makes no sense to me as they could be making soooo much more $$$

    We have a base much like his n my yearly is double that .... just on the cutting of grass side ....not including installs or extra's

    Also understand .... down here with no real break in cutting time .....I have NEVER let a yard go 4 weeks without a cut ...even in Jan's every 2 weeks .... I get paid the same every month no skips ....n break in monthy billing .... almost 95% of my yards are St. Aug under irrigation

    I have Contracts for my commercial jobs, installs or extras over $500 .... ( I don't do side work for anyone unless they are a customer 1 time cuts single clean ups )

    Anyways contracts with resi's ...just isn't there .... but like I said we never really have a break in cutting ... I have proposal's submitted as an estimate n if it is a larger monthly ...yes those are signed ....but fore the most that are under $100 month's a handshake

    I have customers which are 7 years in the going ....without a contract ....looking back at their history .... I would say this is as good as it gets as far as .... will I be cutting em next "season" .... we never allow a season to exist ... we slow down ....but it's only a 2 week break

    Getting back to your deal with this outfit of my biggest look at's would be TIME much time does it take to cut those jobs .... how much time on average ....if they have time sheets or cards .... take a sample thru the year ....get n average n see how much he is getting per hour .... lots of other variables yes ....but what we are selling is Time

    Good Luck in your adventure
  10. mtdman

    mtdman LawnSite Gold Member
    Messages: 3,143

    Is there a workforce included? Or is it just a solo operation? What was his net income for last year? Seems like a lot of lawns/work to make $1000 a week. I can make more than that with far fewer lawns. And what's with the 30 foot trailer, just for mowing? Is he pulling a semi? I can't imagine that gas bill.

    For $60,000 you could buy all your equipment and have a rather nice advertising budget for the next year and just go it on your own. Sounds shakey to me.

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