Purchasing a Business

Discussion in 'Starting a Lawn Care Business' started by bohiaa, Aug 27, 2008.

  1. bohiaa

    bohiaa LawnSite Fanatic
    Messages: 5,220

    Hello Gentlemen:

    For all of you who have had questions about buying a business, I wanted to share a converstaion I had today.

    a Guy calls me tells me he's selling out. " he's in my area" I have never met him.
    he tells me his business takes in around 70.000.00 a year. it has 2 employees one has his license for sprinkler systems. he has 1 truck a dodge 2500 2 john deer ZTR's

    I ash him how much he says around 100,000.00

    he said he has 14 res and 8 commerical clients

    Ok here comes the fun part..

    I tell him that he's in the red and tryign to dump

    I ask him, have you declaired the ZTR, he says YES. I ask why? he couldn't answer,

    I tell him if he has taken full exzemption on these mowers, then it's time to throw them in the trash. BECAUSE, you should declair them over a 4 year period, at the end of this 4 years they should have 3 to 4 thousand hours on them.
    If his 1 employee has a licenses he should be paying hom around 17 to 18 an hour, with that you will have to pay 1/2 in workers comp that brings it to arund 25.00 per hour that's around 50,000.00 a year.

    the rule of thumb is you will loose 1/2 of the customers due to new onership.
    bringing it to 40,000.00 per year "giving him the benifit of doubt"
    he tells me he just bought the dodge truck.
    I tell him that these larger trucks are worth nothing, maybe 10.000.00
    he says theres 15,000.00 owed on it.
    I inform him I just purchased a F250 4X4 for 9,000.00 I told him he's already upside down on the truck.

    also this is the wrong time of the year because were winding down here in a few short months, and he has a 2nd employee. paying him 9.00 per hour.
    I told him with insurance that's 14.00 and that is 15 to 16,000.00 per year

    at 100,000.00 it would take 10 to 12 years to recoop and see a profit.

    the 70,000.00 he claimed was before expensies. so operating cost would run that down to 1/3

    I asked him why he is wanting to sell " Like I needed to at this point"
    he told me that he going into another busness and dont have the time anymore.

    Because this guy is trying to dump I will sit and wait.
    all's I'm interested in is the contracts. and if he has no time to give the customer. they will dump him and go with someone else. maybe me.

    I hope this get's some of your minds to start thinking about all the in's and out's of running a business and how it can become in the red VERY quickly
    these are real life issues. and I hope this helps all who are thinking about purchasing an up and running Co.

    thank you
  2. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Messages: 7,547

    Do you have employees? Is the work comp rate really 50% there? Here it is somewhere around 5%.
  3. amor4421

    amor4421 LawnSite Member
    Messages: 189

    those are really great questions. i will remember this thread before buying any buisness. those numbers sound a little crazy 22 accounts gross 100,000.00
    they just seem really out of whack.
  4. brandtb1

    brandtb1 LawnSite Member
    Messages: 153

    That guy is crazy asking 100K for the business. With work comp and payroll taxes, I would add about 20% to the payroll, not quite 50%. Even so, he is doing all this work to pay for employees and debt. I would get out too If I was him. Hopefully, someone will not pay 100k for that business.
  5. soloscaperman

    soloscaperman LawnSite Gold Member
    Messages: 3,045

    Don't walk in the quick sand.
  6. bohiaa

    bohiaa LawnSite Fanatic
    Messages: 5,220

    yea IT's pretty high, it really bad when it comes to Government work.
  7. topsites

    topsites LawnSite Fanatic
    Messages: 21,653

    Forget it, one proper way to sell (and buy) a business whole is through a bidding process
    somewhat similar to how commercial properties are bid, because it is fair and ethical.

    Now there may be a few other ways but if the current owner wants to sell it then
    they need to go speak to an attorney first, everything needs to be properly drawn
    up and all of that because otherwise I won't even consider it.

    That having been said I doubt this guy wants to sell, that or once he finds out
    about the true price he'll change his mind right quick, around here folks are lucky
    to get pennies on the dollar way the economy has been going.
  8. tradeyouraccounts

    tradeyouraccounts Banned
    Messages: 343

    Made interesting reading and you came back with good questions. If the hand over process and communication to the customers is done correctly the lose rate on customers can be minimal after the change of ownership. Always best to have a guarantee period and hold some money back till this has been completed.

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