Purchasing a minority interest

Biz Buyer

LawnSite Member
Location
Houston, TX
i am considering beginning to purchase minority interests in lawn care companies by purchasing a percentage of revenues. This allows the company to be valued much more than traditional metrics would. For example, if a company earned $100,000 in sales, I might be willing to pay $25,000 for just 10% of sales, valuing the business at $250,000! Does anyone have any comments or thoughts on this?
 

snomaha

LawnSite Bronze Member
Location
midwest
i am considering beginning to purchase minority interests in lawn care companies by purchasing a percentage of revenues. This allows the company to be valued much more than traditional metrics would. For example, if a company earned $100,000 in sales, I might be willing to pay $25,000 for just 10% of sales, valuing the business at $250,000! Does anyone have any comments or thoughts on this?
I have a comment and thought - why?
 

BigJlittleC

Banned
Location
Chicago
Maybe I am missing something but how does putting 25k into a 100k business magically make it a 250k business?

If this magically does make the business more valuable what good is that valuation outside of a sale? What's the point?
 

BrandonV

LawnSite Fanatic
Location
Central NC
In my little area of the world lots of wealthy folks have lots a lot of $ investing in landscape operations and nurseries. I don’t know you’re specifics but I’d be wary.
 

tonygreek

LawnSite Platinum Member
Location
Connecticut
i am considering beginning to purchase minority interests in lawn care companies by purchasing a percentage of revenues. This allows the company to be valued much more than traditional metrics would. For example, if a company earned $100,000 in sales, I might be willing to pay $25,000 for just 10% of sales, valuing the business at $250,000! Does anyone have any comments or thoughts on this?
Going only by the example you've given, this isn't well-thought-out.

And your exclamation mark after $250,000 valuation gives me even more pause. To be more pointed, the exclamation screams scam.

My only follow up question is "Does Lawnsite still prevent a new member from DM'ing people until they have some sort of track record on here?".
 

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