Thinking of buying an existing business.

Discussion in 'Starting a Lawn Care Business' started by Back40, Aug 25, 2006.

  1. Back40

    Back40 LawnSite Member
    Messages: 4

    Mainly just want a little feedback on the deal.

    Business has 13 fairly large commercial accts with receivables of 80k. Equipment is as follows:

    1 2000 27 kohler grasshopper with 61 deck
    1 2003 diesel grasshopper with 61 deck
    1 22 foot rigged trailer
    2 echo weedeaters
    2 backpacks (don't know what brand)
    1 snapper commercial self propelled
    1 1997 Z71 with snow plow and salt spreader

    1/2 of the accounts have contracts with 2 years left

    15k op costs

    All but one acct within 15 minutes of each other.

    All accounts but one pay on time.

    Longest cut time with wife and child helping is 5 hours (this acct pays 18k/yr)

    Wants 40k for accounts or 65k for the whole deal as listed above.

    Your feedback would be helpful and appreciated.

    I already own an 18ft trailer, Kubota zd2160, echo trimmer, old robbin backpack, 60 inch pullbehind for the rough stuff, pulling vehicle. Possible partner has a compact kubota with 60 inch deck, 3 pnt hitch, loader, etc. Also has various push mowers, weedeaters....

    Thanks for your time.

  2. TNT LawnCare Inc.

    TNT LawnCare Inc. LawnSite Bronze Member
    Messages: 1,157

    You need to make sure these commercial accounts will sign with you 1st. How many accounts do you and your wife and child do now. 13 fairly large accounts will be in my opinion? only.. might be very hard on the 3 of you. 99.99% of all commercial accounts want weekly service. If you have lots of residentials you will have to do 2 commercial accounts a day,plus what ever else you have. 40k is not that bad for the accounts,make sure you have insurance. You may want to hire 2 people at 1st. GOOD LUCK:waving:
  3. J Hisch

    J Hisch LawnSite Senior Member
    Messages: 952

    well, I am in your area. The exact city..... Do you have the cash to buy it? if not then it is not a good deal. I would probably go for the whole 65k reason being if something goes bad with the deal you will have some assests to sell off to help recoup some of your investment. A number of other things come to mind. Your overhead maybe different than this operator. You already said the magic word. Wife, kid helping...equals very little labor cost. You will not be able to get that lucky. Also is this a serious business or just a guy cutting grass. how long have you been in lawncare? I own 2 Nice Guy Lawncare, and Greenekeeper Lawn Care in Evansville. I have had good luck buying out other business, so I could help if needed.

  4. Evergreenpros

    Evergreenpros LawnSite Bronze Member
    Messages: 1,154

    80k yearly revenue for 40k? /cough If he'd finance the entire thing maybe. Otherwise it probably isn't a good deal. Usually it's 10-20% of annual revenue for 1 year on buying contracts. Contract brokers, people who just buy and sell contracts like these, usually only charge 15%.
  5. Back40

    Back40 LawnSite Member
    Messages: 4

    Thanks for all the feedback. So, if we got to actually being interested in this business I should have the equipment evaluated and see if 25k is ok for it and then offer him 15-20% for the revenue on the accts?

    To answer a few of your questions: TNT-right now I don't have any accts. I have a fulltime job in the evenings at Toyota. My wife and kids will not be participating in this business but a neighbor may be. We both already own a fairly significant amount of equipment outright.

    J. Hisch- We have part of the money. The owner will finance half. I believe I know your service and where you used to live. Don't you deal with Rick at Power Equipment Plus from time to time? I live down the road from your old house (if you have moved--seems like the barn is rented out to store RV's now) Oh...I was in the business back in the late 80's early 90's in GA. I may be in touch if it gets that far. All the accts are in Princeton area.

    Evergreen pros- I agree with you that it is too much. One of the reasons I asked the question. This particular person has money from other sources and I think he is a motivated seller that doesn't really need whole tamale to walk away from the business. I do know that he has great repoire with his accts (at least three of the largest). He should be willing to help with the transition. I would insist on cutting with him for a week to see just how long it takes.


    PMLAWN LawnSite Gold Member
    Messages: 3,534

    What proof of operating expence does he show??

    18K for the year-- Year round contract?? what do you do during the winter. How many times do you cut-
    Do this -- 35 visits times 15 hours (3 times 5) so 525 hours total / 18K

    18000 / 525 = $34.00 an hour , more visits = less per hour
    less visits = more per.
    Do this with each account.
    Average account is only $6153 a year. I believe that you are not even getting a full schedule for one truck. I would hope to produce over 100K for a crew. With your stuff you will be very mower heavy.
    I believe his operating costs are low because he is not paying for new stuff like he should, All the stuff is old and is close to spent. I believe you will spend a lot more than him on equipment replacement. 40 K for the route?

    I believe this is a great deal-- for him
  7. Back40

    Back40 LawnSite Member
    Messages: 4

    In my response, do I have the right idea on the numbers? I have not found anything I disagree with on the feedback.


    PMLAWN LawnSite Gold Member
    Messages: 3,534

    I would not even consider the revenue-- it is meaningless as far as a business goes.
    The number you need to know is the profit that the business throws off--
    Have him produce the last few years of tax returns for the business and see what his operating costs are and for what. Also what his take home out of the business is.
    My business does make a profit but not that great of one-- But it pays a higher than market rent on the building it uses (my building) and supports phones- computers- P.O. Boxes- trucks and trailers that help in other areas in my life. Look at how he has all that structured and get a true read on what the real money flow is. (by the way-- I do not cheat on taxes but use the laws to the best of my ability)
  9. Buckeye2006

    Buckeye2006 LawnSite Member
    from Ohio
    Messages: 12

    If Both parties are serious, you may request to do Due Dilegence (sp) and review his books. If he doesn't let you or doesn't produce satifactory or limited reference, I would walk away. This is a huge process, especially when your investing that kind of $$. i would get the last 3 years, thats a better average.
  10. 6ofus

    6ofus LawnSite Member
    from Ohio
    Messages: 19

    no! I wouldn't do that, It is to hard to buy someones clientele, Also if he was making money he would not get out. Any on can redo there books, look at his schedual C. that dosent lie because if he shows alot he pays alot

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