what would you pay???

Discussion in 'Business Operations' started by jsf343, Apr 18, 2006.

  1. jsf343

    jsf343 LawnSite Bronze Member
    Messages: 1,784

    Long story short, I have a chance to buy another LCO and I am trying to figure out what a good price is to pay. Here is the details....
    37 full time accounts, 7 by weeklys, 44 total. All are on year long contracts, monthly income is around $5700.00. He has a 96 ford crew cab, (think its a 250) he is looking to get 7800.00 for the truck. Has a 52" ztr, (not sure what
    brand, I have an e-mail out with a ton of questions trying to nail all the specifics) also has an exmark 21", backpack blower, stick edger, weed eater,
    6x12 flatbed trailer, and various other small tools including hand tools.
    He stated that he was looking for around 23,000 to 25,000 for accounts only. I told him that 1 to 3 months gross sounded a little more reasonable.
    any opinions (I know there always are:laugh: ) I need opinions on the equipment including truck, and accounts if anyone wants to take a stab at this. Thank you in advance! Jeff
  2. jsf343

    jsf343 LawnSite Bronze Member
    Messages: 1,784

    Mower is a 96' 52" Toro Groundsmaster, exmark is not being sold, truck is a 96' f-250 with 170,000 miles, power stroke diesel. Accounts are 25 weekly, and 9 by weekly. For a total of 34. I am thinking now that 3 months gross is maybe too much. Dont know a thing about the Toro, it seems like a 96' is pretty old. It was serviced religiously and owned originally by the State of Oregon. Also don't know a lot about the truck, I am not very familiar with that year Ford, seems like 7,900 is a bit high for that many miles, but then again it is a diesel. For anyone on here who has a toro like that how do you like it? give me some feedback please.
  3. jsf343

    jsf343 LawnSite Bronze Member
    Messages: 1,784

    Workin on my own thread here!
  4. jsf343

    jsf343 LawnSite Bronze Member
    Messages: 1,784

    Honestly Jeff, I think the truck has too many miles on it, so does the mower. I would take the accounts though!!:laugh:
  5. jsf343

    jsf343 LawnSite Bronze Member
    Messages: 1,784

    Thanks for the reply Jeff, I knew someone out there would respond!!
  6. jsf343

    jsf343 LawnSite Bronze Member
    Messages: 1,784

    anyone out there???:sleeping: :sleeping: :sleeping:
    Too much:drinkup: going on I guess.
  7. Soupy

    Soupy LawnSite Gold Member
    Messages: 3,125

    Depends how bad you want the accounts. It's probably worth 1-2 months per account. Just think about how much time and money you would need to put into a marketing campaign to gain those clients. It also has a lot to do with the profitability of the clients too. If he has them priced good then they are worth more. If they are priced bad then they are not worth anything.
  8. Turf Dancer

    Turf Dancer LawnSite Senior Member
    Messages: 681

    There was a business that sold over here about 4 years ago that had 65 accounts and all but 2 agreed to stay with the new owner. He grossed 65K with these accounts and it took 2 guys 28 hours to do them all. The business sold for $15,000 and included an 89 Nissan truck, 5x10 trailer, 4 Toro 21" 2 stroke mowers 2 of which were new never used, a couple trimmers, blower and a 36 Exmark Metro. It was in another town a ways east of here but I thought for what he paid those 2 guys, I could have expanded on it and covered 3 towns and never had to go over there except when there were problems which he said he never had any with them. I could have put $ 18,000 a year in my pocket and that was all there was to it except I could not come up with the money in time.

    If he is a sole proprieter then the contracts are void if he sells you his business, that is according to my lawyer. I asked him about this in the case of the business that was for sale listed above as a few of those people were on contracts. He said the only way to be able to retain those contracts legally is if the business is incorporated. This is because if it is his business and it is not incorporated then all contracts are legally with him as the sole owner, and not the business because he is the business even though it is under a business name for example: John Doe DBA Greens Care etc. The only way you can retain these contracts as part of the business is if it is incorporated. Then when you buy the business the contracts are an asset of the business just as the equipment or the truck would be. The contracts may say for Example: Greens Care but they are worthless to you if you buy him out because Greens Care is just a legal alias that he is doing business under. All contracts are with the guy that owns the business. Lets say you agreed to buy him out for $30K and you thought that all those contracts were going to be yours after you paid him and the deal was done. The next week you could find out that you have none of them because he decided to take the $30K you gave him and buy new equipment, different truck etc. Then you find out he is still doing all the contracts you thought you had. All you have to show for your 30 grand is just an old truck with a trailer full of worn out lawn equipment worth a couple grand. The worst part is that you won't have much legal ground to stand on when you try to sue him to get your $30K back.

    This also holds true for business debts, if you were to buy a sole propriators business and he owed $500 to a shop for welding or repairs. He still owes them even after you buy him out and even if you retain the business name because the agreement was with John Doe not Greens Care. My brother found that one out the hard way.

    Now for what I would do with this situation.

    #1- Find out if he is a sole proprietor or inc.

    #2- If he is not then see if you can get all the customers to agree to sign a new contract with you if you come to an agreement with him on a price. By doing this you would be able to look at the properties to see if they are going to be profitable. Who knows they may not be worth the hastle.

    #3- I would offer him 4 to 6 weeks gross for each property.

    Example: 34 properties@$25 a week each=$3400 4 weeks. $5100 6 weeks.

    The accounts aren't worth anything if you can't legally retain them for at least the remainder of the current contract. I would suggest paying a lawyer for an hour of his time before you jump into this deal. The information I have given you was based on information from my lawyer.
  9. jsf343

    jsf343 LawnSite Bronze Member
    Messages: 1,784

    You wrote a lot of info there T.D. and it is good advice. I plan on asking for more info on these accounts. I have made up my mind that I am not interested in the equipment, I would rather find my own that is not so old.
    as far as the contracts go I plan on running them by my lawyer first as well.
  10. abuckeye

    abuckeye LawnSite Member
    Messages: 93

    I bought an LCO at the end of last year to help me get started. I purchased the equipment and his accounts, not his business. He had no contracts on his customers, all residential. I paid 30% of 1 years income based on 30 weeks in Ohio. I paid him 40% up front and will pay him the rest in June, less the amount for customers that did not renew with me. To date I lost about half. Needless to say his June payment will be much smaller than the original amount.
    Some of the accounts are good. A few are under priced and just poor lawns. So make sure you go and physically look at the properties before commiting to anything.
    If you are already in business and looking to expand I would suggest spending some of that money on good advertising.

    Just my 2 cents.

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