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A few questions

Discussion in 'Introduce Yourself to the Community' started by dirtmovr, Oct 18, 2007.

  1. dirtmovr

    dirtmovr Junior Member
    Messages: 25

    Hello, Just have a few questions, tell me what you think. I am looking at buying an operating snow removal business, with all equipment, buisness name and accounts. Equipment is six 24 ft blades and one mfwd tractor ( subcontract five more mfwd tractors) , six 9ft box blades on tractors(1985-2003) with loaders, two 1974 tandem axle dump trucks, and a salter on a 1-ton truck. There are 60-65 accounts, some small but most are big parking lots and open areas. I currently own heavy construction equipment and do land development. What do you think it is worth. Thanks
     
  2. SnoFarmer

    SnoFarmer PlowSite Fanatic
    from N,E. MN
    Messages: 8,457

    What does this business gross in a year?
     
  3. dirtmovr

    dirtmovr Junior Member
    Messages: 25

    In an average year, about $500,000, but we have not had an average year in quite some time. We pulled snow three times last year, 16 is average. I have worked with him for three years as an operator. The business has been around for 17 years, and has a good reputation.
     
  4. Clapper&Company

    Clapper&Company PlowSite Veteran
    from NE OHIO
    Messages: 4,413

    I think most of the time they take the gross x 3 to get what the accounts are worth. Plus the equipment.

    Dont hold me to it but I think thats how it works
     
  5. dirtmovr

    dirtmovr Junior Member
    Messages: 25

    Thanks C&C, I was just looking to see if anyone have any ideas on how to figure it out. I appreciate your info, it gives me something to work with. Anyone know of any business that have sold, Thanks.
     
  6. bribrius

    bribrius PlowSite.com Addict
    Messages: 1,609

    hmm. i think ill put it this way. i was approached six years ago by someone who was willing to sell me a tow truck/garage company.
    i added up all the equipment values that i expected them to be worth. then i minused 30%. reason being if your buying that much crap at once you should be getting a package deal. so i figured 70% of value. some of the trucks had so many miles on them i would have rathered he keep them.
    how much does it gross? HOW MUCH DOES IT NET is just as good a question. and after you finance whatever you need to finance and subtract that bill from the net is it still in the black? was the business in the black before or was it already running in the red before you added your cost of financing? is there any overhead you can cut? any fat to trim?
    what are the contracts worth? individual basis. some might be better to not have. some might be great. how long are the conracts? one year? four years? makes a difference. is the contract profitable? will it be if you operate differently? i never bought the garage/towing company. all though i loved the idea of it i was not putting that much up in risk level for such a small profit margin. it wasnt just the gross i cared about. it was what does this thing need for a influx of cash to fix what the previous owner ran into the ground and what will it actually put in my pocket. so it has a good name. what is a name worth? its already in the balance sheet. names are great in a start up franchise and might be worth the money. its already in business in this case. the names in the numbers already. thats what its worth.

    why are they selling the business? not making money or not keeping money? just retireing? because im sure the reason you might buy it is because you want to make money and you want to keep money. be careful. some business's they should PAY YOU to take. i think you need to do lots of homework. the number your looking for is there but it isnt something you pull off the top of your head. dont be white washed by looking at all the equipment, building, GROSS income. looks are deceiving and its easy to not see the bottom line and thats what your looking for.
    if your going to finance this the bank will want lots of these answers too. smoke and mirrors dont finance well.

    almost forgot. EMPLOYEES? any of them leaving that are valuable? good employee can be worth more than the dumptrucks. even if seasonal.

    funniest thing. guy the other day told me he was selling his company. he has a truck. zero turn. weed wacker maybe? tractor, couple trailers. only been in business three years. he doesnt really have much of a business. few small contracts but next year they could be history. who knows.

    i said "what company?" way i see it he only had some equipment to liquidate.
     
    Last edited: Oct 22, 2007
  7. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    it's 3x NET receipts
    A business that makes no money is worth precisely zip.

    and not just one year, but the last 3 to 5 years going back. (tax returns too)

    Most service business's are worth their equipment plus a little for the contracts
    and that's about it.

    But it's a quick way to get started.

    You generally have to sign a non-disclosure agreement to get a look at the books.
     
  8. dirtmovr

    dirtmovr Junior Member
    Messages: 25

    Thanks guys. The previous owner wants to retire, (70 yrs old). The business is in the black for the previous years, no losing years, but everything he owns is paid for, no payments makes it nice. The owner will finance the business for me. Although it has been in the black, you add in a yearly payment and interest ( $110,000.00 for the first year), operating costs and repairs and that changes real fast, a bad year (3-4 storms, which we had last year) and the business does not support itself. On the other hand a decent year and it pays for itself in 4-5 years. The million dollar question?,, is it gonna snow or rain ? who knows. As for as employees they are all subs, and work just when it snows. They are all good operators. There are long term contracts for 4 accounts, the rest are yr. to yr. contracts. Not ideal, but the customers want the 24' blades to do the snow removal and this is the only company with them, the owner had the blades built at a local machine shop. Too much stuff to think about. Thanks again.
     
  9. andrewlawnrangr

    andrewlawnrangr Senior Member
    Messages: 339

    have ur CPA go over the books just as lonecowboy said its the best way.. the business may look great but it will show on paper.. just what i hear froom my dad whos a cpa good luck
     
  10. Clapper&Company

    Clapper&Company PlowSite Veteran
    from NE OHIO
    Messages: 4,413

    You might be better off to, wait till he retires then pick up the accounts, with out paying for them:)