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Buying a Turn key business????

Discussion in 'Business Fundamentals' started by Double C, Sep 24, 2009.

  1. Double C

    Double C Member
    from Montana
    Messages: 41

    Looking for some advice/input/.02 cents or anything else.
    I have the opportunity to buy a turn key snow removal business.
    35 commercial accounts all within a 4 miles radius
    5 old Chevy 3/4 (75-76's) in good shape for the age (?? I think)
    4 with 8ft straight with wings
    1 with 8ft V
    and one spreader and snow blower
    The accounts are all billed hourly ($80)
    About half are "Handshake Deals" all have been with the business for at least 5 years

    I'm looking at about 15-18 plowable events a year the current owner said he starts plowing about 1am and is done be 7am ( 6 hours times 5 trucks = $2400 per event) only one acc has a small sidewalk to do everything else is truck only.

    Insurance, employees, work comp, Ect... are all covered
    the business is for sale for $28,000.
    Is this good/bad/or ugly???
     
  2. Lux Lawn

    Lux Lawn PlowSite.com Addict
    Messages: 1,137

    I wouldn't spend that much money on a business that has the contracts done on a handshake. Also 76 Chevy's, that sure seems pretty old. Tell the guy to get all the customers to sign contracts.
     
    Last edited: Sep 24, 2009
  3. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    most service business's (mowing, plowing, plumbers, etc) are worth the cost of their assets plus a little bit for the customer list.

    IMHO the assets (4 30 year old trucks) are worth precisely zip and the plows are worth a little.

    the customer list is worth some, but not much.

    Probably not worth over 5 grand or so. TOTAL

    If you were a bank, would you lend someone money to buy this?

    if so, how much to make sure that you (the bank) wouldn't lose money?

    Darn right, wouldn't be much.
     
  4. snocrete

    snocrete Banned
    Messages: 2,862

    Is strange an option? Ins.,workers,workmans comp is covered? By who and with what money? Handshake deals, are only good for the ones shaking hands;)
     
  5. Double C

    Double C Member
    from Montana
    Messages: 41

    The snow removal business would be purchased by my Farm llc, all i have to do is list snow removal on my insurance already have everything else covered
     
  6. snocrete

    snocrete Banned
    Messages: 2,862

    either way it still dosent seem like a good deal, IMO. 35 com accounts and 5 trucks should be turning more than $2400 per event........and this is how much 5 30yr old plow trucks are worth - ........wait, I forgot how much srap metal is going for? Can someone help me out?
     
  7. 2COR517

    2COR517 PlowSite Fanatic
    Messages: 7,115

    If it's such a great business, why is he selling? He could add one more driver and just stay home to watch the snow fall.

    There's nothing wrong with old plows on really old trucks, as long as you know them inside and out, and have been very good with maintenance. I'm guessing he hasn't if he's been thinking of selling. If he wants to "hold the note" so to speak, maybe. Maybe give him half the profits after every bill has been paid for the storm. Fuel, insurance, maintenance, everything.

    And the contracts would have to be nailed down. Handshakes are ok if you know the people, but you need something in writing.

    Also, your math might be optimistic. If you are six hours boots on to boots off, pretty tough to bill six hours.
     
    Last edited: Sep 24, 2009
  8. plowtime1

    plowtime1 Senior Member
    Messages: 446

    Start fresh..or offer 40% of gross receipts; every seller fudges numbers. JMO
     
  9. MIDTOWNPC

    MIDTOWNPC PlowSite Veteran
    Messages: 4,452

    I have bought accounts / business before.
    I paid a percentage on the total billable amount for the previous year.
    I didnt buy any equipment.

    I would suggest you have him break down the prices for the equipment and then get it out of the picture.

    In some cases buying contracts never works, but for me it did because the previous guy had a good story for leaving and passed on all the contracts to us by calling the customers and saying how he was retireing and we were taking over. In a way he did the transition for us, then we called to confirm everything and it went pretty well.

    One thing that did work well also was I paid him in installments, over the season, it was based on the contract renewals and if people dropped he wasnt getting anything. So in a way it kept him honest.

    Ended up being a record year that year and 75% of the people stayed with us, the others dropped and did it themselves. Anyways I ended up paying him out in full on the second payment of 5 payments beause I had already billed enough to pay him before jan. It was one of my best deals I have ever done.
     
  10. MIDTOWNPC

    MIDTOWNPC PlowSite Veteran
    Messages: 4,452

    I have bought accounts / business before.
    I paid a percentage on the total billable amount for the previous year.
    I didnt buy any equipment.

    I would suggest you have him break down the prices for the equipment and then get it out of the picture.

    In some cases buying contracts never works, but for me it did because the previous guy had a good story for leaving and passed on all the contracts to us by calling the customers and saying how he was retireing and we were taking over. In a way he did the transition for us, then we called to confirm everything and it went pretty well.

    One thing that did work well also was I paid him in installments, over the season, it was based on the contract renewals and if people dropped he wasnt getting anything. So in a way it kept him honest.

    Ended up being a record year that year and 75% of the people stayed with us, the others dropped and did it themselves. Anyways I ended up paying him out in full on the second payment of 5 payments beause I had already billed enough to pay him before jan. It was one of my best deals I have ever done.
     
  11. Double C

    Double C Member
    from Montana
    Messages: 41

    I know it is hard to give an opion without seeing the lots, however 80% of them are about 15-20 parking stalls, str8 up plowing with room to pile snow, the other lots are bigger but still nice to push. So i keep woudering if I could do all of these accounts with the 3 good trucks i already have with 8'V (need to by 2 more V's) vs his 5 old trucks? and come to some sort of deal to only by the accounts at a fair price
     
  12. 2COR517

    2COR517 PlowSite Fanatic
    Messages: 7,115

    If you already have trucks that aren't fully booked, that's different.Tell him to sell the trucks for cash. Maybe take the best one as a backup/spare. Then give him a percentage of this year's revenue, and maybe a smaller percentage of next year for the customers that don't jump ship.
     
  13. Double C

    Double C Member
    from Montana
    Messages: 41

    Have 3 trucks only 1 plow thinking about getting 2 more plows
     
  14. 2COR517

    2COR517 PlowSite Fanatic
    Messages: 7,115

    You would almost have to be better off putting plows on your existing trucks. Are they 3/4 or 1 ton trucks? You really need that to run a vee commercially.
     
  15. RLM

    RLM PlowSite.com Addict
    Messages: 1,270

    I agree see what he thinks the truck/equipment is worth, its OLD, but at that age it is easy to work on, problem is it could be rotted junk also. Every one has given you GREAT advise. If it were me I'd consider it. Cost/time to acquire accounts vs. what he's asking. If the truck price is right work it in, (to me right is around 10K, or less, for all 5). According to my math 15 visits @ 2400 is $ 36,000, with the $ 28,000 he's asking after fuel & payroll, you might break even first year, don't know if thats good or bad...your call.
     
  16. MileHigh

    MileHigh PlowSite.com Addict
    Messages: 1,827

    Wow..

    5 trucks plowing 35 commercial's only churning up $2400 per event?...

    It means that an average of $68 gets billed to each client each event.

    Ouch..That is one dark hole.