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Company purchase

Discussion in 'Commercial Snow Removal' started by Snowshow, Nov 21, 2002.

  1. Snowshow

    Snowshow Member
    Messages: 43

    I was looking for some imput from all of those who have bought into/out another snowplowing company in the past. I am a company that has been in business for approximatly seven years. We are a smaller company that is running six trucks and a loader for equipment. I am looking at buying into a partnership with a good friend of many years who's company is more successfull and also larger. (13 trucks 2 large loaders, misc support equip.)

    My real question is how much is this company worth. I am interested in knowing if anyone has made a purchase like this in the past? Good or bad expierences, ect. How much are contracts worth. Or how much should I pay for them to buy half the partnership. My friends company is running around 250k in gross sales (contracts) can anyone tell me what these contracts are worth to buy in for a partnership. How much can I expect to pay for just the contracts. I have evaluated the equipment and this is not my point of concern.

    I have done extensive reasearch on this topic and am just looking for some extra input. Any help would be appreciated.

    Jim
     
  2. Snoworks

    Snoworks Senior Member
    Messages: 466

    Snowshow - This is a loaded question, but there are several ways to come up with a fair price for buying into this company.

    First, you need to answer some questions.

    1.) Is this going to be a 50/50 partnership.
    2.) Will he be taking 50% ownership of your company during this merger.
    3.) Gross rev. is a good thing to know, but is his company profitable. What is the companys debit/income ratio?
    4.) Are you buying into a company that owns a building (property).

    CGB
     
  3. Sno

    Sno Senior Member
    Messages: 320

    Think I would keep the friendly competition going....

    Put your money in your self.... I have to wonder why he wants to partner with you? needs cash?

    He may be down to six trucks and a loader before its over. ?

    Maybe he would like to sell some equipment?

    ;)

    Sounds like you are doing just fine, maybe you aught to think about it abit more.... ?
     
  4. Snoworks

    Snoworks Senior Member
    Messages: 466

    Sno - My thoughts exactly.

    CGB
     
  5. mulchmonkey2000

    mulchmonkey2000 Senior Member
    Messages: 106

    6 trucks and a loader sound like a good operation. Wish i had that :D I agree with the other guys too
     
  6. Snowshow

    Snowshow Member
    Messages: 43

    Snoworks, The partnership would include 50% of everthing. Equipment, tools, accounts. I would have to give up my equipment as well to throw into the mix, and he will be getting half of my stuff. What make this intersting is that I do a lot of sub-contracting for his company. I have my own accounts, but I started out subbing for him and have always kept trucks on with him. (Pay is great)

    There is no property involved as we both have our own shops. The company I want to buy into has a great earning ratio. I belive that it could be run a little better or tighter, but so can mine i guess. I am still wanting to grow and have tremendus growing pains. My friend doens't need the cash to grow. He is financially stable. My friend is somewhat at his current operating limits he feels and needs another set of eyes to help control it. (There are a ton of other reasons but he doenst need my buy in money)

    Just some thoughts, I guess. Has anyone bought into a company or delt with a similar situaion. I appreciate the comments Sno, and I like to think that I should invest in myself and am confident in going on my own still. I am in NO RUSH! to make this decision. We work well togehter as it is now. But we are just both wanting to take it to the next level.

    Thanks for the inputs.
     
  7. plowking35

    plowking35 2000 Club Member
    from SE CT
    Messages: 2,923

    Why not sell him your company and then be hired on as a manager. Partnerships with friends is rarley a good idea. If you must be a partner, get everything in writing including how to disolve the partnership if that need ever arises. Kind of like a prenup, but these things are so needed when money and friendships meet.
    Dino
     
  8. SnoJob67

    SnoJob67 Senior Member
    Messages: 384

    I'd stay as far away from that deal as possible. If you are friends, keep it that way. I guarantee that if you form a partnership your friendship will change, if not suffer.

    Find your own work, buy your own equipment (or subs) and make your own decisions. Otherwise, you are better off workin' fo da man! It sounds like the only things you need are a little confidence, some salesmanship and some marketing skills. They don't come easy, and they don't come for free despite the tuition reimbursement program for the School of Hard Knocks. Even if you two are better together than peanut butter and jelly, you still will have to split any increase in profits in half.

    Don't listen to me, though. I'm just some wet-behind-the-ears plowguy who conservatively anticipates snow revenues in the low six figure range going into my third season. :D
     
  9. plowking35

    plowking35 2000 Club Member
    from SE CT
    Messages: 2,923

    While I respect anyone who is succesfull in any business venture, I do have to say that on more than one occasion in the past few weeks, posters seem to find it a must to enlighten us on how mush revenue they make. Why is that? Does it really matter? We all know that John Allin is very succesfull in our industry, but what if he wasnt, would that make his posts any less valid? Of course not, post what you like, but I dont see the need for financial statements in this forum.
    Just my humble opinion from a guy who makes XXXXXXX.XX a year.
    Dino
     
  10. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    I guess my advise and observations are not worth much. My revenue is in the several fewer "X's":( .

    Maybe next year:cool: .
     
  11. SnoJob67

    SnoJob67 Senior Member
    Messages: 384

    Snowshow mentioned the revenues of someone who had been in the business for what I would presume to be a "long time."

    I mentioned my revenues because it put into perspective the fact that if someone can do what I have in a matter of three years, maybe a company grossing $250K isn't quite as successful as they seem at first glance.


    If I lost $50,000 in the last three years how much is my advice worth??? Using the logic of the last post (by Dino- sorry, I didn't refresh my browser and catch Mick's post before I made my post.), it would be JUST as valuable as John Allin's advice and I beg to differ.
     
    Last edited: Nov 22, 2002
  12. plowking35

    plowking35 2000 Club Member
    from SE CT
    Messages: 2,923

    Exactly my point Mick, revenue has no bearing on whether or not a post has merit. And if you need to post your revenue as a way of validation to make your point, than insecurity is a bigger issue. Whats more how can anyone realy check on the numbers anyway, you could post any number and we have to take it face value, yet (not implying anyone has done this recently) not even own a snow shovel.
    Dino
     
  13. Ohiosnow

    Ohiosnow Senior Member
    from Ohio
    Messages: 415

    Snowshow

    Bigger is not always better as in more $$$$$$$:eek: . If your going to be big too make alot more $$$$$$$ you need to go BIG. A good friend did what you say you want to do but the then bought out the other guy & then another guy (45 men). Well guess what he is not making that much more to be worth all the extra stress. He has now sold everything & starting over in a new BIZ & staying small ( as in 3 men).

    I myself had been running 2 BIZ'S working 80 hr. weeks to make more $$$$$$$$ for 10 yrs. & found it was not worth the time away from my family. :waving: I now run 1 BIZ full time & just myself as a snowplower, with alot more family time!! And still extra $$$$$$.
     
  14. SnoJob67

    SnoJob67 Senior Member
    Messages: 384

    Dino-

    In regard to your insecurity comment: Every time you point your finger at someone else, there are three fingers pointing back at you.

    My business success does not depend on what anyone here believes or disbelieves. I tried to help the gentleman who started this thread which is more than these argumentative, off-topic posts that you have started are doing. I don't think I said anything out of line and stand by what I said in that post 100%.

    Calling someone insecure in an offhand way is far from "respecting" them. So, I'd say your blowing a bunch of hot air when you talk about respect in your post. In the mean time, if you would like to discuss this further, email me or call me (you have my home/office number) and we will talk about it off the forum which would be much more appropriate.

    Also, you may not know if I own a snow shovel or not, but you do know that I am taking delivery of two MPT polyurethane edges for my ATV plow. Who would spend $125 on 2-4' sections of polyurethane if they didn't even own as much as a snow shovel?

    John
     
  15. plowking35

    plowking35 2000 Club Member
    from SE CT
    Messages: 2,923

    Posting revenue as a means of adding credibility to yourself is not needed. Even if you had lost 50K last year, but your post had good information, it would be just as valuable as someone who made a profit. What I am saying is, the information that we share is what is valuable not how much you may or may not gross in a year. All that does is try and fluff a personal ego in front of the group, it really has no bearing on the discussion. Feeling secure about oneself comes from with-in, not with a pat on the back from others.
    IE, some of the best info has come from ideas gleaned from John Allin, who's business grosses millions of dollars, this makes perfect sense, since he obviously is doing something right and know his industry. However I have also gleaned as much knowledge and ideas from Chuck Smith, who when I first met was operating one truck and grossed alot less than JA business. Not to say these are the only two who have helped me over the years, it just illustrates that the ideas and info are what matters not the money. The ideas and info will lead to the money.
    Now none of this was meant to start a flaming thread, it is just that this forum can be very anonymus, and while I certainly didnt try and single anyone person out as being insecure, one could draw that conclusion.
    Furthermore John, in reference to this thread, I agree with your statement, and it made alot of sense, it wasnt till I read that last statement about the wet behind ears operator, that I gave pause for thought.
    Dino
     
    Last edited: Nov 22, 2002
  16. Sno

    Sno Senior Member
    Messages: 320

    I dont know, I kinda enjoyed all the posts.

    Including the dollar figures.

    And if you all politely argue with your customers like you do with each other .. I believe all the numbers.

    I love watching good diplomats in action.

    :drinkup:

    Back to the original post, sure wish I could talk you out of it.... Just doesnt sound right.

    Maybe keep all separate? and work together? Why give up control of assets? That would make me loose more sleep than a weather man could.

    By the way, I'm aproching that 50,000 loss this year... But, I own my shovel. :drinkup: :drinkup: :drinkup:
     
    Last edited: Nov 22, 2002
  17. Snoworks

    Snoworks Senior Member
    Messages: 466

    Snowshow - Ok, it sounds like you have a handle on the details.

    Now put a spread sheet together:
    -List what you bring to the table, in description and $'sss.
    -List what your prospective partner is bringing to the table, in description and $'sss.
    -Make sure you account for your profit margins, too!
    -Subtract, your net total from his.
    -Times this number by 5-7, and it should be in the ballpark.

    Remember, in the end, his company is only worth what someone is willing to pay for it. Snowplowing company's, or any other companys for that matter, can look good on paper. But how much would you pay for it.

    If it was me in your place, I would be looking really hard at your future salery projection. Is it worth it for you to by in at blank $ amount, to enjoy, the projected salery.

    Let it snow!!!!!!


    CGB
     
  18. SnoJob67

    SnoJob67 Senior Member
    Messages: 384

    Sorry, duplicate post edited and removed.
     
    Last edited: Nov 22, 2002
  19. SnoJob67

    SnoJob67 Senior Member
    Messages: 384

    Dino-

    I see we are starting to see eye to eye from your last sentence. My intent is not to brag or gloat. Many here don’t have a clue if they have the potential to earn $5 or $5 million in revenues in their first few years in business.

    Knowing that a contractor such as John Allin is doing tens of millions of dollars worth of snow removal per season is a great motivator for someone such as myself. Maybe on a smaller scale there is someone who will read my post and be motivated to achieve what I have in their early years since I have “paved the way“ to a road they now know exists.

    On the other hand, I do understand where you are coming from. Revenue does not equal expertise. However, it is one possible indicator that points to success when you see accompanying signs of success.

    By no means do I consider myself a snow god when my revenues would not begin to pay John Allin’s tax bill.

    Do we argue so politely with our customers? My answer would have to be yes, most of the time. ;) I can answer yes for Dino, too, since technically buying those poly edges does make me a customer of his.
    :drinkup:

    John
     
    Last edited: Nov 22, 2002
  20. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    Snowshow, among all the banter you've gotten some good advise. Regardless, if you decide to proceed with this merger, the first thing will be to get good, objective business and legal advise. Find a business consultant who specializes in mergers, then find a good accountant. Let them handle the details while you and your friend go out to eat supper with your wives. Now, when the consutant and accountant are done, you can consider their advise. Remember, they just give the facts. They could care less if you take it as long as you pay them.

    Good luck.