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HELP may be buying a business out

Discussion in 'Commercial Snow Removal' started by dvlscapes, Oct 19, 2007.

  1. dvlscapes

    dvlscapes Junior Member
    Messages: 12

    I am negotiating with a 65 yr old man for buying out his established 40 yr old business. What I am getting in the deal is about 18 small commercial leads, and about 5 or so residential. the average price per lead is about 50-60 per plow. Totaling about $1350 for the route which he claims can be done in an average snow with 2 trucks with 1 helper in each truck 4.5 - 5 hrs. I drove around with him today and looked at the routes they are all within a couple miles of each other in a town about 6 miles from my town. The deal also comes with a piece of junk (but does run) 90 chevy 2500 series diesel with meyer plow in fairly decent cond.

    Oh and I am getting into plowing because I have to try and lower the downtime in the winter for my guys causee we currently do nothing and they collect unemp. for about 3 months in winter and my rate is getting crazy. I asked my insurance co about adding plowing and there is no increase. What would you guys pay for this? any thoughts? His asking price for this is $10,000. I am thinking more like 6- 8,000.
     
  2. Mick

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

    I would pay nothing. First, you said LEADS not contracts. Leads are worth nothing. You can get some of them on your own and others. The equipment is junk and won't last long; you'd be better off getting new. Six miles is too far to drive in severe conditions.
     
  3. forestfireguy

    forestfireguy PlowSite.com Addict
    Messages: 1,276

    I agree with Mick, Leads aren't worth more than buying the guy lunch, paying 6-8 grand for a truck that if it's a rat is worth what ????? Maybe 3-4 k with a good plow. Seems silly to me if they were signed contracts and you could look at average income(not gross billings) overe the course of the at least the last three seasons you'd be better off. Also what business is it you are in now??? Could you simply put plows on trucks you already own??? My advice is find someone with a decent snow operation, sub for them, learn all you can......Then if you feel comfy strike out on your own next year. If you finance plows you'll spread the costs over a couple/few seasons(interest is deductible). Also consider a spreader if you buy a package you will better be able to leverage your buying power. Just don't go and layout rediculous money in one lump(unless your accountant told you to dump money into the business) Anyway.......JMPO residentials are a big PIA........Not one of them will be happy, especially in your first season. Another option, try to tap your existing customer base, it is easier to expand an existing relationship than to build a new one.......Unless a woman is invoved then you may as well play the lottery.......LOL
     
  4. dvlscapes

    dvlscapes Junior Member
    Messages: 12

    Ah well I meant contracts then. I'm not giving him a dime until the letters he sends come back signed after the 10% price increase I said he needs to do across the board. What do you mean by 6 miles is too far to travel in severe conditions, where do you guys plow, In your backyard? Maybe its more like 4 or 5 miles to the closest one from our shop but to the center of all of these would be somewhere around 6 miles. I'm figuring the truck is worth about 1,000 and the plow with hydraulics is worth about 1,000. This guy is also willing to run one of the trucks and make 1/2 of what the 1 truck route pays and help me out and give veteran advice for the first year or two. He wants to start getting out, he is old. Thanks
     
  5. TwistedMetal

    TwistedMetal Member
    Messages: 48

    dvl...why not offer to help him this year..learn the accounts he wants to sell you..you can make some money..pay for a plow on a truck you already own..see if its something you want to do on your own..just my .02 cents
     
  6. Mick

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

    Yes, now everything is in a two-mile radius and I'm starting on one side of that. Granted, it took several years to get to that point, but what I'm getting at is that you're going to be driving in the worst conditions possible - at night in blinding snow. Regarding used equipment - last year I sold a 1/2 ton with a six year old 7.5' Fisher. some surface rust and the truck was pretty well worn out but run. I sold the plow for $2500 and threw in the truck since he was in the repair business and could sell it for parts. Then I sold a 9' Fisher that had some surface rust and a good-running (when it ran) '96 Chevy one ton 6.5 diesel for $2000. The point of all this is that used plowing equipment isn't worth much to start with.

    If you're getting signed contracts showing you as the vendor, then I'd go maybe half of a season's (or the contract period) worth. His "expert advise", I'd recommend paying seperately. Come to an argreement on what it is that he's going to advise you on and come a financial arrangement based on that. Too many guys just want to tell you "Well, that's how I did it" which is not worth anything. You'd be better off having an independent person going around with you; showing you what you want as an end result and how you might achieve that. That's the same reasoning why most businesses/organizations etc want the previous supervisor/manager gone before bringing in a new supervisor/manager.
     
  7. QuadPlower

    QuadPlower PlowSite.com Addict
    Messages: 1,056

    Above is all great advice and I agree with it.

    Do his customers know he is quiting? Are they signing contracts with him or you? Will all of them go with you when its over?

    Just a thought. Maybe they are not happy with his work, but are keeping him on because they have had him for soo many years. Don't want to make an old man upset. Maybe they have someone else who has been knocking at their door and offering do to it for less. But staid with him because they feel sorry.

    How many events/plows do you get in your area? How long will it take to make a profit on this deal? Do you have another truck or sub to cover you when 90 Chevy stops?

    You mentioned keeping your guys busy during the winter. Are they going to be doing this or are you? If he was doing it him self in 4 hours, is one of your workers going to get out of bed in the cold and do it for you or will they stay in bed and keep the un-employement? If you want to keep your people working, you will have to get more accounts than this.

    Pay him what you want for the contracts & the truck. Pay him to ride along with you the first storm, show you the route, where he pushed snow, etc. Then do it your self.
     
  8. dvlscapes

    dvlscapes Junior Member
    Messages: 12

    I am in landscape design and installation. We have two other 4 wheel drive trucks which could be hooked up with the plow if the purchase truck takes a dump. The pricing he does the work for seems reasonable. We are a good company that is among the best at what we do...patio and landscape installs. If we get a huge dump we have 2 bobcats and a dump truck we could truck snow out in the event of a major snow. I have done snow removal on a limited basis with the bobcats when major storms hit so I am somewhat of a Newb but not completely. We live northwest of philly so we don't get a ton of snow but every few years we get some pretty major storms, and we are due for one.

    Heres my situation, I am spending about an extra $3,500 - $4,000 annually on Unemployment tax due to my guys collecting all winter and me seeing higher rates all season. I pay 8% on the 1st $8,000 that each guy makes to UC fund and we have 7 employees, thats a lot of money! If I bring in work for them in the winter the lower rate from paying out money for the guys sitting on their butts will be used to generate profit for the company (once we become efficient, which should only take 1-2 snow events) I have a good forman who sits on his butt all winter who takes side jobs here and there but collects UC all winter. I have talked to him and he is very enthusiastic about the snow removal possibility. I just need to come up with a real number to tell the old man, something fair to both parties.
     
  9. dvlscapes

    dvlscapes Junior Member
    Messages: 12

    Mick,

    the conditions in Maine i'm sure get to be more severe, more often then here near Philly, so in your neck of the woods I can see wanting to keep close as possible. Here we want that too but you said it yourself that it took you several years to get there.

    Twisted Metal

    That might be a possibility working as his sub but, insurance for him is a lot more then it is for me. For me insurance is free of cost but there is always the chance something happens so its not really free now is it.
     
  10. forestfireguy

    forestfireguy PlowSite.com Addict
    Messages: 1,276

    You cannot count on that truck, you need to have another one ready to roll out. If it does dump good luck getting someone to put a blade on it last minuite
     
  11. mrbrickman

    mrbrickman Senior Member
    from montana
    Messages: 138

    snow is tricky to solicit for, ive done it for years from july-november and youre lucky if you get a .5% response rate out of cold calling, a 1-3% rate if faxing out advertizing to select commercial property owners/mgrs, so although it seems they are quite small, that many commercials arent bad. Id personally never pay for something i can get on my own, id never pay for someones lawns unless they were substanisial commerical cuts. Get a nice uniform together and go out to your local business district, walk in and drop off a flyer, i have these little postcard flyers with boxes you can check to get a free estimate (on paving, landscaping, snow) and postage paid return....it works awesome, used to work even better in the days before email, i also include a phone number and email on the card, and now adays most replys come via those methods.

    my opinion......forget about the guy selling the stuff, outfit one of your own trucks, or two...check out craigslist.org or tradin times magazine or even ebay and get yourself a rig, perkiomen performance has some used stuff along with yoakum electric, im guessing your somewhere around montgomery/chester county? in that case id get my trucks outfitted.....get a toro paddle snowblower or 2 and give BRICKMAN of main line or BRICKMAN chester a call (check out brickman.com for a central phone number), ask to become a subcontractor, you already have the insurance, and are always looking for help to take care of a site or two they will dedicate to you. Theyre payin about 85 an hr per truck, 35 an hr per guy, 45 an hr per snowblower and heck, mention the word owned bobcats and plenty of manpower and theyll for sure take your number. (theyre paying 90-120 an hr depending on the branch for a bobcat)

    ...or buy that guys stuff, is there anything to ensure they wont like you, your looks, your personality, your men, your work, that your an outgoing 29 year old and not a 70 year old grandpop and decide to drop you just for that reason? its a gamble 6 miles aint bad, i drive out to valley forge from willow grove and from valley forge to morrisville each event, so thats a good 40 mile trek end to end
     
    Last edited: Oct 19, 2007
  12. dvlscapes

    dvlscapes Junior Member
    Messages: 12

    Thanks Mrbrickman I have some decisions to make
     
  13. garkencha2

    garkencha2 Junior Member
    Messages: 6

    True with what they said, $10K can buy a lot of sales time, try putting your employees through a leasing service, you pay a certain percent on the dollar usually a $10 hr guy will cost u $12.50 to $13 an hour but you are now free of the work comp., unemployment, fica, suta etc.....and they are now responsible for any comp. claims including the paperwork that goes with it.
     
  14. Ozone

    Ozone Member
    Messages: 49

    Nice to see some guys from the Philly burbs on here.
     
  15. framer1901

    framer1901 Senior Member
    Messages: 813

    That seems like a big dollar amount for nothing really gauranteed long term.

    First you say you have seven guys collecting unemployeement, but are gonna run only two trucks with helpers. That still leaves you three guys collecting with you at home in bed, and you'll probably want to be one of the guys out working......

    How many snow events do you have in your area?? Five or Six?? The math comes out say ten events, six hours each, 4 guys - saving 240 hrs of unemployeement in a at most best case.

    IMO, the best way to get in this business is to sub for someone, limit the liability of your best asset, your name. We plow alot up here, in one year, you gain alot of experience of sooo many things. The smarter you are, the more you can soak in like, how long does it really take to plow something, about how much could someone charge for any lot, how much salt does it take at 30 degrees and at 5 degrees.

    No contract is garaunteed for even the first year let alone second or third. I know I'm probably low on this, but I think more like 10% of paid invoices is what a contract is worth. It gets you in the door only and YOU must perform to keep the contract.

    The thought of giving someone 50% of a route driving my equipment seems waayyy high also.

    You have alot of potential equipment, the laborers to go along with it, offer yourself as subs and slowly pick up your own accounts to obtain growth - I think you might save more in the long run.
     
  16. dvlscapes

    dvlscapes Junior Member
    Messages: 12

    Well heres an update.

    I was in contact with 2 large companies letting them know that we do snowplowing and can sub for them. I offered the old man $4,000 for the signed contracts, minus the crap truck. He hasnt bit yet, I guess he is thinking someone will offer him better or something.

    Framer, just to clarify, Only 3 of my employess can collect, the others are on salary or live in mexico for the winter (H2B). The route he is going to drive would be using his equipment and one of my laborers, so the deal isnt quite as bad as you were thinking. I like the 10% of contract idea, that actually makes a lot of sense. Thanks for the input.
     
  17. Brian Young

    Brian Young PlowSite Veteran
    Messages: 3,382

    I agree, leads are not worth the breath it takes you to say it. We bought out a lawn care company and it included his customer list plus equipment. I was ignorant back then, it turned out we retained 75% of his customer's to this day but the ones that paid well went elsewhere, so basically his list was worth nothing to me. In the lawn care business signed CONTRACTS are only worth a month or two of income. I would say maybe a few grand (3-5k). Thats all I would pay for it.