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thinking of buying someones buisness!!

Discussion in 'Business Fundamentals' started by mc1, Sep 6, 2010.

  1. mc1

    mc1 Senior Member
    Messages: 171

    I have a opprotunity to buy a existing lawncare/ plowing buisness in town. i have a dumpster biz i run myself. it is sucessful but it is only me 2 trucks and 32 cans the biz i am looking at has 170 driveways and 10 commercial lots prevous owner ran 5 pick ups and a skid for apartment complex. i am alittle nevous as my own biz i only worry about me i am looking to buy 6 employees and there headaches. we are in preliminary meetings omly any suggrdtions on what to look for or ask for i have a wizard accountant that is going to look at the retuns for the biz. need to pull the trigger soon. just bit nervous.
  2. Rc2505

    Rc2505 PlowSite.com Addict
    Messages: 1,245

    Watch paying for the accounts. From personal experience, you might find about 1/2 of them will find someone else if a new owner is taking over. Your best bet is to price the equipment out , fair to both parties, and go door to door on the existing accounts, and expalin the situation. You'll get better results.
  3. Camden

    Camden PlowSite Fanatic
    Messages: 6,604

    I had a similar opportunity a couple years ago. Make sure you check out the guy's books before agreeing on a price. The guy I was dealing with was a complete liar and he fabricated all of his numbers. Needless to say we never came to an agreement and he's still trying to find a sucker to take him over.
  4. RLM

    RLM PlowSite.com Addict
    Messages: 1,270

    Good luck:laughing:, the if you think the price/profit in snow is bad, lawns are worse in this market. No way I would buy a lawn business in Rochester (at least the westside), If I had to start over it would not be in lawn maint. the pricing is 30% LESS than it was 15 years ago. Get some bad employees that don't care about your trucks or equip, you'll lose money. Snow has kept us afloat for years, lawns keep the guys busy durring the off season.
  5. Brian Young

    Brian Young PlowSite Veteran
    Messages: 3,394

    From personal experience.....I've bought out two companies. Both smaller and believe me, the only thing worth anything is the equipment! Contracts mean NOTHING! The first guy we bought out said his customer's were loyal, he said he had told him about the buy out and they were all ok and on board with us....yeah right! (lesson learned). After everything was said and done we ended up with about 60% of his customer's and most of them were the crappy properties, the nice up scale and commercial properties went looking and didnt even give us a chance to bid, talk about F'ed up! The second guy was a little different. We bought some equipment and a partial customer list. We kept all but 3 off that list and that was our doings. The only way I can see buying a business and their customer's are a part of the equation is having a signed contract with you before the deal is done. Even then I would be leery as most people don't respect a "contract" any more. Like some one said prior, and I'm being 100% honest, I would look to expand your existing business before I would get into the lawn/landscaping and snow plowing business. Again, like some one said before, this is the only industry that the prices decline yet everything around us keeps going up. Good luck.
  6. LoneCowboy

    LoneCowboy PlowSite.com Addict
    Messages: 1,760

    A lawn care/plumbing biz/snow removal/just about any services company is worth about what the equipment is worth and a little tiny bit more for the phone number, goodwill and customer list.


    And the equipment is typically not worth much. Most people selling haven't put much money back into the business, they have been busy taking it out and not investing in new/used equipment or maintenance.

    Customer lists are worth squat. Structure it so if they come back, then the guy gets paid, if they don't come back, the seller gets nothing. (that's fair)

    Make the seller sign a non-compete if you do buy it.

    See the books, and more importantly the tax returns for the last 3+ years. They better freaking match. If it isn't written down, it's worth nothing.

    You should always get both a your lawyer and accountant involved. You should expect to have to sign a Non-disclosure agreement before you get to look at anything. If not they aren't serious.

    90% of the price is equipment.
  7. JohnnyRoyale

    JohnnyRoyale 2000 Club Member
    Messages: 2,935

    Two years ago we were looking at taking over another grounds maintenance company so we set up a meeting with the largest client which accounted for 90% of the total revenue. We were assured they would be on board as they were great people to do business with...to the sellers suprise, the client wasn't willing to be transferred to new owners as the single most underlying reason they were still loyal to the seller was because the clients' father was good friends with the contractor's father and they respected each other. Needless to say the deal didnt go through and the client ended up doing everythign in house from that point forward.

    All great points mentioned by others, and...dont forget to look at payment history. Are you really interested in buying contracts which may be paying their bills every 90-120 days? Just something else to consider.
  8. mc1

    mc1 Senior Member
    Messages: 171

    thanks for the advice guys. i am leary too. but my options for winter are grim i subbed for 5 years (my truck) plowing and have no exp. bidding snow i know what it takes in terms of time to do lots but i dont want to bee low pricing bids out also i have had a hard time to get my foot in the door to do comm. work. customers are happy with current contractor. and dont want to move to some one new :confused::dizzy:
  9. JDiepstra

    JDiepstra PlowSite.com Addict
    Messages: 1,780

    On the upside of things..... I worked out a deal with a friend to buy out some of his account between seasons. 90% of them resigned. I dropped 10% of those after that season because I did not like them for one reason or another. Keep in mind that along with cutting grass, there is "weed and feed", bush and tree trimming, mulch, planting flowers, sprinkler system maintenance, and numerous other services you can offer to a "mowing" customer. I have found trimming bushes and throwing down mulch to be very profitable. Plowing driveways can also be fairly profitable IF they are close together. You won't make as much if you have 5 trucks driving all over the place.... Also, if you are going to plow, I assume you will be salting as well? Good money there too if you have the right setup.
    Last edited: Sep 7, 2010
  10. ff610

    ff610 Senior Member
    Messages: 320

    I've bought/buying out 2 separate business recently. One snow and one other. Both were looking to get a solid number for the equipment, but accounts are not worth much as everyone here has said. What I proposed on the one since I didn't actually buy much equipment( had another sub of mine buy it) is settle on a percentage of produced revenue. He is a friend of mine so it works fine for both of us. On the other non-snow business, I just bought the equipment because it wasn't worth paying for anything else. Both guys have been talking with their customers and so far great transitions. Keep in mind I did weed through and dump the ones I didn't want. So I guess it depends in how creative of a seller you have, and what the equipment is really worth. I don't think its a great sellers market in this industry because you never know what next year will bring. Good luck!
  11. lawninc

    lawninc Junior Member
    Messages: 24

    Unless your getting multi year contracts with the current DBA, You are just buying the gear. If you want used gear look on Craigslist.
    If you get current signed, multi year deals you can average the gross of the past 3 years of each contract, add the avarge gross of each contract together, subtract the taxes, comp, and insurance to date and that will give you a good base on what the biz is worth. Now add the worth of the gear. Just a heads up, people that are selling a biz think their gear is worth what they owe on it. That is not so.market value. It is worth fair I hope you know what I'm saying. Do someme research. You will find you might be better off expanding on your own.
    Just my $.02
  12. Armor1

    Armor1 Junior Member
    from USA
    Messages: 1

    So did you buy the business...yes/no and why?? Good learning tool here.
  13. blk90s13

    blk90s13 PlowSite.com Addict
    Messages: 1,157

    Great advice, subscribed
  14. Neige

    Neige Sponsor
    Messages: 2,215

    It really sucks, you work hard and invest in your company, but in the end run no one wants to pay anything for it. The going rate in my market is 15% of signed contracts.
    I have purchased 4 companies in the last 4 years. The first one we bought his equipment for $110 grand and got the contract that went with it. That ended up being an excellent deal since we got the equipment at its real worth. The second company we paid 60% of the value of his client list with no guarantees. We also bought his equipment, and paid around 40 grand more than it was worth around 5 grand per piece. This purchase has worked out very nicely also. Everyone thought we were nuts, and over paid. I can tell you its has been the best deal in our companies history. That same year another competitor in the same area wanted to sell. We went ahead and got him also at 60%, but did not want to buy his equipment. Lastly we just bought out another competitor at 50% of last years snow revenue and got his equipment at market value. So far in all the purchases I retained 95% of the original clients and have increased by 20% new clients in those areas. At lot of good stuff has been posted in this thread, and I will be the first to admit that we are paying way over the market value. That being said there are other factors why we paid what we did. I do not want to go into to much detail, but these were all established, reputable companies, in my 4 sq. mile service area. I would hope that when I finally sell, that there would be someone willing to pay 100% of 1 years snow revenue. I say this because over the years, these 4 sq. miles are gold now. Lastly our customer retention was this high because our company was very well know and respected. Be very careful, check out his books and tax returns, see if he was paying himself a salary, and make sure his contracts are worth doing, some of these guys will sign all sorts of lowball contrats to boost their snow revenue knowing they want to sell. Good luck.
  15. mc1

    mc1 Senior Member
    Messages: 171

    decided not to buy the guy lost 65 k in the last 2 years
  16. ff610

    ff610 Senior Member
    Messages: 320

    Probably why he's selling. Doesn't stop you from bidding on the properties unless he had you sign an agreement that's you wouldn't if he showed you his financial statement.
  17. morecoffee

    morecoffee Junior Member
    from Ohio
    Messages: 7

    Rule of thumb "People don't sell profitable businesses."