PDA

View Full Version : To Buy or Not To Buy This Business?


elitelawn13
02-19-2013, 08:33 PM
My friend is in lawn care. He manages the business end and has a good foreman run the crew. He has had his business while working another career and it has been profitable year over year.

Recently, he introduced me to an offer from someone he trusts in the industry that is selling 22 high-end residential accounts that generate $300/mo. I am told a 2 man crew can run these accounts and would be willing to stay with them. The seller wants $15K for the accounts.

Also, up for sale is an 18ft enclosed trailer, 48in and 52in mowers. I do not know the make, model, year or condition of any of the equipment yet. The seller wants $9K for the equipment. If I purchase the accounts with the equipment the total will go down to $22K.

I will still need to pick up a truck and licenses to make this business run. I plan on taking a similar approach as my friend and managing the business while a good foreman runs the crew. My background and experience is in sales and marketing (serial entrepreneur).

I'm looking for advice...

Is this a good deal?
What questions should I be asking?
What would you do?
What do you recommend?

LawnBoy0311
02-20-2013, 05:53 AM
You may want to spend a good amount of time researching before jumping in. What caught me was 22 high end customers generating $300 a month? Is that $300 each? $3000 a month? I'm confused on that one.

When buying customers, it's always a crapshoot. Sometimes it works, sometimes it doesn't at all.

My advice would be to do a lot of research. Read as many threads on here as possible. Theres ton of valuable info, and you'll quickly read about guys who have been doing this line of work for years....their input is incredible.

Jumping in too fast could result in a fast sinking ship.

elitelawn13
02-20-2013, 06:50 AM
To clarify, it is $300/mo per account. They are high end accounts. Also, I am in Florida so it would be year round.

I agree with your advice. I've been pouring over this forum and related resources and finally decided to join to get input from the experts.

Looking forward to more replies.

LawnBoy0311
02-20-2013, 11:34 AM
Believe me, I'm no expert, I'm just an idiot with a lawn mower.

Everyday is something new to learn, and its an ongoing thing. Just when you think you've got it mastered, something bigger and better will come out and you'll have to learn that.

Do you have experience in lawn care? Start small. Get your feet wet first. Learn the basics and start from scratch. Hell, you may hate it after starting! What your looking at buying would be good for someone looking to add on to their business. Maybe another route or bigger operation. Besides, those customers are not obligated to stay with you. You may buy the business, and all but a few customers decide to leave. Then that money you were banking on won't be there anymore.

My best advice would be for you to start your own and build the business. Let that deal go to someone else. It may suck now, but it'll be better off in the long run.

Steve
02-20-2013, 12:15 PM
Recently, he introduced me to an offer from someone he trusts in the industry that is selling 22 high-end residential accounts that generate $300/mo. I am told a 2 man crew can run these accounts and would be willing to stay with them. The seller wants $15K for the accounts.

My first question is, why doesn't your friend buy the accounts if they are good?

That could be a tell.

Why is the seller, selling them?

Let's look at some figures:

(22 acounts x $300 a month) = $6,600 a month income.

$15,000 / $6,600 = 2.27 months income per customer to buy.

or

($300 x 2.27) = $681 per customer.

A lot of times we see the ideal around 1 month's income. No one wants to sell them for that because everyone thinks their customer list is amazing and worth their weight in gold. But you have no guarantees any of these customers will stay with you. No guarantee this seller won't market to them again in a week after you buy them. No guarantee any of his staff won't pick up the accounts themselves. These accounts are flighty at best.

Beyond that, do you feel you could spend less than $681 in your marketing to pick up customers?

elitelawn13
02-21-2013, 09:23 PM
My first question is, why doesn't your friend buy the accounts if they are good?

My friend is seriously considering buying them to add to his existing line of business given that the accounts are in a very affluent neighborhood.

Beyond that, do you feel you could spend less than $681 in your marketing to pick up customers?

Yes. But will the customers be $300/mo residential accounts? I do not know.

Separately, I have heard from different industry players that the holy grail for commercial accounts are shopping centers. If that's true, is it feasible for a new entrant to hit the marketing hard and go exclusively after that niche?

LawnBoy0311
02-22-2013, 05:26 AM
My friend is seriously considering buying them to add to his existing line of business given that the accounts are in a very affluent neighborhood.



Yes. But will the customers be $300/mo residential accounts? I do not know.

Separately, I have heard from different industry players that the holy grail for commercial accounts are shopping centers. If that's true, is it feasible for a new entrant to hit the marketing hard and go exclusively after that niche?

There is a lot more to it than what you think. Business license, experience bidding, FINDING OUT WHO TO SUBMIT THE BID TO, if the current guy is a friend of the guy taking the bids, not consistent business....the list goes on.

Get some experience first. You have to crawl before you can run. The money will come over time, NOT your first year.

Steve
02-22-2013, 11:45 AM
Separately, I have heard from different industry players that the holy grail for commercial accounts are shopping centers. If that's true, is it feasible for a new entrant to hit the marketing hard and go exclusively after that niche?

There is no way I would recommend a new business owner go for shopping center lawn accounts right out of the gate.

How would you be able to bid that if you haven't learned the process on smaller yards first? How would you be able to service it? You'd have to have more equipment, staff, knowledge to do this efficiently than you would if you started on smaller residential properties.

grass guru
03-08-2013, 05:16 AM
I have a lot of questions, and am skeptical at best.
A 2 man crew for 22 accounts? Seems overkill to me.
Lets look @ #'s. $300/month x 22 = $6,600 x 12 (even weekly service in Fl is hard to believe, but I'll go with it) = $79,200 gross.
2 men @ 40hrs/week = 80 hrs x 52 weeks/yr = 4,160 man hrs x $hourly wage, say $11/hr = $45,760 in labor. Add to this business liability insurance, commercial auto insurance, workmans comp insurance, employment insurance, fuel costs for equiptment and truck, wear and tear for all equiptment and truck,equiptment replacement costs, truck replacement costs, trailer replacement costs, shop/office mortgage, office supplies, customer headaches, employee headaches, 10% - 20% of gross set aside for growth, and any expenses for annual licenses, truck registration, fees, income taxes, social security taxes, medicare, medicaide, obamacare, etc..... Whats your wage going to be?
Is the current owner and employees willing to sign a "no compete" contract?
Is the current owner willing to show you all tax docs including w2's and 1099's and payroll?
Is current owner willing to accept payment based on contracts retained? I guaruntee you will not get all 22 to stick around.
Is current owner willing to introduce you to every customer?
Is current owner willing to assist in transition?
Is current owner willing to include all equiptment, list of suppliers/vendors/subcontractors?
Is he full service (fertilize, mow, trim, edge, blow, sprinklers, weed control, etc)? Does he have license to apply herbicides/pesticides/fungicides, if required by law? Do you?
What services are included in the contract, and what are contract guidelines?
How long has he been in business, and why is he selling?
What condition is equiptment in, and are there records of service?
If you go into business w/your buddy, how do things get split?

Honestly, $15k for accounts seems high, but i dont know overhead costs, location, distances, or socioeconomics of your local. $7k for an enclosed trailer, 2 mowers, trimmers, backpack blowers, edgers, etc, seems cheap. Then again, Make, model, year, condition, and hours make a huge difference.
Honestly, if it was me, I would offer much less, (after getting above questions answered, and am comfortable), and do all the work myself.
If you are wanting to run the business as a "manager", and have the crew do all the work, I have a feeling you will be trying to sell it in a couple of years after seeing what the profit margin really is.
Maybe you could work for your buddy for a year, see what it costs to run this type of business, how to mow, how to do managerial work, and learn what it takes to make the front line run. After that, maybe you would be more comfortable in aquiring a business.
There are two types of owners... Those that work hard in/on their business, and those that have everyone else work hard in/on their business.
To do it as he is doing it, I'd pass. To do it as a quick start for a new venture that I would be mowing and working, I'd consider it. Only you can find out the #'s, and ask the questions.

dpld
03-08-2013, 07:16 AM
Separately,[/I] I have heard from different industry players that the holy grail for commercial accounts are shopping centers. If that's true, is it feasible for a new entrant to hit the marketing hard and go exclusively after that niche?


corporate campuses are the holy grail not shopping centers.
shopping centers consist of 95% pavement outside of where the building sits which is good if you are in a snow belt and it actually snows.

shopping centers are also good if you want to make a career change into sanitation because you will deal with garbage more then anything else especially come holiday time.