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Potential to buy accounts and equipment

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  • Potential to buy accounts and equipment

    Hey guys I have an opportunity to purchase a company from a guy that is moving away. I believe he has been in business for around 10 years. I will be getting a lot more details on the company and all the accounts once i meet with him. But before I do meet with him I want to get a little inside into what I may be getting into. As far as I know right now, he claims to bring in $85,000 a year doing the work with him and his partner in the company. He is selling the company for $35,000 and it comes with 14' enclosed trailer, weedeaters, edgers, zero turn, walk behinds and push mowers. I have equipment of my own but more equipment is always a plus. Not sure about equipment brand and all that good info we all want. My main wonder is where does he get the value of $35,000? Maybe that's what he wants but how should I try to calculate a fair price for the accounts which he says is 90% residential. I have read somewhere that people in similar purchasing opportunities will ride with the company for a couple weeks to see the routes meet the accounts and such. As of right now my accounts keep me busy 60 hours a week so that's not an option. Just wondering any good ideas on questions and concerns to ask when I meet him. Thanks in advance
    Meeting him within the next few days
    2008 F-350, 2006 rzt50 23kH, 2010 tank m48 with 25kH, 16x8 vnose car hauler, echo edgers and weedeaters.

  • #2
    If your working 60 hours a week now why do you need more? ask for tax records to see what he is making

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    • #3
      If he's pulling 85K and selling for 35K something doesnt add up. BUT- ask him for a P&L statement or proof of his numbers. Also, what about contracts with his clients? Are you planning on adding another crew? Sounds like your maxed out as it is, but your going to be adding quite a few more after the sale. IMO its not worth buying an existing business in this field.

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      • #4
        Selling lawn contracts seems to be a pretty popular scam


        I recommend alot.. alot of research and verifying

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        • #5
          In regards to why do I need more? I think anyone that is in business should always be looking for opportunity to grow. I can expand with an entire crew for my commercial side and one for the residentials. I talk to him today and he has 58 accounts, 12 are small commercial accounts. He has tax records from up to 5 years ago. Without asking he told me he has a list of all equipment with serial numbers and all customers last names and zip codes they are in. If i sign a confidentiality sheet he will give me the list of full names and contact information for each customer. He said it takes 2 guys 4 days to complete all the properties. His partner in the company is retiring and the guy I talked to is planning to move to Colorado and willing to do monthly payments to ensure the client base is sticking around.
          2008 F-350, 2006 rzt50 23kH, 2010 tank m48 with 25kH, 16x8 vnose car hauler, echo edgers and weedeaters.

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          • #6
            Monthly payments isnt a bad idea.

            From what I seen with buying accounts, you pay for 1 month of service. So if the total properties equal $7000 a month, thats the price.

            As far as him making $85k, thats gross.

            He seems to be willing to give you a lot of information. He might not be a bad guy to deal with if you can figure out a price that works for both of you.

            Good luck.

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            • #7
              I have purchased some accounts in the past, but I will not pay more than 3 times cut value for each, and the jobs have to be priced at least at 1 dollar a minute, and in my service area. I will not pay more than a third of new equipment price for second hand stuff. Too many unknowns.
              Just remember, the purchaser holds all of the aces when negotiating. Not everyone has that kind of money to go off shopping for a business every day of the week.
              I would be wary of 10year + old business as far as pricing jobs goes. Many business do not increase price inline with inflation.

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              • #8
                Monthly is definitely a plus since I can make the payments instead of having that much cash up front and it would put me at ease knowing I am not getting screwed because I am doing the work and making the money. And absolutely that's gross, taking out expenses and everything else I still think it would be worth having a crew take care of it.. The pricing is where I was stumped to how he got $35000, I was figuring something like the $7-8000 range plus fair market value for the equipment if I even need it. I don't think he is a bad guy he is a friend of one of my parent's workers, he has known the guy a good 10 years too. He told me if I am actually serious he will give me everything he has to show whatever I need to know.
                2008 F-350, 2006 rzt50 23kH, 2010 tank m48 with 25kH, 16x8 vnose car hauler, echo edgers and weedeaters.

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                • #9
                  I wouldnt purchase his accounts. Buy his equipment then solicit his old accounts. I dont like the whole buying accounts thing. I would talk to the accounts first and explain he is selling and your buying his equipment and would they like to stay on as a client of yours. Dont pay for an account.

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                  • #10
                    PVMS that's a good point about how they actually priced everything. After signing a confidentiality sheet I was for sure going to check out all the properties to make sure they are priced appropriately.
                    2008 F-350, 2006 rzt50 23kH, 2010 tank m48 with 25kH, 16x8 vnose car hauler, echo edgers and weedeaters.

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                    • #11
                      Well I don't know that he would sell me the equipment and give me the list of his clients. That's why he wanted me to sign a confidentiality clause so that I cant just solicit all his customers.
                      2008 F-350, 2006 rzt50 23kH, 2010 tank m48 with 25kH, 16x8 vnose car hauler, echo edgers and weedeaters.

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                      • #12
                        I dont know man. What if you "buy" a client and they refuse and go with someone else? There is nothing that guarantees they will go with you. I mean they probably would, I just dont like the idea personally.

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                        • #13
                          Well my thoughts in that was I was going to figure in that some will just not be happy with the works so I figured 5-6 of the customers leaving. That is a big worry that maybe they don't want my service but I would not pay the $35k and that's why I liked the fact that he was okay with monthly payments. And if he got a list to me of the customers we could let them know what's going on and see if they plan to stick around for another season. If not maybe I can negotiate into the final price some kind of deduction for each customer that is not a return for next season. I think there is great opportunity in this since he has established routes and been cutting majority of the yards for 5 years now. But it is a big risk to take at the same time. If he grosses what he is saying the work can easily pay the investment back quickly
                          2008 F-350, 2006 rzt50 23kH, 2010 tank m48 with 25kH, 16x8 vnose car hauler, echo edgers and weedeaters.

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                          • #14
                            The gross sounds good. I mean if you think you can hang on to most of the clients go for it. That would be some good growth. I would negotiate the price though. You will have to hire on a few people but thats part of growth. If you think you can get even $75k it would be good. Just negotiate the price. I still dont like the buying clients idea but this sounds like good growth potential and potential for making some $.

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                            • #15
                              Just thinking out load but what if
                              he keeps the business "open" and you subcontract all the work, 50% of billed you are paid the other 50% pays off the loan balance. this way if you lose a customer you can still make payment.

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