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about to possibly purchase small business. what should be on our checklist

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  • about to possibly purchase small business. what should be on our checklist

    I have some money to spend on a new or existing business and have been looking into lawn care for a bit, she's had experience growing a couple lawn care businesses. Neither of us are planning on doing any of the actual mowing etc, but can if need be, but we plan on hiring people.

    we're about to meet with an owner of a small business, 60 accounts, mostly residential with equipment to handle them, except a truck, and she's assuming no employees and I'm thinking at 75 years of age maybe he's got a guy taking care of them all.

    What are the main bullet points we need to have covered, things we need to be knowledgeable on and ask the owner about?

    So far off the top of our heads we've come up with:

    1) how do you charge?
    2)what exactly is for sale?(acct's, employees, equipment)
    3)which of these are on their way out?(non-paying/unhappy cust.'s, oldest equipment, bad or leaving employees)
    4)How do you market for new customers?
    5)How do you book keep and manage customers(CRM software? Physical note pad?)
    6)What is your company's strengths, weaknesses
    7)What Paper work can you provide? (P/l statements, account histories, maybe equipment maintenance)

    I'm thinking the value in the business is the accounts and equipment. So obviously before signing anything we gotta test everything out. I can clean carburetors. Should we hire a mech to inspect? What about the accounts? What's standard on DD on this aspect? contact each customer letting them know we're considering taking over and wanted to verify their existence(not some internet scam with broken equipment and dummy accounts)

    We've worked with each other a short time but find we compliment each other in good ways, have similar entrepreneurial mindsets, expect a challenging full time job for the both of us and are excited about this opportunity with big goals in mind.

    And why would this be a horrible idea between two people of the description I provided?
    And even so, what few main tips can you provide to help us on our way into this new venture?

    Thanks guys and gals!

    -Ben
    Last edited by ben_and_deja; 04-27-2018, 11:11 AM.

  • #2
    she's had experience growing a couple lawn care businesses.
    There are a lot of potential shenanigans that go on when lawn care businesses are sold. Are you saying this business owner has sold a lawn care business before? Could you get some references of people that bought businesses from her to see if she is a straight shooter? Or did she sell the businesses and then go after the same clients again to make a new business to then sell that?

    1) how do you charge?
    That is good to know. How they come up with their price. Also what are their costs of operating. So you can figure out how much they profit per hour.

    2)what exactly is for sale?(acct's, employees, equipment)
    Yes, good.
    In the past on here, we have seen the value of the lawn accounts at 10% of their annual profit margin per customer. The add on the value of the equipment.

    3)which of these are on their way out?(non-paying/unhappy cust.'s, oldest equipment, bad or leaving employees)
    That is good too, but you will never know if these customers will stick with you after the sale has gone through. That is why the value of the customer tends to be what I stated above.


    4)How do you market for new customers?
    And at what points in the year. With what message?

    5)How do you book keep and manage customers(CRM software? Physical note pad?)
    Yes.
    [quote]6)What is your company's strengths, weaknesses
    7)What Paper work can you provide? (P/l statements, account histories, maybe equipment maintenance)/[quote]
    Also how much did they make, and what was the profit on that income?

    contact each customer letting them know we're considering taking over and wanted to verify their existence(not some internet scam with broken equipment and dummy accounts)
    If you could go with the mowing teams and meet the customers, tell them you are considering buying the company and would they stay with you. Have they had any problems in the past with the company? Any insights they can share?

    Many times on here we hear about how when a customer can get a hold of a landscaper working on their yard, they tend to want to talk their ear off. This would be very helpful for you. So if you make yourself available, you should get an earful.

    why would this be a horrible idea between two people of the description I provided?
    And even so, what few main tips can you provide to help us on our way into this new venture?
    As long as the business is what they say it is and you investigate it a bit to find out, you should be able to make a good decision based on the facts at hand. Look into it a bit and keep us posted on what you find and which way you are leaning.

    As far as the equipment valuations go. It wouldn't hurt to have someone that can estimate their value to look at them. How many hours are on the equipment. Any signs of them being on their last leg? See what they say and include that in your total valuation of the business.
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    • #3
      [QUOTE=Steve;n304959]
      There are a lot of potential shenanigans that go on when lawn care businesses are sold. Are you saying this business owner has sold a lawn care business before? Could you get some references of people that bought businesses from her to see if she is a straight shooter? Or did she sell the businesses and then go after the same clients again to make a new business to then sell that?


      That is good to know. How they come up with their price. Also what are their costs of operating. So you can figure out how much they profit per hour.


      Yes, good.
      In the past on here, we have seen the value of the lawn accounts at 10% of their annual profit margin per customer. The add on the value of the equipment.


      That is good too, but you will never know if these customers will stick with you after the sale has gone through. That is why the value of the customer tends to be what I stated above.



      And at what points in the year. With what message?


      Yes.
      [quote]6)What is your company's strengths, weaknesses
      7)What Paper work can you provide? (P/l statements, account histories, maybe equipment maintenance)/
      Also how much did they make, and what was the profit on that income?


      If you could go with the mowing teams and meet the customers, tell them you are considering buying the company and would they stay with you. Have they had any problems in the past with the company? Any insights they can share?

      Many times on here we hear about how when a customer can get a hold of a landscaper working on their yard, they tend to want to talk their ear off. This would be very helpful for you. So if you make yourself available, you should get an earful.


      As long as the business is what they say it is and you investigate it a bit to find out, you should be able to make a good decision based on the facts at hand. Look into it a bit and keep us posted on what you find and which way you are leaning.

      As far as the equipment valuations go. It wouldn't hurt to have someone that can estimate their value to look at them. How many hours are on the equipment. Any signs of them being on their last leg? See what they say and include that in your total valuation of the business.
      Thank you, but we split already LOL. We had only just met and quickly learned that we are incompatible to work together. But thank you for all those tips because I myself been and still interested in operating or actually starting from scratch my own lawn care business so I will take everything I have learned thus far and proceed forward.

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      • #4
        For others considering doing this, can you tell us some signs or signals you got from the seller that was telling you it wasn't going to work? What should others be looking out for?
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        • #5
          For others considering doing this, can you tell us some signs or signals you got from the seller that was telling you it wasn't going to work? What should others be looking out for?
          oh, I don't think I got anything negative from the seller, as he was also a purple wearing Virgo, with his equally likable partner and wife, but they did their business on index cards which was not much of a concern for me, other than that I had to go through every single of the 80 accounts to verify their history, longevity, which looked good enough and their prices were standard. but before I split with my partner, which was the main reason for this deal falling through, I had decided I was going to offer significantly less as 10,000 seems a little bit much for what was being offered

          as far as splitting with my partner, well, I'm probably a little bit gullible, but I am learning as I get older, but you really ought to take seriously the statistic of Sociopaths in society. Or just the I guess I should say tendency for people to Interact with you in an overly selfish manner. You can always tell I believe that as people start in the beginning to butter you up regardless of of the relationship, but then overtime the butter lessons or maybe you were expecting some honey or some Jam at some point, or maybe they introduce some salt pepper or horseradish some other things that you weren't expecting that don't taste so good. well I ended up with some stale dry toast covered in hot sauce and pickles.

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          • #6
            Do you have advice for others considering getting into a partnership? Any steps that could have been taken to slowly course correct a problem before it got too big?
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            • #7
              Well, I'm sure each red flag will be different , so for me, just watch out for their intentions. Both have to have a strong sense for the other's well being equall to theirs as possible. If you're desperately trying to accomplish something such that you don't consider your partner, it wouldn't be fair of you to allow someone against their better knowledge I guess to be in a relationship with you. That's in general but if you google partnerships you'll see most people trying them say DON'T do it. Maybe we just suck for the most part.
              But if you're gonna do it you wanna establish something like 'so if we're gonna do this we're not gonna stab each other in the back WHEN things go wrong right?' for starters,
              then I don't know about you but when I was a kid, my step sister and I would stay up past bedtime JUST to draw plans of all escape routes for every scenario when either of our parents woke up and came downstairs to catch us. We had a plan if one was in the bathroom, one for if we were near the back sliding glass door, if we were in the kitchen. I don't think we ever figured that one out. We couldn't quite fit under the sink anymore or the pantry in that tiny townhouse. But folding a bathrobe over top of us then huddling over the toilet was sure to trick any grumpy groggy parent.
              So, just go through every possible scenario you can imagine and don't be shy. Like, 'what if I become a superstar and you start drinking? Or what if you hit on me and I don't reciprocate?' and this is all assuming you already know the person well. You kinda have to be a a-hole, as in not shy at all with all the things you've experienced before with people despite that great hopeful fuzzy feeling we like to get when we make a new kind of friendship. 'remember that time you yelled at the waiter? Is that something we should.. .uh..'. And then have as much of that conversation put in writing as possible.
              So then and only after then do you talk about your strengths and what roles each will have in the biz. Or maybe that goes in the beginning actually, but that uncomfortable talk is imperative. That's all I can share with my little experience. I don't know that you can avoid problems in relationship, partnerships in particular with people's livelihoods at stake. You'd be quite lucky to have a mutually beneficial partnership I reckon. Do it with your spouse if you want to experiment .That sounds fun

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