Buying existing lawn business

[dawnacb1]

I need help in determining how to value an existing lawn care business? Current revenues are $40,000 with signed contracts for 2009. Seller has equipment 2005 Exmark 36" WB, 1999 Dodge 2500, 2007 Toro commercial push, all blowers, trimmers, hand tools, 14' untility trailer. Selling price $25,000.

[Steve]

Lawn care business tips

Hi Dawn, Welcome to our forum! How many lawn care customers is that? How many are commercial and how many are residential? Did you ask why they were getting out of the business? 2005 Exmark 36" WB How many hours on it? 1999 Dodge 2500 How many miles on it?

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[dawnacb1]

There are 16 accounts and split 10 residential and 6 commercial. He started business as just landscape and branched out into lawn/yard maintenance. He has grown tired of the business and wants to persue something else. Truck is in good conidition with 85,000 miles. Not sure the hours on the mower. He bids for the entire season and includes all yard/lawn maintenance. He provided a spread sheet on a number of accounts and lists services form lawn care, spring/fall yard clean up, yard aeration, fertilizer for lawn, shrubs, and trees, bill bug treatment, etc. Of the examples he has given me the range for a season(mar-nov) of yard care is between $1700- $5800.

[Steve]

I did a blue book value for the truck. You can do this too.

Condition Value
Excellent $3,910
Good $3,535
Fair $3,110

The mower? Well you should check to see the number of hours on it and if it starts easy. Are there any welds broken. Does it blow smoke when it's running?

How much can you find a used "14' untility trailer" for? $500? Less or more?

The residential customers maybe be worth 1 months revenue? Maybe. They may or may not stay during the transition.

How much are the residential clients paying per month?
10 residential clients paying $35 a cut for 4 cuts a month? $1,400?

Then how much are the commercial contracts worth? And will they transition to you?

So far we got:
$3500 for a truck
$500 for a trailer
Mower ???
Trimmer??
Blower??? all based on condition.
$1400 for residential clients?
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$5400 ???

He provided a spread sheet on a number of accounts and lists services form lawn care, spring/fall yard clean up, yard aeration, fertilizer for lawn, shrubs, and trees, bill bug treatment, etc. Of the examples he has given me the range for a season(mar-nov) of yard care is between $1700- $5800.

Can you show us the numbers he presented you?

Figure the 2 mowers listed at about $1500 total. Always figure on the safe side.

You could also contact your local Toro and Exmark dealers to find out what they would sell them for if they had the machines to sell used. Subtract at least 10-15% from their quote since the dealer would have serviced the equipment and repaired everything necessary....

If you post the makes, models, and approximate age of the other equipment I'll do my best to give you an approximate value on them.

I think Steve is right about not placing a value at the full bid value since any "contract" would probably not have contained a stipulation that they stay with the company if it were to change hands. If you decide to try to buy it, ask the owner if they would sell it to you for less say, $18,000 or $20,000. If he wants to get out of it bad enough he should be willing to get it off his hands. Also, use to your advantage that you can not guarantee the customers to stay under new ownership.

If you end up as the proud new owner, be sure you make every attempt to make contact with the customer and forge a positive bond. Or even make contact before the first service and let them know you bought the business and tell them how to contact you, where and how to pay you and find out if there are any specific expectations they have of your business. But then again, I suppose there are others here who know a lot more about this aspect than I do.

Eli

[SprinklerRepair]

A friend of mine has a business for sale.
Not for the faint of finance, it's $235,000.
But, the snook fishing is excellent (and it never snows.)

P.S., the photo in the video that shows the weathered railings going out to the beach? Where I say "where is this place?" That was taken 5 years ago when that was my front yard (I was a renter). Man, I miss that joint. A shack built in 1923 with no AC or heat. It's for sale. 2 acres on the beach with two docks on the inter coastal. 18 million.
I need to buy more lotto tickets so I can move back!

[dawnacb1]

Attached are the maintenance schedules for 4 properties and equipment list for sale. I am not buying the skid steer, sprinkler ad and name and phone #. I am interested in one truck, trailer, 2 mowers, blowers, trimmers and tools.

[musician/lawnman]

wow,

Well, if this all legit & correct the guy is pulling some pretty serious coin per client. This one (I cropped it & resized it) is $1740 a year on a property that is $30 a cut so it's not that big I imagine.

I found the fuctuating payment alittle wierd. I average it all out the clients pay the same rate each month. This goes from $380 in October to $30 in November. Strange how there is no "standard procedure" in this industry. Every business owner runs it completely different from the next guy.

[Steve]

Ok let's review this.

So far we got:
$3500 for a truck
$500 for a trailer
$1500 for Mowers
$50 for Trimmer?
$100 for Blower?
$1400 for residential clients?
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$7050

Now here are some things to think about Dawn. I'd really like to know your entrepreneurial background. Have you operated businesses before? Have you operated a lawn care business before. What made you interested in buying one vs starting one?

One of the many problems of buying an existing lawn care business if you are just starting out is that you have yet to develop the business language you will need to understand it all.

We can ballpark the residential customers value as one month's revenue. The commercial accounts are trickier. Why? Well because we don't know how much profit is being made on each of them. We don't know if the jobs were underbid just to get them. Then you show up and have an annual contract with these commercial facilities and quickly find out that you didn't buy an asset, you bought a liability.

With the residential accounts, you can probably very easily either drop the account or attempt to raise prices if they are unprofitable, but with the commercial accounts, you are going to be more locked into them.

Have you figured out how much it will cost you to operate your business per hour? Have you used any of the calculators I have here online to help you do that?

If you have $25,000 to spend on getting into a business, would you rather simply get started cheap with a cheap truck and a cheap mower and use that money to help market your business?

Depending on your monthly expenses, you could use that as a cushion to live on as you started to scale up your business. In fact, right now is the perfect time to start a lawn care business. You could be starting a new one now and have cash in the bank!

Then you could build up the infrastructure and the understanding of the language of business as you go to then know how much you need to bid commercial jobs at. You can pretty easily figure out the residential account prices. I have that average job price chart on the home page of the forum to help you with your pricing.

Right now I am giving this deal a thumbs down because I would rather you learn and grow your business step by step. From scratch. Save your money and use it sparingly as needed.

If you were already running your lawn care business and wanted to buy some additional accounts, you might then want to review these jobs individually and see how the job pricing compares to your other jobs. Then you would have a better frame of reference.

What is your view on it so far?

it sounds to me that they are some good prices for service for these accts, but the problem comes with that is they could just sound good. It is really hard to tell if it is a good deal unless you were able to visit each acct, or even maybe work them with the current owner for a couple of weeks to find out the time frame for each job, the travel distance from one to another to find out what your time investment is in both travel time and labor time, to get a better feel for the true value of the accounts. Also as Steve stated above what is your back ground? so many people try getting into a LCO think i have done my yard for 10 15 20 years or whatever so whats so hard about that. There is alot more to it when you need to make a profit from it.
I would ask the current owner if he would be willing to let you do a ride along, and if they are not willing then the odds are they have something to hide.
I think that Steve is rt. start small, and as cheap as possible, keep as much cash aside to live on in the start up as possible.