Fair price for business?

[NJCleancut]

A local lawn care business owner I have become friendly with is offering to sell his business to me. He has about 40 clients. As far as the equipment, he has an '04 wright sentar 52" - 25hp kawasaki with 600hrs. , an '04 Ferris 36" belt drive walk behind with 15hp kawasaki with 100hrs. , '04 Stihl backpack blower and trimmer. The mowers have steel side baggers as well. The trailer is a 7x12 single axle, tube frame.
How much do you think the business is worth? I was thinking 20% of his income for the customers and maybe 6-8k for the equipment? He is asking 15k for everything with no guarantee of me getting any of his clients. I told him I was only willing to pay for clients that signed a 1 year contract. I know there a lot of things to consider before doing this, but do you think my offer is fair?

[J & J's Lawn]

I would definetly have him open the books for you to show you income and possibly income tax returns.

[MASTERMOWER]

I think a question you ought to answer is how will you lure these potential clients into signing a 1 year contract? Are they used to contracts?

Also, how desperate and/or ready are you to add as many as 40 additional clients? With $15,000 you could advertise intensively and easily end up with a boat load of more work than just 40 lawn clients.

My 2 cents....buy outs aren't always the best avenue to travel down. Who's to say he won't start up other lawn service gig down the road? I sold a former lawn business I had started many years ago with no intention of creating another lawn business - yet I did. If this dude decides to jump back in down the road - his old clients will be the first to know. If anything (if you go through with the purchase), have him sign a no-compete agreement stating he will not compete against your business for a certain time frame (typically 2-3 years).

$15k seems somewhat high to me. The equipment isn't worth an incrediable amount. Are the clients high, medium, or low end???

[Shoal]

if you did buy it you need to have him sign a no compete clause also you need to know what his business is making. you might want to counter his offer after looking at what he has you be able to pick up some great customers for a considerably less amount and instead of flooding your business you can upgrade it. good luck shoal

[NJCleancut]

I did tell him about about signing a no compete clause, and he has no problem with that. The majority of his customers are in the $40-$50 weekly price range. But some are mow when the customer decides it needs to be mowed, which I won't do. None of his clients are currently on contracts, which is why I said I would only pay for the customers that agreed to a 1 year contract.
He said he is willing to go to each client with me and explain to them what is happening, but that is still no guarantee that they will hire me.
As far as being able to handle 40 new accounts, that would be no problem. I was planning on setting up another crew for next year anyway.

[MASTERMOWER]

If they aren't already set up on a contract, the chances of you swaying the idea onto them is gonna far fetched....JMO.