Buying a lawn business

[dhlandscaper]

I am currently in the process of trying to buy an established lawn route, along with the equipment. I currently cut two days a week. The lawn route is three full days of comercial cutting. Wondering how you come up with an offer and how does the contracts work. Are they signed over to me with the property owners permision or what. Any help would be appreciated.

Thanks,
David

[rustyt22]

Usually the going price around here is 2-3 months worth of income per account. For example, a $100 per month account is worth between $200 and $300. You can multiply that by the number of accounts the guys has, and then add in what you think the equipment is worth. As for the accounts, Ive heard of asking when the customer will be home (if its residential), and going to meet the customer with the current business owner and explainging the situation, introducing yourself, telling of your qualifications, and promising to do a great job as the last owner. That usually goes over pretty well. If theyre companies, they probably dont care as long as there are no personal relationships with the owner and you continue to do a good job for the same price the previous owner charged. I would consider a couple things though...

1) make sure prior owner signs a non-compete contract that he will not return to lawn business in your area or take your customers to another company

2) make sure all accounts are profitable. He may have underbid all of his accounts, and be losing money, so he just wants to sell it and get ride of it. Then, youre stuck with a buisiness going downhill...

[dhlandscaper]

Thanks for the reply. The info you gave really helps.

[rustyt22]

no problem....good luck!

[bobkessler]

I think Rusty covered the bases pretty well. The non-compete is very necessary. They are quite valid in Florida. You may not be able to prevent him from opening another lawn service company and competing with you. However, you can definitely prevent him from taking any of the customers he sold you, for I think up to 2 years. Hey I'm not an attorney, and if you think this may be an issue you might want to consult with one. I do have some non-compete experience though, and that's where I'm coming from.
You may want to consider a statement in your contract that says if there are any material misrepresentations, that you are allowed to deduct 115% from the purchase price. That's just in case he says he has such and such under contract and you find out he really doesn't. Sometimes the charges are overstated because he says an account paid him $15,000 last year, but fails to mention that $5,000 was in hurricane clean-up.
Also understand he may have collected some monies in advance. Put a clause in the contract about that, subject to the same 115% penalty.
One other thing is account aging. Say an account hasn't paid for 45 days; you might not even want it, or make a lower offer since there remains a large chance they will not pay you either. On my deals I would not pay anything for any account past 60 days, and very little on those over 30 days. But I reserved the right to try to collect the past due, and keep the account.

His labor hours per account helps you value the purchase. He might not really know what they are, but try to pin him down anyway. Like Rusty said you might not even want it if he spends some 20 labor hours per month average on a commercial account, for only $500.

Be willing to pay him a fair price. I consider one quarter of his annual revenue very fair. Sometimes I paid twice that amount for well maintained accounts, especially if I got some good employees out of the deal. That is always worth a premium dollar. It's really a good way to grow fast if that's what you're looking to do.

Good Luck