Tweet
Hello all. I am new to the board. I have been browsing and soaking up some info the last couple of days. I have been cutting grass with this guy since I was 14 (now 27). I do this as a part-time job. He is getting older and is thinking about selling his business. He has 25 accounts mainly residential. His equipement is decent and consists of a Echo blower and weedy, 2 handmowers, 2 Exmark Lazer Z's 60 inch cut and an old, old Gravely Promaster 60 which we use to bag grass. He bought the one Lazer when they first came out and the other is about 5 years old. He also has a trailor. So my question is how do I figure out what this business is worth to buy. Any info. you can give me would be great. Thanks.
-
-
The cut and dry answer is from 20% to 30% of gross sales for one year (grounds maint accts) but the better answer is to start with those percents and make sure the accounts are profitable otherwise their value is ZERO.
Good way to test the accounts ... figure the total man hours it will take to perform the work of each customer account divide those hours into the total gross sales (take out any billed materials first) ... this gives you earned return per hour ... compare that return per hour with your own ... and how far above cost per hour is that return? You're buying profits, not merely sales.
Safe to buy them? ... build in a provision for customer drops and cancels so that you pay only for customers who stay ... at least short term ... after short term it's up to you to retain what you bought.
Phil -
Thanks for the info Phill. I will continue to research and eventually make a decision. Thanks again.Comment
-
It seems that you still work for this person so knowing the total labor hours to service each account is a given. Total sales per customer per year ... total hours to service ... return per hour ... what is monthly cash flow from that ... figure pymts that will allow positive cash to you and what do you have to lose in buying them ... you already know the work.
On the surface I'd say if it's profitable work ... after payments to owner if you net more than you earn working for him ... you'd be ahead of the game as long as you can carry equip part of payments ... in other words what will your bottom line be? ... go for it.Comment
-
Sorry but I will disagree with Fil just a little. I have bought and sold 8 different companies out over the last 5 years. each time I buy a company I cull accounts and keep the best ones and sell off the others. Now unlike Fil I am a real landscaper and have a successful Landscape business, Something Fil has never been able to document for those who have ask.Originally posted by Phil Nilsson
Fil states that you are buying Profit. I will tell you that you are buying OPPORTUNITY. Buying Opportunity is good business whether you are starting or increasing your business. If these accounts are profitable then you have opportunity to increase there numbers and up sell services. Purchasing accounts also gets you into new neighborhoods where you can cloverleaf for more accounts. Purchasing accounts is in fact more economical than advertising expense and the time involved in chasing leads.
It your case, you know the accounts and have worked them therefore the normal 10% lost from a change should not effect your purchases or at least you know these accounts better than a stranger would.
Now as for the price of the account and the Equipment. Equipment should be priced at fair market value. Used Equipment unfortunately doesn't have a real high value. Check local new paper, mower shops, and bargain traders in your area to find comparable equipment prices.
Account prices will depend on many factors. First as Fil has stated Profitability. Second on the financial arrangement. Cash up front talks, and Payment plans walk. However "Sweat Equity" is very common on small business sales. You can offer to do these accounts for a period of time and let the former owner collect the revenue. Or you may elect to do them and let him collect haft the revenue for a longer period of time. Third Factor to consider is the "Safe To Buy" factor as Fil calls it. Sweat equity buy outs have this built in automatic. The seller is taking a risk on accounts he has had a long term successful relation with. He should be compensated for his risk.
20 to 30% of the annual gross is Industry standard for sale price of accounts. Company name, good will, and Equipment, etc. can be another factor.
But the bottom line is "What is it worth to you?" And "Is the seller willing to part with it for that price?" "How is the transaction going to be compensated?" These are the real determining factors of any sale.Comment
-
Prestige ... Don't be fearful or take on a "pessimistic attitude" when buying accounts. It can be very safe given a few precautions. I've sold plenty of green industry businesses as a Broker and when "done right" there is very little risk other than normal. You need to know what you're buying but this is true with anything in life.
Some of the fastest growing and most successful outfits in the nation got that way via acquisitions. It's not just for the big guys, it's an avenue available to anybody and it is by far the fastest way to grow.
Anybody needs help with this give me a call.Comment
Comment