Local competitor asked if I would buy his lawn care business.

Sometimes you need to actively go out searching for new opportunities and other times opportunities come looking for you. In this discussion from the Gopher Lawn Care Business Forum, one entrepreneur talks about how he was contacted with an offer to buy out a local competitor. The question he wondered though was should he do it and if so, how would he figure out the value of the company putting itself up for sale?

One lawn care business owner wrote “today I was asked if i was at all interested in buying a local lawn care business competitor. The business is mostly spraying and fertilizing, with the occasional leaf clean up and de-thatching work. The company is located in a town of 3,000 people about 2 miles from the town I live in.

I had worked for a local contractor for 7 years before starting my own mowing business so many people in my community know me and because of this, I feel buying this company would help me be able to pick up a lot more local clients. Here is part of a letter the current owner gave me and said he has been using to shop around his business sale.

‘I am considering selling my lawn care business. I have attempted to work out an agreement with a local competitor thinking combining our accounts would make his business model stronger, but we have been unable to come to terms to date.

I have compiled and master list of 370+ customers over the years. The master list includes names, addresses, and lawn measurements for my customers.

I also have all the equipment needed to perform the work and other peripheral equipment that might be used from time to time but I don’t use much.’

This business was his part time job. Since I am already licensed to spray fertilizer and chemicals, this may make for an easier decision for me. The current owner claims his business grosses $30,000 a year minus $10,000 in expenses. He says his insurance runs him $1,000 a year. He was offered $10,000 by his competition and he did not take it.

What’s the value of this existing business?”

A second lawn care business owner said “you can’t get a value without looking at his actual numbers. You need to see invoices, payments made, bank statements, expenses etc to see what the real situation is.

As for the equipment, if he has no use for it or used it very little, then why would you want to buy it? There is no point in paying for a equipment if it is just going to sit in your garage and collect dust. It doesn’t matter how good something looks, it is only worth the price of scrap metal if it does not get used.

In my opinion the only thing of real value that he has is his clients. Even with that, how many on that ‘master list’ are even active? He said he has compiled that list over years and he may only actively service 1/2 of them or less! I would dig deeper and ask for the financial records. There is a reason that he is selling. If he will not show you the financial records then walk away.

If you were to purchase this business how many of the customers do you think you are going to lose? I would estimate half of the active customers but I hope it wouldn’t be that bad.

If I were to make this purchase, I might offer to create an incentive for him to get his customers to stay with me. What happens if you pay him and those new paid for customers decide to go with the competition, when you take over?

Maybe you could offer a lower purchase price, and a % of revenue from the customers retained for the following year?”

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