I can help, I've done acquisitions for lawn care/landscaping. If you want a BUSINESS VALUATION, below is a very real formula. If you want a REAL LIFE VALUATION, a lot of times it's two guys over coffee, going over customers and employees, then they agree on a percentage of revenue (20-100%) plus maybe buying out some equipment. [B]Short Answer:[/B][B]I'd start out with a number of mows per client, so I'd offer to pay the previous owner the payments received for the first 2-3 mows. You can do it the week after you mow them, or if you wanna be a nice guy, you could pay them for 2-3 mows once they sign your contract. [/B]If that isn't good enough, below is very valuable information on larger business acquisitions:[B]Answer that imparts wisdom for this and future transactions:[/B]A REAL VALUATION, which you should run at least once per year so you know what your business is worth goes like this:Technically, it's based on EBITDA, which is Earnings Before Interest, Taxes, Depreciation and Amortization. If you would like to know more about that, just reply and I'll give you a better explanation that should be useful. It's basically a "cash flow" formlula. You take your profits, depreciation, interest expense, and any of your pay that is "excessive" to what you do. So, if you're running a crew and making $80,000, you could put $40,000 back towards cash flow because a new owner would have to hire on a new foreman to run that crew:Formula works like thisProfit $20,000Depreciation $30,000 Interest Expense $8,000Excessive Owners Income $40,000 Total: $98,000. Then you use a multiplier on this EBIT or EBITDA formula. Something like 2.5 to 3.5, so the business would be valued at $250,000 to $350,000. In this sort of equation, the value of the equipment is negotiated. IT can be rolled into the price, or the net value can be added, or the buyer may ask that the equipment be paid off from the $350,000 and be free and clear. The way to keep this clear is to think from the buyers view is:I'm going to buy a business for $300,000. I expect to earn $98,000 per year or get 33% for my money which is a lot better than Wall Street!Other factors, it's based on:1. Size of company. I would rather buy companies over $750,000 because there has to be some management or systems in place, but a business broker friend of mine says he finds many many more buyers of businesses of around $200,000-$400,000. We think it's because it's easier for another contractor to add that much service to his present line. 2. Type of billing. Since we're in the Lawn Maintenance forum, I'll assume that we're talking about mowing. "recurring billing" is what brings in a bigger amount. When you have solid monthly billing, this is something that buyers can count on more than one time landscape sales. Commercial usually worth more than Single Family Residential. 3. Spread out customer base. A Customer base that doesn't consist of 3 clients that make up half of the billing is going to scare some people away. A base with 50 clients with no one client making up more than 25% is pretty solid. This is also something that banks financing your company, or financing a sale4. Growth. Most buyers prefer some decent, but not excessive growth. A 10 year company growing 15% every year sounds pretty solid to me with probably a solid customer base. 5. Gross Profit margins. Anyway, if you have other questions, let me know, Best of Luck!Steve Hoogenakker
Steve Hoogenakker, Showcase Landscape, Taylor Made, Delano Minnesota, CIC, MHA, CAI-MN, MNLA, Gerrit Hoogenakker is awesome, Kirsten Hoogenakker is great, Paul Hoogenakker is Super, Teri Hoogenakker is a saint.
