Buying a business

[RandyS]

Just got a call from my nephew. He wants to buy a tree care business. I guess it's more of a takedown and less trimming business. Comes with a bucket truck, log loader, brush bandit chipper, F500 dump, wood processor and saws, ropes etc. I have not seen the equipment so don't know anything else about it. The guy said he has a base of 1200 clients to draw from. He wants $45,000 for the equipment and business.
Any thoughts? My nephew is a good climber but this would be his first forray into business.
Thank you.

 

[JonnyHart]

$45'000?! depending on the condition of equipment, I would jump on it. A nice bucket alone costs about that or more. Get it. If he don't, I'd be happy to take it. Are you sure you didn't forget a zero in there?

 

[MasterBlaster]

I would tread carefully.

 

[JonnyHart]

Why? possibly buying somebody else's problems?

 

[begleytree]

Local landscape company here just sold. It was in debt @ 1/2 a mil, and sold for 300K.
The owner went 2 miles up the road, and opened back up with same name and clients.
Purchaser didn't do much more than buy the guy's bills from him. If it's a running outfit, maybe. If he's talking about quitting or such, forget it, let him quit, and pick up the pieces you want, like a couple trucks and the loader. His clients will be calling someone else anyway.
my $.02
-Ralph

 

[Big A]

From what I've been told you can buy the kit but cant buy the clients, they have no reason to follow a company especially if they know the owner has changed. The kit sounds worth the money though.

 

[Ryan Willock]

Just about every business that I have seen get sold the clients did go elsewhere. I'd check the condition of the equipment first.

 

[Lumberjack]

Something aint right.

 

[JonnyHart]

What if the number is 555-TREE?

 

[alanarbor]

I'd find out how much money he's bringing in each year, and how profitable the jobs are.

Look at his P&L. If he dosen't know what that is, then you're probably buying a loser. 45k sounds awful cheap for that amount of equipment.

I would be very, very careful.

 

[treeman82]

Check with an accountant and see if the company is profitable or not. 45 G's for all that equipment isn't much at all, but to add the company itself into the mix for that amount, something isn't quite right.

 

[Dadatwins]

Sounds to good to be true, 45k for that amount of equipment is low, unless it is wrecked. Make sure all the equipment titles and ownership paperwork has clear title and is not borrowed against. Agree with not buying the company name, just make your own and move on. The only thing the client list might be good for is to send notification that xxx tree service has folded up and you are the new operator. Good luck.

 

[Newfie]

Gicon is right on the money about the companies numbers. They mean very little to you other than maybe an explanantion of why he's getting out. I've seen plenty of idiots ruin companies in the most profitable times. Just because he sucks at running a business does not mean that you have to follow suit.

 

[RandyS]

Thank you all. I have a lawn maint. business so this is a bit out of my area. Years ago I bought another lawn business out and didn't lose 1 job. When I sold it the new people lost 1/3 of the clients.
Went and saw the equipment and met the guy selling. He seemed nice enough, whatever that's worth. The trucks were old but seemed maintained. To me the equipment seemed like it was worth $15-$20,000. This figure is from what I see on Ebay. He has work lined up for a couple months for sure and more will follow as we're getting into nice weather now. He said he looked at his income from May-September last year and it was $59,000 on the books.

 

[alanarbor]

Is that gross or net income?

 

[John Paul Sanborn]

I would also look at the demographics of his clientel.

Client lists are worth something in this buisness, especially if you can get back on a property. If it is a TD specialist, then there is some question on the worth, unless there are comercial clients there.

 

[Newfie]

I would also look at the demographics of his clientel.

That's a good point. It's been 25 years since I lived in Litchfield County but back then , there was a huge disparity in demographics depending on what town you were in. Was he working for the blue collar union guy or the weekender city folk from NYC?