Buying an existing tree business any advice?

[Uzi]

I'm looking at buying an established tree business, looking for input from others that have done something similar.

Equipment included in the sale.

89 Ford bucket truck 55' WH material handler diesel engine 93k miles 5500 hrs. A few dents and dings on the body but solid boom no leaks or issues.

Morbark 2400XL chipper 12v cummins runs out and chips good.

80's? F-700 chip truck very straight for an older truck runs well v8 gas motor

Vermeer 665 stump grinder

Saws include a Stihl 660 460 362 and a couple top handles 150's
3 hydraulic saws that run off the tool circuit in the bucket.
Power washer, chain, lots of spare knives, belts and parts for the trucks, chipper, and grinder etc.

Ropes, rigging equipment, harnesses and lots of other related gear.

The previous owners are my wifes family they are certified arborists, and line clearance certified in Nebraska. They have an A+ rating with BBB and have been doing this for quite a while. They built it from scratch and are heading towards 60 years old and no longer wanting this much labor.

Price is $95K I get a loan for 60K they carry 35k on somewhat flexible terms.

I've got a lot of experience with saws and have been running a firewood business on the side for a few years but somewhat limited experience in a bucket and rigging. I've done both but not in amounts to feel proficient. They have offered to stay on training me until I feel comfortable with all aspects of the work.

My Wife and I are planning on working it together and being the sole labor force. I'm am currently self-employed in a partnership that runs 2 feed stores and my hours are somewhat flexible there with peak season for that business being dead of winter. My wife does accounting for a school district with 4 day weeks in the summer and 5 day weeks during the school season.

My main question is can we make this work on a part time basis? Since we both have jobs that are good and we aren't expecting to take much of a wage out at the beginning. Hoping mostly to get equipment paid down ASAP maybe a little bit of equipment updating or reorganizing. Then being able to see some more serious profits after the 5 year mark which is the loan term we are looking at. We are both in our 20's highly motivated, in shape and between our 9-5 jobs and the firewood business we are used to and capable of working 7 days a week when necessary.

Any thoughts or experiences appreciated.

 

[johnny5ny]

100 large is a lot of corn for a young couple/family. Enough IMO to warrant a sit down with a professional to "really" determine if the equation balances.

Just my 2 pennies, so take FWIW...

 

[pro94lt]

How much tree work have you done? And the bbb means nothing. At least not around here.

 

[I'llbearealclimberoneday]

I wouldn't touch it. Payments on a $60000 loan on top of payments for a $35000 loan is an extra house payment a month. Piecing together a similar setup for $95000 gets you the same thing but with trucks that are 12 or so years newer. used saws and used climbing gear isn't worth much to a lot of people. YMMV.

What's the revenue from the company?

 

[ronnyb]

Definitely need to know what they were grossing,.

 

[BC WetCoast]

The value of buying an established company is in the experienced crew, company name and the customer list. Equipment can be easily acquired by anybody with a decent credit score. So, you are not getting any crew, therefore you are paying 100k for the equipment and customer list. You're only planning on running this part time with your wife, so why buy all the equipment? Most of it will be sitting around, costing you money.

Has the boom been inspected, dielectrically tested?

How is your sales ability?

Can you do anything but removals ie pruning or hedges?

In my opinion, you're going to be up against the wall. Cash flow will be vital or that loan will kill you. I think you're biting off more than you can chew at this point.

If you really just want a part time gig, just buy the stump grinder.

 

[lloyyd]

No way I'd go that far into debt for just a part time gig, no matter the profession.

 

[no tree to big]

My part time gig has roughly 5k invested.... no grinder though or bucket but yo don't need no stinkin bucket.
Are you a good mechanic? Trucks that old will have all kinds of issues that pop up, guaranteed! I've used trucks from that Era and they always have issues all kinds of really anoying issues.

 

[Uzi]

I appreciate the replys, general consensus is that the price is too high? I should have probably stated in my first post that I've talked with a banker and figured my monthly payments to be around $1200 on the 60k at 5 years term. I've also got the option to pay annual, bi annual, or monthly. I already have a great working relationship with this bank in my other business. But I also realize that because I can get a loan on it doesn't mean its a good business decision.

The current owners also have 9-5 jobs and work weekends only like we had planned to continue. Being self employed already I might have slightly more flexibility than they did. They grossed around 55k working around 40 weekends a year.

To answer other questions I was a diesel mechanic for 5 years before becoming self employed. I saw the older equipment as a plus not because of its value(obviously it's lower) but because I could do all the work on it with out computer software. I do realize it will require more work as it ages but it would all be work I could do myself.

As far as work being done it would removals, trimming/pruning, and ROW clearance. They have a $20k+ Power line clearance contract that is just finishing up. I've got to help with a fair amount of it and a few residential removals with some rigging involved we've been working with them around 2 months now.

Do the details change any opinions? Still paying too much for to little?

 

[Uzi]

I should also add that we are in a situation where we don't need this to produce profit right away. Obviously the goal is to get it there as quick as possible. But we don't need it to pay for anything other than the equipment itself. We are willing to put in the work without return initially to get it up and going with idea that it pays us back in the long term. Am I going about it the wrong way?

 

[no tree to big]

55k annual sounds like a 55k purchase price tops, if you had better equipment, more like 30 or 40 for what is being offered... do you get yard space?
You have a lot to learn even after your 2 whole months experience... how are logs removed from site? If you are hand loading your 2 person workforce will get tired pretty damn fast.

 

[fordf150]

I read somewhere about business valuations for small business. Can't remember exactly how it went but it was something like this.

Fire sale...what can you get out of the assets if you sell them fast/at auction.

Asset value....what the equipment and property is worth.

Perceived value...Asset value plus revenue/profit...this would be the highest valuation for a company.

Don't know much about the tree trimming biz or the value of the equipment used in it but I would say your easily in that perceived value category.

 

[I'llbearealclimberoneday]

They grossed 55K?

Vehicle registration, insurance, fuel, saw repairs, broken parts, boom maintenance, dump fees....... then split whats left if anything amongst "Them". You'd be better of with an S10 and a mower. The gross would be the same, but about $90000 less expensive initially and easier to maintained and store.

 

[Uzi]

Yes 55k gross for about 70-80 days worth of work after payments, fuel, repairs, maintenance, insurance, taxes etc they netted about 20k. Average of $250 take home per day which isn't much but it wasn't losing money. This was working weekends only, and not every weekend at that. Another thing I should mention is that I'm in a sparsely populated area of central Nebraska. There isn't any company I know of in 100 miles of here that does full time tree work, not enough demand or climate to allow it.

After talking with my CPA yesterday I feel like I've got most of questions answered on the money end of things.
Any opinions on what a fair value of the above equipment would be? Is there a KBB or NADA equivalent for tree related equipment.

 

[I'llbearealclimberoneday]

That clears up some confusion then. You had me thinking that amount was for 40 full weeks of work haha. that math wouldn't have paid a groundman.

Not sure of an equipment pricing site, but I always just look for the closest model listed and price it around that. Ultimately, its worth what some one is willing to pay for it. Ive been trying to sell an F250 4WD for 3600 and haven't had a bite. Its probably worth 5k somewhere else

 

[Uzi]

Ultimately, its worth what some one is willing to pay for it. Ive been trying to sell an F250 4WD for 3600 and haven't had a bite. Its probably worth 5k somewhere else

This is very true I don't know that this stuff would bring close to what they're asking if it was on the coasts where the climate is different and tree work is needed everywhere. To see a bucket truck around here is rare unless it belongs to a power company and a chipper is rarely seen either.

That truck would bring 5k here all day long but any 3/4 ton 4x4 that runs and drives is a hot item.

Right now I'm working a deal to buy the equipment at a lower price minus the bucket truck. I found a newer lower mile truck one state over that is a 70 foot truck and since I live in an area dominated big cottonwoods I think that might do me more good. Most of this is still up in the air and I've not signed the line on anything yet. Still talking with them, the banker and CPA. And also trying to get a better feel for what the market will bear in this area. I'm very lucky to already be involved with a great business that gives me the flexibility to consider this one. And the fact that the owners are my wife's family there isn't pressure to do something fast or danger of them having ill intentions towards us.

If I get a deal done I'll update here to let people know how it went or how bad I'm losing my A$$

 

[Zale]

If you want your marriage to last, do not work with your wife. Trust me on this one.

 

[no tree to big]

If you want your marriage to last, do not work with your wife. Trust me on this one.

Yea but think you could spend lunch in the back of the chipper truck... [emoji131]

 

[jefflovstrom]

You will need to hire a climber, there goes your $250 a day.
Jeff

 

[BC WetCoast]

So out of the 55k gross, there was a 20k+ power line clearing project that you won't be able to work on because you're not certified. That would leave a 35k gross and 0 net. Which leads me back to my initial question, how good is the customer list and how good are you at sales?