My Lawn Care Company is FOR SALE (How to Buy a Business)

Hey everyone, it's Mike Andes and today we're going to be looking at a lawn care business and seeing if it's actually worth buying out a location. If you're getting started in your business, maybe you want to start from zero, but maybe you would rather buy into a business and buy an existing company. Most of the time when I look at mergers and acquisitions, they are large companies, but today is a relatively small company that just got started in the past year or so. And so let's go ahead and jump into the numbers. I literally just got this information yesterday from our media team and it's actually a location of Augusta Lawn Care. So I actually know a lot about the location and the business model, et cetera. So I'm going to go ahead and show you the information I have and then break down some of the numbers. And regardless of whether or not you want to buy this specific location, which is actually for sale, it's a real deal, or if you would rather go look on Craigslist or Facebook Marketplace and find another small business that wants to sell, maybe during the winter or even during the spring rush, this is going to be a good way to do these valuations. Now, I made an entire entire webinar a couple years ago with multiple different ways of valuing a company. Check that video out right here, the long form video. But this is gonna be a little more short and compact and actually look at a real example and a smaller one too. Not a big company that has a lot of goodwill and a whole lot of intangible assets. We're just gonna be looking at the real basics here. All right? And for most of you, if you're trying to buy into a business, this is the type of business you're gonna wanna buy. So let's go ahead and pull up. Let's see here, I'm share my screen and I'm going to go over to augustalongerservices.com/franchise. So this is the franchise website right here. I'm going to refresh this. Okay, cool. So this is it right here. And if you're going to scroll, you can scroll past all this stuff, you can read it if you'd like. But I'm just going to the very bottom and there is a button or a thing called want to purchase an existing location. Okay, cool. Nampa, Idaho and partly the reason why I'm doing this, showing this location is because most, most of the time when people show me mergers and acquisitions, I have to sign a non disclosure agreement. This one specifically because it's part of Augusta and because they gave me the permission to do so, I'm able to show it here publicly. So kind of fun. So thank you for the owners being willing for me to show this to everybody. So let's go ahead and look at this. This is the kind of information you're going to want to get from an owner. This location just got started in May 2021 and leads are abundant in the area. Before pausing leads, the location had 63 potential clients that had reached out in April of 2022 alone. The leads come from organic sources such as the website increase, Google search and local visibility and word of mouth. About 800 was spent this spring on Google local services but was turned off because there were too many leads coming in. This area is one of the fastest growing in the country and the potential is unlimited. Augusta is a lead generating machine for an owner operator. This is a great opportunity to get started and do 300,000 in the first year. The current owners have immense appreciation for the past year and the experience it has given, but now see themselves taking a different avenue in the professional community. They're excited to see a driven individual take this location to the next level. So I know the owners of this location and Jesse is the one of the partners that is actually running this location full time, currently actually doing all the work in the field. And so I know specifically that these, these great. These guys are awesome. And so they kind of already. Because I already know the owners that kind of checks the box of a trust. And that is a big key factor when you're looking into acquisitions is do you trust the owner? And so hopefully able to take an owner out for lunch or dinner and get to know them a little bit before they start giving these numbers. Because these numbers can all be fabricated if there is not a third party involved. And so really a lot of times acquisitions will come down to how much you trust the numbers. And so what's kind of cool about when you're purchasing from Augusta, for example, like this deal specifically is the fact that I vet these numbers and Augusta Lawn Care, the franchisor has to vet these numbers and make sure that they're real before they go into here. So you've got some highlights on the right hand side here. We got 72 mowing customers, all right, 550 contacts, franchise models, the growth to protected territory around Nampa, Idaho. Franchise fees 1200 per month. And they've just got started. In the past these owners have been owner. This is like a year. Their pricing is. They're Here again, giving you their pricing. $72 and $80 per hour. That's great. You could verify that really easily by looking at a few invoices which you would want to ask of the owner. The CRM they're using is service autopilot. Last year's revenue, so their first year was 166,000. And this year they're on track to do 220,000. And I specifically know that it's basically Jesse, one of the owners, working and then he has some part time help. They've had some struggle finding full time work, but they have other business ventures. They already had other businesses before starting Aug, and they're wanting to go focus on those. And Jesse does not enjoy doing the work out in the field, which is understandable. And so let's go down here to the asset evaluation. There's a breakdown of all the different assets they have. You got a picture of all the customers and where they're currently at. And there's 72 recurring customers. And let's see here. These are all the different pictures of the assets of trucks. Trailers like a walker mower. Got a commercial X market, looks like the double tandem axle, a trailer kind of utility trailer with the weed whackers, got some miscellaneous tools, etc. Looks like it's in some sort of shop area. So hopefully we'd be able to get rent on that and just continue using that same facilities. That's pretty cool. That's something that you would want to talk about with a potential owner. So. Okay, cool. So that's kind of like the two page document sharing some of the highlights. Obviously they grew a lot last year, 166,000. So the fact that they're only going to 220 shows that they're stunting growth. And that lines up with the data that they're giving us, which is, hey, we turned all lead sources after April, so the past six weeks they haven't had any leads coming in whatsoever. So that, that's a really good piece of information that is going to be kind of played into some of the valuation side of the business. But let's go ahead and pull up the valuation because this is what I want to talk about. And again, that other video I talked about, the webinar goes through different ways of valuing companies. Let's go to the asset approach first. Right. So their truck trailer equipment is 20,600. I feel like all these asset values are probably understated slightly just because of inflation. You know, they put the value on the truck like $8,000. Honestly, finding any truck under $10,000, what's cool, this truck area is painted and decal in the past year. So just that alone is probably worth two grand. So I would definitely say this is a fair valuation of truck and trailer and equipment. Now, the franchise license would typically cost you $20,000 in terms of the license for Augusta Lawn Care, because you have a guaranteed location, a guaranteed territory. So that has real value. And what's cool is that that asset actually goes in your balance sheet and does go up in value as we increase that initial fee over time, which it does, the franchise license fee. So the contacts and contracts, that's going to be 9,400. They put $14,000 in the actual flyer here. I noticed as I doing the math, though. So see here, they got, they did $200 per customer and 14,400. When I did the math, I added everything up. I got 9,400. So they took $5,000 off the top, it looks like, as a discount, which is really great because if you look at $9,400, divide that by just 70 mowing clients, that's $134 per recurring customer, which is a steal of a deal. Because, you know, honestly, like, the franchise license is going to basically get you into the website, which is going to bring all those leads in. But let's just look at what they currently have. And as we're basically paying $9,400 for 70 million customers, it's $134 for a recurring customer. Now in my mind here. So let me just kind of start thinking out loud here. So, you know, in the prime, the prime sort of CAC or customer acquisition cost is going to equal $100 per. Right. Per mowing client. So if I look at the premium that I'm paying on this, I'm essentially paying 70 times $34. Anything above 2100, I'm basically paying a premium of $2,400.30. The reason I'm coming up with that number is that is the difference between 70 mowing clients times 100, which would be 7,000 customer acquisition costs. So if I paid $100 for customer acquisition cost per client, if I paid $100 per, that would mean I had to pay $7,000 to get that 770 million clients. So I'm really paying an extra $2,400 as a premium to get these customers. So essentially what you're doing in this acquisition, which I really like, is the fact that you're paying $2,400 to essentially probably eliminate one year's worth of work. And that is going from zero to 70 clients. You're eliminating one year. You're basically buying time for $2,400. Save yourself a year of time and effort. Great deal, in my opinion. So I really, really like it from an asset approach. When I look at what goes on my balance sheet in terms of assets, and then the part that is soft, soft of assets or goodwill, some people might say is $9,400. But when I look at that against how many recurring customers they have, which is 70, well, I'm really, really happy paying $134 per recurring customer when I don't have to do an estimate. The pricing is already set up, customers already ready to roll. I can just pick up where they left off. So I'm paying a premium on this deal of $2,400, and I'm willing to do that. I think that's a good exchange for saving one year's worth of time. And that's what would take to probably go from 0 to 70 clients. You basically jump right into the 70 million customers. Therefore, you're paying just a premium of $2,400. I like that approach. Another approach that some people look at is customer acquisition cost versus payments. All right, I'm going to talk about here in a second what I would recommend or what I would offer on this deal and how I would jump into this. And by the way, this deal is for sale, so if you're interested, just email me franchisegustalongarservices.com I can put you in contact with the owners of this specific location. And they're trying to get out. And obviously they're pricing this in a way where they just. They're just wanting to get out of the business. And so you obviously want to talk to them, have them explain why all the rest of it. But this is definitely an acquisition based upon a premium of $2,400. This is a great deal. So let's look at the customer acquisition cost versus payments. So if we look at monthly lead flow, last month they had 63 leads prior to them turning leads off. So literally, they turn the spigot off because they couldn't get enough employees. They just turn the leads off, and they're basically maintaining these 70 mowing customers. Basically, Jesse is by himself at this point. So. So if we assume that last month they had 63 leads. Now that was April, so probably not the best because, like, in May, I know they would have had more, but Then it would have come down say in the winter. So let's just as an average, let's say 50, 50 leads per month. Let's just change this to 50. So that was, that would mean that if I'm willing to pay $50 per lead, I'm going to essentially get the value of $2,500 per worth of $2,500 worth of advertising cost would be saved by basically just getting this location that already has a stream of leads coming in. And this is really what you look at evaluation and you start looking at, okay, where's the opportunity? Right? Where's the hidden opportunities and the things that can be exploited in this business is the fact that they turn the leads off. So all of this checked out as is. But the fact that I'm also tapping into these customers, these leads that are coming in, if I'm willing to pay $50 per lead, which is pretty good. If you pay $50 per lead and you close 50% of those, that would imply that a hundred dollar customer acquisition cost and be like that's a lot of money for paying for one customer. Okay, well would you, would you pay $10,000 for a business that has a hundred recurring customers? You should, you should want to do that. Would you pay $50,000 for a business that has 500 recurring customers and has like a million dollars in reven. Most of us would do that exchange. So $100 customer acquisition cost is really good. Anything under that I'm usually all about. So if we assume $50 per lead though, we can assume that the amount of leads that are currently coming from the website, which you can actually look up. Let's go ahead and check out their website. So Augusta longer service.com nampa whoops. Slash nampa. So Nampa is in a very, very fast growing part of the suburbs of Idaho. Sorry, not of Idaho, of Boise, Idaho. And it's a great market. And so they have literally turned off all. So literally the only way you can submit a, an estimate right now is submitting a video. So there's no estimates over the phone, there's no estimates in person. It's just you have to submit a video and that's the only way to do it. So this is the website, this is right now currently basically been turned off and we are letting go about 50 leads on average per month. Last month it was 63. This month it probably would have been like 75 or 80. But as an average, let's say 50. So you're really looking at $2,500 per month of what you would otherwise be spending in marketing is going to come to you for free. Now, if we look at the payments on this. Right. So let's look at. See, this is the thing. I always want a deal to cash flow, assuming that I got debt on the deal. Because if I have to take my own cash, well, now to make the deal work, if I have to spend my own money, it's not that great of a an investment. Now, if I'm able to get a loan against that and still pay the loan and make cash flow from day one, that's a deal I should just theoretically do over and over and over again. So if I go to the loan calculator. Let's put in. Let me refresh this. No, here we go. I typed it in. Let's go $50,000. I put my loan amount five year term. I'm going to assume that. Let's assume like a 9% interest rate. Okay, let's just be a little bit more conservative here. You're probably going to be able to get something less. If you go to the SBA, you get a micro SBA loan. You could probably get this down like 6 or 7%. Let's just say 9% interest rate. Though if we do that at 9% interest rate for 5 years, loan payment amount is going to be $1,000 a month. So $1,037 per month. So $1,0 37 per month payment, assuming we are doing a 50 case of the entire transaction loan with a 9% interest. Cool. So I really like this because look, just if I look at the payments that I'm going to spend on 100% debt, none of my cash is in this deal. I'm literally going to be paying $1,037 per month. And I know that from day one it's making like $30,000 in revenue. And if I'm just 20% profitable, well, that alone 20% of that is going to be what, like $6,000 in net profit a month? Well, minus out my payments, I'm already cash flowing from day one, five, six thousand four. No, four or five thousand dollars per month in net profit after my payments of the loan. This is a great deal in my opinion, for multiple reasons. One, if I take it as is from an asset approach, I'm literally paying a $2,400 premium, which is going to basically skip a year's worth of work. Great. I don't have to worry about website. I don't have to worry about all the Market material that's all done in the franchise. The website's going to be there, the email's already set, the phone numbers already there. It's already there. And then if I look at from a standpoint of okay, what's the payments If I get 100% debt on this deal versus my lead flow, well, I'm getting enough leads right now to basically I would otherwise be spending a couple thousand dollars a month on marketing. And I'm not even going to spend that much money on just the loan if I get all of it in debt. And that's what I want to do. I don't want to put my own cash in this deal. I want to be able to put my cash in to maybe a down payment. But I want as much of this as debt as possible and then I want the cash flow to pay off the debt. And if I can still make any sort of profit, if I can make any sort of cash flow after paying off the debt service and it's cash flowing from day one, that's in my opinion a no brainer deal. This is what I've done with many of the acquisitions that I've done and that is as long as the debt service can be covered and from day when I can, cash flow, that's a great deal. All right. Now if I have to go hire somebody, go do the lawns for me or do a manager, you might need to take that out of the net profit. If you don't want to be inside the deal, you don't want to be actively managing and working on the deal, you're not going to get that and you're six, $7,000 a month profit, for example. But again, that's something you talk about the owner and decide you get in the nitty gritty. Now this is what I would offer and this is what people, people get wrapped up in the numbers too much and they start nickel and diming on a, a deal like this. And in my opinion, when you run the numbers, you should not nickel and dime someone if they, if the deal pencils out, what you actually want to do is focus on some other value besides the numbers. Because these numbers are great. Like if I literally wanted to squeeze this person out of $40,000, they'd be giving it to me at just the cost, the book value of the license and the trailers. Like I'm not going to squeeze them on that. Like there's no reason trying to squeeze someone on the price here. What you do want to do is look at, okay, I want to make sure I protect my investment and what I would be doing in an acquisition like this. And I'm not just saying this because they're part of Augusta. I've done this in many acquisitions that I've done and that is, I'm not going to nickel and dime them on the price, but I want, I am going to negotiate them with is I want to make sure I retain as many of those mowing customers as possible. And then I'm able to get back up into speed with these leads coming in, accepting the new estimates and actually getting some support. So the transition is really smooth because I truly believe, like, I know this location personally, I know they'll do over 300,000 in annual revenue in the first 12 months if someone just turned the leads on. Like if they just turn the leads on, this is a $300,000 year, 300,000 year business easily in the first 12 months. I would say, based upon the fact that there's a couple other locations within proximity of this location that have grown up really fast in the past few months as well, that this could easily be a half million dollar location in 2023 with someone that wants to get there, hire people and really invest into this location. No doubt about it whatsoever. And the fact that you're $50,000, which is basically a $2,400 premium, blows my mind. So that's what I'm talking about today. This is for sale and you can buy this. So email me. Franchise, franchise. GustAlongerServices.com I'll put you in touch with the owner. But this is what I would offer if I was you. This is what I would do. I would actually offer above asking price. Okay. And I'm not, again, I'm not getting paid to say this, by the way, but this is someone that is part of Augusta and I know all their numbers. And this is what I would do if I was buying a bit of buying the location. And I've bought several locations from owners before. And that's why I have four locations of Augusta Lawn Care across the country. So what I would do, my offer price would be actually $55,000. And the reason I'm doing that is because really this number up here is too low. Like very, very low. I've seen people do acquisitions that are five times this recurring cost per customer. Five times. I'd be willing to pay almost two or three times this in most acquisitions. So this is a steal of a deal in my opinion. Again, that's why I'm talking about it. So even if this was inflated by five grand and we actually use the numbers that they use, which is 200 per recurring customer, I'd be thrilled. And so that would put us at 55,000. But what I would, this is what I would negotiate. This is my negotiating points. I was to do this deal, negotiation points. I would say I wanted the owner to.

Be on site or in the truck with you for two weeks and they would have to be part of transition, transition of ownership. So this way there would be very, very small amount of friction for existing customers. They'd stay on with you longer because I have the owner there with me for two weeks and they'd be able to show me the ropes, show all the customers. In two weeks, I'd be able to hit every customer at least one time on my mowing route. I'd be able to make sure I know all the properties. I'd be able to make sure that I understand the systems, I understand the software, I get to know how the business is operating, how it's run. Like, this is a fantastic deal in my opinion. To be able to go above asking price and the extra $5,000, you basically get someone's for two weeks to be with you in the truck mowing, going over the business with you, showing you how to route and dispatch, using the CRM. Again, this is in my, in my opinion, a very, very good offer for someone that wants to jump into a business and not start at zero, not spending one or two years getting to 300,000, but immediately be able to jump in, turn the leads back on, hire a couple people, get a second truck, they need a second truck very badly. And so this is again where I say that the existing business is well valued. It is very, very well valued. And then furthermore, looking at the fact that the lost opportunity of turning off 50 to 60 plus leads every single month is of value like that alone is worth to me a massive amount of money. So this is going to be a beast of a location. I predict that 20, 23, with the right owner, this will do easily over half a million in revenue. If you'd like to buy it, this is what I would personally offer. I would not offer 50. You want this owner to be with you for two weeks and be involved. And I would, you know, actually what I would do, I would say that 50,000, 50k up, 50k would be up front and then 5k would be after two week orientation. All right, that's what I'd be trying to do. The reason you're going to tie this 5,000 to after the two weeks is so that way they are motivated to be with you, make sure the properties, you understand them, make sure that everything goes smoothly in terms of transition with existing customers. Make sure you understand the systems and software and everything, how it runs. So I really encourage anyone that is watching this to get started on this location. I really do. I don't. I've never brought one or like this before because I feel like there's a steal of a deal, absolute steal of a deal. If I had more time on my hands, I would buy this location from the franchisee because I know I could get a general manager here, get this up to half a million dollars in revenue relatively quickly with a few good hires, a couple trucks, I'd just immediately be able to invest into this. I'd probably put an extra 30, 40,000 into it, be able to get it to 500,000. But I know the leads are there. Like the leads are being turned away from this location right now by the drove. So if you're interested again, hit me up and hopefully that was helpful. Regardless of whether or not you are buying this location, when you are looking at acquiring a business, a lawn care, landscaping company, look at that recurring number of customers, check those out and make sure that all this pencils in all what's the premium you're paying? Because ultimately what you're doing when you pay a premium is you're buying time. What would that time be that you would otherwise need to spend in order to get those customers? If you just did it on your own, if you built your own website, if you built your own brand, if you got your own trucks, like, you don't have to find all that stuff. So there's always gonna be a premium in acquisitions because you're basically leapfrogging time and you're able to immediately get started. So I think it's a fantastic deal. I think anyone listening should buy this. And whether you're franchise, current franchisee of Augusta Lawn Care or someone that wants to get in, this is a great opportunity. We aren't allowing anyone else into the franchise until later this this year. And so if you're wanting to get started sooner, you've been chomping at the bit. This is probably the only way you're going to get in. So feel free to check it out. And again, watch this video here if you like, more information, information about acquisitions, mergers, how to improve the valuation of your business if you're wanting to sell it down the road. All that information here in this video couple years old, but it's still very relevant information.