# Buy-Out?



## Sooner

My company is six months old and I am new to the sweeping business. The area I work in is predominately contracted by one company who seems to have cheap-bid all of their contracts and doesn't do a very good job. I have had mixed success with getting their customers to change to my company even though our quality of work far surpasses what they are used to and my bids are close to what they are currently paying. I had a crazy idea yesterday of offering to buy out the other company, as the owner is a 'jack-of-all-trades' and is the age of retirement. Am I approching this the wrong way? If not, how would you go about valuing a sweeping company that probably has 4 or 5 trucks running 8 hours each/night with no land or office involved? Should I just keep grinding it out and slowly take their contracts as I can by offering a better alternative to the businesses? I, know this is alot, and have been doing the latter, but I want to grow this business as fast and smart as possible. I would appreciate any fresh ideas, thoughts or suggestions. Thanks-Gene


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## iceyman

first of all you would have see if the guys wants to sell. then you will have to come up with a value for the co. value will include trucks, route income, any inventory, storage, etc. with knowing all of that you can come up with a number the company is worth. make an offer which is on the low side and see what his reaction is. maybe he wants to get out of the biz and he will jump at an oppurtunity for some fast cash. you gota do some research.


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## Sooner

*Thanks*

How would the contracts be valued? I mean if you have an annual contract worth $36,000. That is up in Dec., but were going to sell out in Feb. what is that valued at? Surely not the whole $36k.


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## hickslawns

First of all, good luck with your business. Second of all, if he is "cheap-bid" then WHY do you want his work? Thirdly, if you are slowly picking up his customers, then why do you want to buy him out?

I am in a similar situation. I have been sweeping a little over three years. My competition is closing in on retirement and does less than quality work in my opinion. I have asked myself this several times because I know there IS a possibility he may approach me to sell in the future. I cannot compete with his pricing. His trucks are older or will be by the time he wants to get out. If I don't buy him out then his customers will end up in my lap anyhow. This is business buddy. I talk to the guy, and I like him, but I don't owe him anything. He bids against me just like I bid against him. I just lost 2 pharmacy stores managed through an outside company to him because I would not lower my prices to match his. I had swept them for 2 years. My costs are going up, so NO I will not drop my pricing, I should be raising prices to feed fuel to my 2 engines running. It is competition and it is business. He didn't roll over and say "Hicks is a nice guy, I won't bid this."

So after all this rambling, I offer you this advice: Continue doing quality work. Continue to bid in a profitable range. Do not stoop to his "cheap-bid" and cut your own throat. Quality always prevails in the long run. Customers that shop for cheap bid get cheap work, and will drop you as soon as they find someone cheaper. Go for customers that are willing to pay fair market price for quality work as they are the keepers. If he is near retirement age and a "jack-of-all-trades" then he will probably drop work which is least profitable first and keep the most profitable trades until he has to sell or give it up.

The risk you take is someone else buying him out. Never fear. If they continue working at his cheap rates they will not survive. Be patient and grow steadily. Fast growth generally equals fast death. Take off like a rocket, be prepared to crash and burn. Go steady, pick off his jobs steadily, and build a solid business. This is easier than trying to start from scratch with no credit after you file bankruptcy.


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## Clapper&Company

I agree I would slowly keep taking his clinets and wait till he gives it up. You might pick them up for nothing LOL or then buy him out


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## Sooner

So far, I have been good about bidding in a profitable range. I have even had some success with getting some of his lower-paying contracts to pay us much more for our quality of work. The quality of our work/more services offered is my main selling point when speaking with property managers, and other than the three Wal-Mart stores in my area, most seem to be more concerned with that then whether or not I can beat his price. So I will continue with the 'slow and steady' tactic. I appreciate all of the advice. I believe I just had a bout of frustration and impatience when I started this thread, as I had just gotten another 'no thanks' from a Wal-Mart... :salute: On a positive note, I just got asked to bid all 30 of his Walgreen's stores in our area! Wish me luck!


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## hickslawns

Good luck. They do not sign contracts. No big deal, but don't spend big bucks on equip if they change next year. Probably thru an outside property maintenance company? Am I right on that one?


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## tman3007

*good advice*

Sooner,

I think that Hicks nailed it right on the head...no point in trying to buy out your competition when his pricing is way below what you would deem profitable. Steady growth and most importantly, landing PROFITABLE accounts is much wiser for you in the long run. We all would love to eliminate our competition; and a buyout works in some instances. But it sounds like you'd be upside down with cash flow right off the bat on that large of a purchase. That can only lead to bad times down the road for you.

I bought out two smaller lawn maintenance companies back when I lived in Florida and had currently ran my own lawn maintenance co. It made sense because they were getting out of the business and all accounts paid very well and were in upscale neighborhoods. They approached me and we settled on a buyout price of 6 months worth of income. It turned out to be a very good long term decision for our company. I'm betting that you'll eventually land a lot of your competitor's accounts strictly by the quality of work you're providing...and save a lot of money in the process. Just be patient, it'll all come.

I've only been in the sweeping industry for about 5 months, it is not my "main" business priority but has proven to be very promising. My main business is our landscape division. We got into sweeping by default, we landed a Walmart account that wanted one company to handle all outside maintenance such as plowing, lawn maintenance and sweeping. So nevertheless we went out and bought a sweeper to ensure that we would land the account. Since landing Walmart we just recently landed one of the large shopping malls in Colorado Springs, a gated community and a local bank. It is growing at a very nice pace that isn't taking my attention away from our plowing or landscaping.

Wow, I sure know how to ramble...but anyways, good luck to you and your new business. Sounds like you'll be very successful!!!


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