What do you think of this offer?

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I am interested in buying a lawn maintenance business from a friend. It has only been around for about a year and a half. It has about 55 lawns so far.
I think the asking price is too high, and I'm looking for some outside input on realistically valuing this company.

This is the email he sent me.


Invoices come in at 15356.60 and credit cards ring in at 5251.65 for 3 month gross of 20608.25 this is a less and estimated 1200 to 1500 in uninvoiced cash and personal check payments for a gross of roughly $22,000 in 3 months. Estimated to be equal to the next 3 months for a seasonal gross of about $44,000. Owner benefit estimated at $27,400 after employee payment of Est. $9000 advertising of $3200 equipment repairs and maintenance (inc major truck repairs) $2000. And fuel insurance phone and basic operating costs of $2400. From what I have read about selling of businesses and all for a primarily owner operated lawn company a standard sale mark is one season owner benefit plus equipment value or one half seasonal gross plus equipment. Again this is for a business with heavy owner contribution as management only business can be valued at 4 times this number. This would place the value at if we use the lower number and a low estimate of equipment value at $6000 and half gross at $22000 for a total $28000 market value. I would be willing to do a base number of $26000 for the business with a downpayment of $10,000 non refundable and $16,674.2 or 694.80 per month over two years at 4% interest. This is for a minimum of maintaining current numbers for next season with balance of payment falling with the percentage of gross falls if it happens to fall. Also I would come back and guide and help on the growth plan on bonus terms if gross hits goal of 120 lawns and $2800 per week gross in first three months of 2010 season number would go up to desired $30,000 for business with the $4000 covering the month of help in late april and may and this number falling to no pay for my assistence if no growth happens again in proportion to relative growth or decline. I think this could be a fair structure for both of us as it is incentive based on both of us hitting our goals if the numbers and success is right.




Business will only run about 6 months a year, and he has one employee being paid utt.
Assets are only worth roughly $5000.
What I see value in are the accounts already established.

What do you think it's worth? What are some good negotiating points? Thank you in advance.

[ZingerIntl]

If he is offering seller finance at 38% Down that is good because he has a stake in your biz profiting. I know a ton about purchasing businesses and your entire email is very confusing and terribly written. You will want to take 20 minutes and separate the assets, accounts, add-backs, profits, expenses, etc. Make up a PnL real quick. It will make your decision much easier. Does he have a LOC or a company credit card? Does he have any accounts on retainer? You have creative options like having clients prepay for services at a slight discount so you can raise the down payment if you need. Find a single large commercial account. Their one year may cost $15,000. Tell them their first 2 years are $10,000 each if they pay each year up front. Then you get this business and its income for the free work you are yet to do.