determining the value of a tree business

It's a complex matter and really depends on the approach. I would speak to your accountant and/or a consultant that specializes in small business valuation. If you're thinking of selling it then this is definitely the way to go as it will establish a real value that you can then market. Otherwise it becomes difficult when it comes to negotiating a sale price. While a general ballpark like 1 yr gross is a starting point it doesn't take into account all the nuances of your situation.

Of course, that is if you are looking at arriving at a figure for more than just your own information.
 
Yes, but what do you consider a small business. One crew? What if that one crew had enough work to be busy year round, with a few contracts that were guaranteed work for a set period of time. I would believe the company would be worth more than just the value of their equipment. Also, their is value in a name as well. Sometime that is what you are purchasing. Good question though. I have always heard that it's the value of one years gross sales. But, much more should be considered as well.
 
LeviRockett said:
I would be worried about retaining clients in the sale. Also I would be leery of entering into a contract that I had nothing to do with initiating. A name could definitely be worth some cash. I would feel safer purchasing a larger company compared to an owner operator situation.
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I agree with that!!
 
LeviRockett said:
Royce didn't you buy a pre-established biz?
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Yes, Just a phone number, name, and client list. One of the main selling points for me with buying the business was the name. This business had been in this area for 44 years. Plus, they were the only company with a PHC program and a certified arborist. The owner tried to sell the facility, and equipment in a package deal. He tried for a long time and no one would buy the whole thing. It was too expensive. He made his money by selling his equipment and then selling me the numbers, name, and client list.
 
I have been working for a few. I have not really looked through the client list too much. I have got a ton of new customers that I am servicing right now. I sent a letter out to all the re-peat customers from the last 5 years. I have not gotten a ton of work form that letter. I am about to send out another mailing to try and strum up some business for the next few months.
It has been really good. But, I have been keeping the business small. Just me and two others. A chip truck, chipper, bucket truck and a mini. Plus we have a PHC trailer for root injections in the spring. I just find I can be really profitable with a small crew, with me on very job. I bought the business in the end of July. I missed the big spring push for tree work. I am excited to see what this spring will bring for me.
 
Royce's situation points out one of the areas of concern in buying a small business that is owner/operator, customer retention. When assessing the business you really need to ascertain how many have stayed due to a personal relationship with the owner. How many will stay once they are no longer there. This will determine whether you're well served having them stick around for the first couple of seasons to make the transition.
 
That is very true. I inherited my business when my dad passed and some of his oldest customers were pretty much dedicated to him and without him they pretty much dropped us.
 
No loyalty round here. 4 out of the 5 tree guys are bucket truck removal only services.
For the most part, who ever is quicker and cheaper.

I'm that one that climbs and prunes. Probably the only one with hand saws and hand snips.

The two biggest guys around me are getting out...only thing I would consider buying is there phone numbers. They don't even advertise and they are busy. I get jobs often they were supposed to do.
 
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