Thread: Looking for advice on a distributorship I'm looking at buying

I am looking at buying the exclusive distribution rights to a commercial lawn mower company. Here are most of the details I have. Advice welcome, especially from anyone in a similar type business. Thanks.

- Exclusive rights to eastern side of the US. (everything east of the Mississippi)
- Commercial and high-end home lawn-mowers
- Company in business now 28 years
- Company is US based (mowers made in USA)
- Competition would be with brands such as 'xmark'
- Asking price high 4 figures to low 5 figures.
- If sellers claimed sales repeat this year, would likely pay full asking price back in one year or less
- Seller claims March/April/May is biggest sales time but sell all year long. If this happens, most of the purchase price would be made in profits from the first three months.
- Current distribution owner has had it for four years
- Current owner sold over 20 units last year with absolutely no sales and marketing effort. They claim this to have been their worst year of the 4
- Sellers say they are selling because they have 2 other successful businesses and don't have time to give this one proper attention
- Seller is a long time friend I trust
- Seller currently has 4 dealers
- Seller may be willing to take payments. (12 monthly installments or something)
- Mowers seem to be very high quality but I don't know much of anything about comercial mowers
- My goal would be to somehow transform the business into a much higher volume business
- I don't know how to find out how big the market might be.
- Current website is really bad, huge room for improvement.
- Seller is not doing anything with marketing at all, including online.
- The price point for the mowers is $5k-$7k-ish (seems like a lot)
- Manufacturer has a range of attachments to sell as additions
- Manufacturer has about 12 different models
- Mowers have some exclusive capabilities that other commercial mowers don't have
- Mowers apparently have very high customer satisfaction rating and return customer rate.
- Seller is not selling me any inventory - claims i don't really need to have.
- Manufacturer drop ships all sales and handles warranty claims
- Established pricing with existing dealers. Make about 10% to 15% when selling to dealers. 20% to 30% when selling direct. (seems low to me, but again, I don't know much about this type of business)
- Seller says they did return phone calls, and send out dvds/brochures when they got requests. (dvds they burn as needed and feature movies of the mowers in action. Brochures are free from the manufacturer)
- I co-own and help operate two other businesses full time and would not have much time to work this businesses. I'm hoping I can develop a much better online presence. Do off-hour online marketing. Somehow add many more dealers and transform the business into servicing dealers
- Seller makes about same markup on taking trade-ins of same brand/refurb and resale through closest dealer.
- Have a father-n-law with a successful lawn irrigation business who would likely be a new dealer and might be interested in being a partner in this excursion.

Probably more, but this seems like a good start.

Thanks for any advice in advance.

Thanks all

Okay, I have lots of professional Landscape Maintenance experience...

I'm sure I can help you with this...

Okay, look at betteroutdoorproducts.com first.
Compare your products with theirs and let me know of your findings here...

Secondly, know that ExMark and Scag are now on the verge of pricing themselves out of the market, but produce the best and most respected machines available other than "boutique" commercial mower brands that run in excess of $25,000...

Now, we can discuss your potential acquisition...

Hell I may even buy a few mowers from you...

Thanks for the links. I had looked at xmark a little bit, but hadn't heard of scag. Betteroutdoorproducts.com looks like all walk behind mowers? I wouldn't have a walk behind so probably not the same market.

The mowers I would be selling would be in direct competition with the xmark and scag mowers. They are the same style, varying deck sizes, zero turn ('true' zero turn with two wheels in front and one balance wheel in the back) , kohler engines, etc. It also has a front mounted, floating deck that not only keeps the deck level all the time, but also lets you completely tip it up a full 90 degrees for cleaning, maintenance and blade changes. They are made of 'thicker' steel than most (whatever 'thicker' means), and each unit weights around 1,000lbs. The seller says they are 'tanks' that 'never quit running. There are 16 models in all. 10 residential, and 6 commercial.

One of my big questions is the price point. Retail cost starts at 7,250 on the home models and goes up to 9,650 on the commercial. Seems to be priced out of any major market. They do claim a lower cost of ownership (then say an xmark) over time because they are so durable and easy to maintain.

They seller says that they are much better quality than xmark and they run forever. But I'm wondering if this price point puts them out of reach for most? As it sits, this is a low volume, low leverage business. If there is no way to make it a high volume, high leverage business, I want to pass and keep looking.

If I could get it up to selling 1000 mowers a year or something, then I could sell the business after a year or two and cash out.

Thanks again for any advice.

How thick is the steel in the decks?

Do you have a "stander" model?

Walk-behinds are very popular...

Exmark and scag start at around 8 grand and go up to 14 grand...

If your costliest mower is less than 10Gs youre good.

Any more info on the Kohler engines or the hydro pumps? Both are very important aspects to mower buyers...

Do you have pics or specs links you could send me?

I'd like to see all the 16 different mowers...

What you would want to do is start and expand an absolutely hellacious dealer network in your demographic.
Provide badass service and support to your dealers, and help them get these machines out there as much as possible...

- not sure on the deck steel - i've never actually seen one in person - still missing some of this key info obviously
- Kohler engines, OHV Kohler 20 HP is the biggest. The seller said that they have caught some flak in the past for not going bigger, but he said the way these mowers are set up, the hp goes to the blades. He said he's never had anyone come back and complain about power 'after' they got it. He said you can pretty much run at tall grass at full speed and never slow the blades down. (seller claims of course. i can't substantiate yet)
- 2) BDL-10L Hydro-Gear Pumps (one for each drive wheel i guess?)
- I didn't realize exmark and scag were that pricey
- does the margin seem right? (about a 10% markup to dealers, 25% retail)
- I don't have all of the detailed info yet - seller out of town for the next week or more

How much do the distribution rights cost?

We haven't settled on a final price. They offered 10k as a starting point.

- Any idea on the US market for these types of mowers?

- Are most dealers locked in to exclusivity with their brands?

- Are there dealers or types of dealers that would be a good target to adding my mowers?

- What do you think the reasonable upside could be for a well run distributorship with a solid dealer network in terms of total annual units sold?

- Do you think buyers do/would buy from a website in any kind of volume? Or is this market too dependent on seeing a mower in person and buying through a dealer. (I can imagine if it was me, I'd want to see the actual mower, even test it. But I'm not the target demo)

10K isn't bad at all...You could make a lot of money.

Keep in mind that the buyers of these machines are die-hard fans of their brands just like car enthusiasts.
You will not make any money if you can't develop a good reputation, because no one respects lowball machines in this industry.

The market is willing to pay for quality, and often!!! Pretend I underscored this whole sentence...

Give them VALUE!!!

Great product with few complaints and a good price is a good idea...

The big boys have their noses too high in the air to see the market responding to low-priced models made by value-based companies.

Dealers are not locked into exclusivity very often that I know of, they often sell many competing brands!

I would start by building a contact list of every equipment dealer in your area, and by finding a great salesman to close as many as possible, then after you increasing your rep try to close as much of the list as possible...

The brand Stihl is so respected not because they are the best or the cheapest, it's because their dealer network is so SOLID.
These guys provide legendary customer service and stock Stihl parts at all times, because when a piece of equipment goes down, the dollar signs start flying out the window for that lawn jockey. I would recommend getting dealers started with consignment packages of mowers and the parts to fix them. I would not recommend approaching dealers that do not have an in-house mechanic at least part-time. Doing otherwise could hurt your brand irrepairably.

Even using salesmen and cherry-picking dealers it will take several years before the locals quit laughing at trucks pulling trailers with your mowers on them...Just because that's people...I would recommend asking these guys why they don't make walkbehinds or standers tho, as all the major companies make all 3 generally(ZTR, WalkBehind, Stander). Ask how long they've been around, and know that it's hard to be respected in this industry, but if you play your cards right I'm sure you could move several thousand units a year eventually, maybe more with time...

As far as the website goes, you are MUCH better off selling them through a dealer network only...Only the cheapest mowers are sold factory-direct or without the use of dealers...Think commie steel being pawned off as quality to red-blooded americans as far as these guys are concerned...

Thanks a lot. I'll post more info when I get it.

My main apprehension at this point is that I'm under-capitalized right now, in both money and time. I realize that I'm going to have to take action to change that, but if I can help it, I'd really rather not make a miss-step and dig myself more of a rut.

Another thing, those hydros are not first tier hydros, as far as I know. There are 2 major brands of hydros that people look for, and Peerless is one of them, I forget the other. But I have not heard of those before...Could be a major indicator...