The Case of Enviro-Lawn: Valuing a Local Business
Richard W. Anderton and James C. Brau
Marriott School, Brigham Young University; Provo, UT 84602.
Vol. 2, Spring, 2001, pp. 23-30.
At the beginning of2000, two brothers are selling their lawn-care business. They have owned the
company for three years while they have been college students, but now they are graduating.
oftheir acquaintances has offered $15,000 in cashfor the business. The brothers want to
estimate a value for the firm to determine
this is a fair offer. They have asked theirfriend and
employee, Jason Andrews (who also happens to be an undergraduate finance major), to price the
Key Words: company valuation, finance education, case methodology
Disciplines of Interest: Finance, Entrepreneurship
In need of part-time school jobs and wanting business experience, John and Andy Miller decided
to start a lawn-care business as opposed to working a minimum wage student job. In February
1997, they formed an s-corporation and obtained a $13,000 loan at an interest rate of 10% from
John's brother-in-law, Bill. In addition to the 10% interest, Bill received a 10% ownership stake
in the finn. John contributed his old Toyota truck valued at $1,800. His wife, Sue, contributed
work hours valued at $1,800, and Andy gave $500 in cash and $1,300 worth oflabor.
that John, Sue, and Andy contributed an equal amount, ownership was divided as follows: John
and Sue together, 60%; Andy, 30%; and Bill, 10%.
John was to run the business until he graduated in August of 1998. Then Andy would take over
until he too finished college in April of 2000. At that point, the business would be sold or
liquidated, and the proceeds would be divided to each owner based on percentage ofownership.
Enviro-Lawn's first year's business activities focused on spring aeration, power raking, and lawn
They even found themselves laying sod. At the end oftheir first season, most oftheir
equipment was destroyed in an auto accident. The $8,000 of insurance money was used to invest
in a larger lawn sprayer and to buy two used trucks. By focusing more on lawn spraying and
pest-control, the business began to grow. Customer contracts further increased revenues and soon
Enviro-Lawn grew from a part-time, side job, into a healthy small business.
Now after three years of operations, Andy, who is currently running Enviro-Lawn, is graduating
and wants to divest the business either through liquidation or by selling the business as a going
Andy is concerned, however, that he will not be able to sell the business for enough to
pay offthe $10,000 debt that is currently owed to Bill.
Pete Williams, an acquaintance who owns a local landscape business, surprises Andy by offering
him $15,000 to buy Enviro-Lawn as a going concern. Payment would be up-front and he would
assume the business before the 2000 spring season, releasing Andy from any further work.