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View Full Version : Selling my mow route. What's it worth?


Mile High
08-25-2005, 11:17 PM
I am considering selling my mow route. What is a mow route worth that brings in 90K? The route is tight, all in 10 sq. miles. Making $60 to $100 per man hour. Each day 22-25 lawns, one guy can do alone, mostly small lawns under 3000 s.f., all residential. On each mow day, all lawns in a 3 sq. mile radius (not a lot of driving around time). Thinking of selling with or without equipment.

dixiedemon
08-25-2005, 11:37 PM
i have a question for your question, another lco came to me with a list of his clients, he wants me to buy them he is going out of the business after this year why should i pay him for them when he will no longer have them and i know what he gets for each of them and by the way he wants 15k for just the yards all residental 35k for everything mowers yards, etc.

HighGrass
08-25-2005, 11:42 PM
I am considering selling my mow route. What is a mow route worth that brings in 90K? The route is tight, all in 10 sq. miles. Making $60 to $100 per man hour. Each day 22-25 lawns, one guy can do alone, mostly small lawns under 3000 s.f., all residential. On each mow day, all lawns in a 3 sq. mile radius (not a lot of driving around time). Thinking of selling with or without equipment.


I did some quick math, let's see if I'm in the ball park.
You're average per lawn is $80/hr. A single person can accomplish the 22-25 lawns per day. That's roughly $1840.00/day times (assuming here) 5 day work week equals $9200.00. Now if in CO you can (?) work a 20(+/-) week season, that works out to $184K. So where are you getting 90K?

CuttingCrew
08-25-2005, 11:52 PM
He stated $60 to $100 per man hour. Not per yard. I figured he was doing several yards an hour at 22-25 a day.

10 hours a day, five days a week X 20 week is $80,000 a season.

Mike

stevo22
08-25-2005, 11:52 PM
now this is just me personally...if i were going to entertain the idea of paying someone for their accounts i would do it one of two ways...1. draw up an agreement that would pay the seller x amount of money per yard over the span of say three months...say it is a $35 yd with say 25 cuts ($875)...not sure if your cuts are higher or lower...come to an agreement to pay say 15% (130) over three months...this is of course after he and i have visited each property to speak to each homeowner and looked at each property...

2. i would pay someone what i thought it was going to be worth to me, not to the selelr...you might think that your 90k route is worth say 20-35k...a buyer might be only willing to buy them for 8k, and probably not all up front...

instead of selling, why not hire and have someone else do the work...pay them well and not lift a finger and still prob make more than you would by getting someone to buy them...

HighGrass
08-26-2005, 12:02 AM
He stated $60 to $100 per man hour. Not per yard. I figured he was doing several yards an hour at 22-25 a day.

10 hours a day, five days a week X 20 week is $80,000 a season.

Mike

OOps...you're right. For some reason I missed that. So he's doing 2-2.5 yards per hour.

I've never had to "buy" accounts before, but If I could guess, I would have to say I would treat it like a finders fee. Maybe say...10% of the gross annual income per yard? So maybe $8000.00?

Vassk1
08-26-2005, 12:27 AM
50% of sales. Will probably sell for 50% of asking price..so around 25% of sales plus equipment would be the rule of thumb. I actually just looked this up in a business broker book.

HighGrass
08-26-2005, 12:31 AM
50% of sales. Will probably sell for 50% of asking price..so around 25% of sales plus equipment would be the rule of thumb. I actually just looked this up in a business broker book.

So when a buyer purchases these yards at a given price, is there usually any stipulation as to accounts dropping?

firstclasslawncareandplow
08-26-2005, 12:36 AM
Now i'm kinda new at this also, but i heard from a very large local company that the contracts are only worth what they will make you in ONE MONTH!!! The guy i talked to said that with a switch of ownership many people will go looking again and you will loose many of them!

Vassk1
08-26-2005, 01:05 AM
BS as far as I am concerned. Listen. If you are professional with your work and the seller properly introduces you to the customers then they have no reason to drop you. Of course, you should work with the seller for a couple of weeks before he/she even mentions it to the customer, this way they will see the work you are doing.

You may lose 10% of your customers. For arguments sake you do lose 10%. Are you telling me you wouldn't spend 25-30k for a "job" that easily nets that? I think it's a fair trade off. This is an investment. There are risks. If you can't handle risks then you should be working for a LCO, not owning one.

Let's say company A operates in Florida using a 40 week year. They have 200 accounts charging 30$ per cut. That is a $240,000 gross per year easily netting over 100k for the owner. You're saying that business is worth around 20-25k?! That's laughable. I'd love to buy a job that nets 100k for 25 thousand dollars. So would everybody else. Not gonna happen. At least not in this industry.

I don't even own a company. But I would if they were this cheap.

Vassk1
08-26-2005, 01:10 AM
As far as the stipulation for potentially losing accounts sure, there are creative ways to deal with this. Put some of the purchase price in escrow. Let the seller guarantee the transfer of accounts. If some accounts drop you then you get some portion of the purchase price returned.

I don't know how many sellers would do this but they would probably get more for their company if they did. Also seller financing could help keep customers since the seller is going to be much more interested in what you are doing with this business because he wants to get paid.

topsites
08-26-2005, 01:49 AM
I'd pay 20 to 40 dollars per customer, the same it costs me to acquire a new customer via advertising + labor in time spent estimating.

So when someone comes around wanting 15k for 35 customers then I let them know I'll gladly pay 700 dollars and that shuts them up OR they go on about well then I'll just let them go, at which point it goes back to the FREE market and for exactly that price, so as far as I'm concerned, someone ELSE's customers ain't worth no thousands, to be sure.

Vassk1
08-26-2005, 03:08 AM
What goes back to the free market exactly? He's grossing 90K. Are you? He's far from going out of business. You have an existing business. Let's say he guarantees the accounts for 90 days. You wouldn't jump on those 35 customers for 15k? Do the math. You will make money. Not in those three months, but you will make money.

rodfather
08-26-2005, 05:51 AM
Purchasing one's mowing route vs. a true turn-key operation are two very distinct issues.

Mile High
08-27-2005, 12:25 AM
i have a question for your question, another lco came to me with a list of his clients, he wants me to buy them he is going out of the business after this year why should i pay him for them when he will no longer have them and i know what he gets for each of them and by the way he wants 15k for just the yards all residental 35k for everything mowers yards, etc.
What does the business gross? What if that owner has done a great job getting good properties to mow, properties that are easy to mow, clients are not too picky, route is tight, ect? When we do quotes we only "want" 1 out of 5 quotes we do for the same issues. So our clients are very highly selected. But if you go and look at his lawns during the week and you wouldn't want half of them anyway, then its not a good situation. Also I'd like to see his A/R for these clients.

Mile High
08-27-2005, 12:31 AM
now this is just me personally...if i were going to entertain the idea of paying someone for their accounts i would do it one of two ways...1. draw up an agreement that would pay the seller x amount of money per yard over the span of say three months...say it is a $35 yd with say 25 cuts ($875)...not sure if your cuts are higher or lower...come to an agreement to pay say 15% (130) over three months...this is of course after he and i have visited each property to speak to each homeowner and looked at each property...

2. i would pay someone what i thought it was going to be worth to me, not to the selelr...you might think that your 90k route is worth say 20-35k...a buyer might be only willing to buy them for 8k, and probably not all up front...

instead of selling, why not hire and have someone else do the work...pay them well and not lift a finger and still prob make more than you would by getting someone to buy them...
I may do your option #3. Mowing is very profitable and great cash flow, but we are not as passionate about it as growing our fertilizing and sprinkler businesses. I was hoping to find a one-man owner who would pay me half of a years gross, plus the equipment. I'd throw in the $20k in aeration business we do for the same lawn clients.

Mile High
08-27-2005, 12:34 AM
Very wise of you; you are right. This is a turn key in my mind because, I don't mow any of the clients lawns. They don't know me or have a relationship with me. I have had several different people mow their lawns over the years and they don't care who mows it, as long as it gets mowed. Our Clip software manages the routing, man hours, receivables, etc.

Mile High
08-27-2005, 12:39 AM
I'd pay 20 to 40 dollars per customer, the same it costs me to acquire a new customer via advertising + labor in time spent estimating.

So when someone comes around wanting 15k for 35 customers then I let them know I'll gladly pay 700 dollars and that shuts them up OR they go on about well then I'll just let them go, at which point it goes back to the FREE market and for exactly that price, so as far as I'm concerned, someone ELSE's customers ain't worth no thousands, to be sure.
One thing you are not considering. We don't want every joe blow that calls us and wants his lawn mowed. We are highly selective. We take 1 in 5 mow quotes on as customers. Lawn has to be less than 3000 s.f., no walk out basements, lawn has to look good already (no project lawns), etc. It took us years to get these "selected" clients, all very close together (we drive less than 4000 miles per year on this mow truck on this route). You could not get these accounts for as little as you have stated

Mile High
08-27-2005, 12:41 AM
As far as the stipulation for potentially losing accounts sure, there are creative ways to deal with this. Put some of the purchase price in escrow. Let the seller guarantee the transfer of accounts. If some accounts drop you then you get some portion of the purchase price returned.

I don't know how many sellers would do this but they would probably get more for their company if they did. Also seller financing could help keep customers since the seller is going to be much more interested in what you are doing with this business because he wants to get paid.
What if the new owner doesn't mow nice? Or does show up, or does bad quality work? That would be my chief concern. I guess I could put a clause in the contract that I have the right to take a client back on if he's going to lose the client (but I am trying to get out of the mow end of it!).

turfmgr
08-27-2005, 02:42 AM
i have a question for your question, another lco came to me with a list of his clients, he wants me to buy them he is going out of the business after this year why should i pay him for them when he will no longer have them and i know what he gets for each of them and by the way he wants 15k for just the yards all residental 35k for everything mowers yards, etc.

because he put the work in to getting the yards and so he doesnt lose his ass on the whole project of setting up a business, you pay him for the work he put in. you will probably be paying a percentage of what the yards bring in over the season. remember, you are buying his business, if you want free business go get it on your own.

Rougewave
08-27-2005, 09:42 AM
If that business was in our town I would buy if for 1X the earnings (net earnings) for everything.

If it nets you 50K a year I would pay you 50K.

just my 2 cents.

topsites
08-27-2005, 10:02 AM
One thing you are not considering. We don't want every joe blow that calls us and wants his lawn mowed. We are highly selective. We take 1 in 5 mow quotes on as customers. Lawn has to be less than 3000 s.f., no walk out basements, lawn has to look good already (no project lawns), etc. It took us years to get these "selected" clients, all very close together (we drive less than 4000 miles per year on this mow truck on this route). You could not get these accounts for as little as you have stated

It costs me 20 to 40 dollars to get the accounts *I* want and my accounts are just as picked as yours and here is where the problem begins:
- YOUR picks are not what I would pick and vice versa there are NO two lco's who would pick EXACTLY the same kind of lawns, thou we'd always agree somewhat there is also a considerable disagreement because I DO pick some project lawns, my lawns are all MORE than 3000 sf and really right there your WHOLE route is completely worthless to me with all those small lots but if that suits you then more power to you while MY route is worthless to you with them 1/2 acre - full acre spreads I got you might hate my route, too, lol !

Thou you do got me a little bit jealous on your annual mileage now I am VERY impressed thou I like my route spread out as I like doing 2-3 in a row, then take a 15-20 minute break while driving to another area, see that has its advantages also with bigger lots I spend up to an hour on a lot easy.

No doubt I think you can raise the price SOME but before I go spend 5 or 10 grand (or more) on someone else's customers I'll gladly throw it into MORE advertising, my only point is *I* never have believed someone else's customers are worth that much thou I know there's some who believe otherwise and I suppose it may be one of those permanent disagreements. I can live with that but my opinion stands, someone else's customers are exactly that and so there are NO guarantees to retention or success, hence why I low-ball it if you want to call it that... Besides, if nobody buys said customers then they go back out into the free market which is dandy by me.

heh, sorry is ramble.

topsites
08-27-2005, 10:06 AM
As far as the stipulation for potentially losing accounts sure, there are creative ways to deal with this. Put some of the purchase price in escrow. Let the seller guarantee the transfer of accounts. If some accounts drop you then you get some portion of the purchase price returned.

I don't know how many sellers would do this but they would probably get more for their company if they did. Also seller financing could help keep customers since the seller is going to be much more interested in what you are doing with this business because he wants to get paid.

Yes now this is a feasible idea if someone were willing to at least guarantee the retention loss because there WILL be some, hopefully not a lot and if you know what you're doing it SHOULDN'T be a lot but you never really know and that's my problem with the enchilada costing a lot of money when I can't be too sure it's MY kind of enchilada.

topsites
08-27-2005, 10:22 AM
What if the new owner doesn't mow nice? Or doesn't show up, or does bad quality work? That would be my chief concern. I guess I could put a clause in the contract that I have the right to take a client back on if he's going to lose the client (but I am trying to get out of the mow end of it!).

For one, once the route is sold and I have my money, I couldn't care less what happens BUT would be glad to take back those customers who call me telling me the new LCO never showed, for an example. Then you just made double money as you got paid AND now you get paid again and the customer loses a bit of mental skin but no money.

There are a couple of things I WOULD like to add:
- Chances are 98 percent of those customers DO pay on time, right? But what if they don't? I know Lco's who keep shabby records and there's a 10-20 percent or so loss right there with customers not paying and the lco never realizes it OR doesn't care because it doesn't bother him, what if you get THAT kind of route? Matter of fact, a LOT of businesses operate on a 10-percent NON-pay loss (a 10 percent loss is default or average) but mine does not because I can't deal with that.

- Customers have a personality, and this is ONE big reason why when transferring accounts, some will get lost, yup, personality - Two folks (lco and customer) who don't get along will not do business and this SHOULDN'T affect things but believe you me, it does.

For all this matters, I been thinking of selling my WHOLE business for 60 thousand with 50-55 accounts and all the equipment AND I'll work for the buyer for FREE for 2 years to boot (as training for THEM) - Now there's a turn-key deal but see most people STILL won't end up buying it (oh yeah I'll get a LOT of calls but I can already hear the comedy) because they fail to realize 50-55 customers of mine are still only worth ~$35k / year. So you see, there's a silver lining in every cloud but there's also a bit of lightning and rain, lol.

Mile High
08-29-2005, 11:30 PM
If that business was in our town I would buy if for 1X the earnings (net earnings) for everything.

If it nets you 50K a year I would pay you 50K.

just my 2 cents.
This is what I have determined to try. I'll let you know. Thanks for all for the input. I appreciate it. Mow route has been listed.

olderthandirt
08-29-2005, 11:36 PM
1st thing I would do is have my accountant go over his taxes from the last 5 yrs to actually make sure what he was grossing from these acounts and for how long

drmiller100
08-30-2005, 12:26 PM
i've had 3 different competitors offer to "sell" me their accounts. One wanted 23,000 bucks for 2 worn out 21 inchers, a box of 32 inch walker parts, and "25" accounts. I told him I'd give him 100 bucks for every custoemr he referred that paid me a cent.
It turns out his "25" accounts were actually 11 accounts, all of them pissed.

Another guy just GAVE me 9 accounts. He hadn't done a thing on them for 4 weeks, and they were all crappy looking when I started. Of them, I have kept 5. 1 is now doing it themselves, one is a church using a church member, and 2 i fired because of PITA.

Net is a funny thing. If you are netting 50k a year, is that before or after paying yourself a salary? If before, then you are really netting ZERO, as being a business owner is a PITA and no fun to do for free.
When people start thinking of quitting mowing, they are burned out, their quality and attitude starts to suffer. Mowing routes are not worth a lot generally.
If I advetise a little, odds are good I could get the customers anyway.