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CMLawnCare
03-12-2007, 05:04 PM
I have had the chance to buy an existing lawn care business from a fella in town and need alittle bit of help. He has approximately 30 residential accounts "generating about $100,000 gross annually." Hes looking for $125,000 just for the lawn accounts (no equipment).

This is a recent thing that has come up and I have requested more information on the specific overhead of the business, the profits, and so forth. To be able to see even what I'm potentially buying into.

I'm hoping to spark acouple peoples interest and hope to find out if there are "rules of thumb" to purchasing accounts in the Northeast/Mass. Market. Thanks everyone

haybaler
03-12-2007, 05:23 PM
hey, i'm in western mass. what town are you in?
Rule no 1!!!! make sure every account has a contract that can be legally transfered to you.

no 2. DON'T PAY MORE THEN 10,000 for 30 accounts, and those better be some damn good accounts.

you could start from nothing on your own and get 15 accounts easily your first year.

creatived
03-12-2007, 05:45 PM
I WOULD BE VERY SKEPTICAL AND WANT TO KNOW WHY HE IS GETTING OUT OF THE BUSINESS AND CHECK OUT THE PAPERWORK. BUYING ACCOUNTS IS VERY RISKY THERE IS NOTHING TO SAY THAT THE PEOPLE MAY HAVE ISSUES WITH PURCHASER. 30 ACCOUNTS IS WORTH 10,000 AND I FEEL EACH ONE SHOULD BRING IN 5k A YEAR. I WOULD BUILD UP YOUR OWN BUSINESS YOU WILL GET MORE SATISFACTION AND A SENSE OF ACCOMPLISHMENT. BUT IF YOU HAVE THE $$$ AND WANT TO GIVE IT A WIRL DO IT BUT THE SELLER SHOULD BE READY TO WORK WITH YOU TO GET THE ROUTINE DOWN AND CONFORTABLE WITH THE CLIENTS. HAVE A LAWYER CHECK EVERYTHING AND MAKE SURE HE DOESN'T OPEN UP UNDER A NEW NAME. GOOD LUCK

haybaler
03-12-2007, 06:00 PM
ya, good point. my buddy bought a business and then the guy opened up under a new name and tryed to get his old customers back.

CMLawnCare
03-12-2007, 06:23 PM
Hey

I appreciate all your responses and appreciate the advice. As soon as I heard the numbers I almost had a heart attack. Nope, these accounts are strictly residential and NO CONTRACTS. Right there I'd have to assume the accounts are virtually worthless.

I have heard rules of 3x of a normal mowing could produce the purchase price of an existing account, I have hear certain percentages of the gross could produce the purchase price, but I'm not entirely sure what the % was. If anyone could through some numbers out there that'd be very interesting to see.

I'm checking into the paperwork but I think the two big numbers important numbers are the GROSS INCOME: "100,000" and the purchase price: 125,000.

Thanks everyone

bullethead
03-12-2007, 07:00 PM
Unlike many on here, I don't think the contract aspect is that big of a deal, but it just may be a regional deal - where I work - standard wording in the contracts offer either party a 30 written notice "out". More important is the quality of the company doing the work, if they do a good job, chances are the customers are happy - so if you do a good job, they will probably stay with you.

Do each of his customers pay 3-4k a year?

CMLawnCare
03-12-2007, 07:45 PM
Unlike many on here, I don't think the contract aspect is that big of a deal, but it just may be a regional deal - where I work - standard wording in the contracts offer either party a 30 written notice "out". More important is the quality of the company doing the work, if they do a good job, chances are the customers are happy - so if you do a good job, they will probably stay with you.

Do each of his customers pay 3-4k a year?

He has yet to show me the specific information but coming from past experience and the same market/season i can figure each costumer is paying about 3-4k a year.

salandscape
03-12-2007, 08:00 PM
I'm in MA although Eastern hopefully my area isn't to far to get a good price idea.

I bought 42 accounts last year, with 24 plow driveways, most of which are not lawn accounts. The price was 27K. This was based on 1/2 year gross lawn cut only price and 4.5 plow passes per season. I had it paid off in 4 months.

This purchase doubled my business in a year, I would do the same again in a heart beat!

I had another guy offer me his business 75 accounts, plowing trucks (old beaters) everything for 25K, just wasn't as confident with his customers though.

That being said 125K is outrageous! 1/2 a season mowing only is fair to me, most guys on here think that is to high. At the price he is looking for you have to put 20% (more than that with intrest) a year down to break even in 5 years! Hope you don't like to eat! That's only if he is making over 20% profit on the accounts. It is one thing to buy an established business and be asked to pay a years gross, but you are just buying accounts, not his name, reputation, equipment.

Should you come up with another agreement here are some things to be aware off:

Make sure you are covered against firing for issues that are not your fault, my newphew is going to do it for free, moved etc.

Have a lawyer pick it apart, and it should be at his expense, he is trying to sell you something it is his responsiblity to make sure the sale in legal in all respects.

View all the properties and meet the customers. Insist on full disclosure about each customer, don't believe anyone who says all the customers pay on time, aren't PITA etc.

Why is he selling? Find out the truth!

haybaler
03-12-2007, 08:10 PM
I was lucky enough to have a guy that went out of business and he wrote all his clients a letter with 3 names of people to call and all he asked was $10 per account that I got. I got like 12 really good accounts and i've had them for 3 years now.

haybaler
03-12-2007, 08:14 PM
I think you have to go with your gut instinct on this one. You could just as easily pay $25k for those accounts and triple your money or you could go out of business by the end of the year. don't forget you need equipment, insurance, etc. Everyones giving you some good numbers to work with on here and I think you can take it from here. I would look for someone else's accounts though, This guy gave you such an off the rocker number somethings fishy.

BSME
03-12-2007, 08:40 PM
When i bought a small sprinkler company out (100 customers) i basically looked at if I spent that money on advertising if I could find that many customers on my own...

you should be able to figure out a decent cost of getting another customer

if you spent 125k on advertising i'd hope you'd be able to pick up more than 30 accounts

RedWingsDet
03-12-2007, 08:50 PM
What I would do is divide the gross income by how ever many weeks you cut, then times that number by 3 or 4 and thats what you should pay.

So if its 30 weeks you should pay about 10,000-14000.

1cooltreeguy
03-12-2007, 09:04 PM
I was lucky enough to have a guy that went out of business and he wrote all his clients a letter with 3 names of people to call and all he asked was $10 per account that I got. I got like 12 really good accounts and i've had them for 3 years now.

Yep - good info and advice. If I were to sell our business I could not even see selling our accounts for $125,000 and we have county, city, residential and commercial contracts. (220-240) that is crazy. No question:confused:

abuckeye
03-12-2007, 09:08 PM
Am I missing something? 30 mowing accounts that gross 100K? That averages out to almost $120 per week for 28 weeks.

Lawnworks
03-12-2007, 09:26 PM
I have bought accounts from two different business. One recently and one last year. One grossed 70k... I paid 12k. The second one grossed 150k... I paid 13k. I would do it again, if the accounts are priced right. That is the main thing. You need to make sure you are getting what you need per man hour from the accounts.

You absolutely positively have to have a non-compete contract.

I would say the accounts are probably worth 10% of the gross. If they are high end clients... possibly more. Having residential clients on a year to year contract is worthless in my opinion... they will quit whenever they want, and there is usually a 30 day- quit clause in there anyway. I would want a copy of his quickbooks, so you can see exactly what is going on. I would at least want a few quickbooks reports if he was unwilling to show you everything.

You will probably lose 10-30% of clients right off the bat.... no matter what the seller says... this will happen and you need to base your buying price on this.

Overall, I think buying out businesses is a great way to expand... probably the quickest and easiest. It is great to do when you have money in the bank and are already spending 10% on advertising.

I get sick of people saying just advertise and don't throw money away on buying accounts. My guess is these people aren't grossing over 500k, and really don't know what it takes to expand.

CMLawnCare
03-13-2007, 10:20 AM
Thanks for all the replies and the advice. The % that you guys are recommending make perfect sense and obviously the $125k is absolutely way off. I should be getting more info in the next week or so and will keep everyone updated to see how exactly this guy will justify that price. Thanks again.

Metro Lawn
03-15-2007, 05:52 PM
Thanks for all the replies and the advice. The % that you guys are recommending make perfect sense and obviously the $125k is absolutely way off. I should be getting more info in the next week or so and will keep everyone updated to see how exactly this guy will justify that price. Thanks again.


I just purchased 120 accounts that gross around $90,000 a season for $10,000 That $125K figure is just silly