PDA

View Full Version : purchasing accounts


solaras
07-25-2001, 04:18 PM
I was approached by another landscaper who is interested in selling out his accounts. He has approximatly 60 of them. He is looking to get 3 months pay per account. Personally I think he is out of his friggin mind. But I didn't make like I thought so. I told him that I had to talk to my partner and I would get back to him. I was thinking of proposing $100 per account or 150% of the monthly rate. Could someone please offer up some advise. Thank You!!

Guido
07-25-2001, 04:24 PM
I'm sure someone with more experience in doing this could answer better than I so I'll keep it short. You have to look at it logically and legally. If there are contracts that you take over, and you can easily make your money back in a month, it may be worh it. Make sure legally that you agree on a no compete clause with him saying that he can't take those accounts from you.

Sorry I can't give you a full answer, but as I said, I'm sure you will get more responses, and mixed ones so you can see both sides. Good Luck and let us know how it turns out for you.

Lawn-Scapes
07-25-2001, 04:48 PM
I sold my business a little over 3 years ago down in Florida. The price was 3 months for the accounts only.

solaras
07-25-2001, 04:59 PM
Thats what he is asking for. But my thought is that I pay for Aug, Sept, & Oct. Then guess what, growing season is over. How many of these people are going to drop? What % will I do for free. I'm not getting paid. What % is loyal to this guy and doesn't accept change that well and drops us right away. I would still be obligated to pay for those three months.

Lawn-Scapes
07-25-2001, 05:17 PM
solaras,

I don't know how "his" business is set up or what kind of work "he" does.

I do know that "I" billed the same amount each month January-December and "I" did excellent work. So if the purchaser continued to do excellent work (which he did) he'd lose practically nothing and gain $$$ after 3 months...

You need to take a good look at his business and decide whether or not it's worth it to "you".

What we did when I sold my business was send a letter to all my customers that said my company was merging with another. I continued to stay on as an employee until the transition smoothed out nicely (which was about a month).

Good luck...

Fantasy Lawns
07-25-2001, 07:32 PM
Tom is right on target

on the east coast most average sales are 2 months for resi's & 3 for comm ...... work the yards atleast 2 weeks ...... meet ALL the people ........ get his letter ...... you have a letter ....... get a non compete statement from him signed by a notary (so he doesn't just get em back)

check his books ....... how long has he had them ..... do they continue in winter (most do ..... if he has done them a few years) .... what they are paying for is 40-42 cuts a year

most guys sell out in april-may after the nice winter ..... so check that out ..... why is he selling ??? ....

we offered 3 months last spring for a 60 pack ($$ in 72 hrs).....nice gated golf club community ..... all tucked together ....... they were sweet .....(he'd had em most of em over 6 years .... fat st aug .... right on Bay Tree ..overlooking putting greens & fairways)..... but the guy wanted 6 months firm .... sure he had lot's of tire kickers ...... so I offered him a job to go with .......run a crew ..... benefits ...... vaca ......truck .....but he wanted that big cash ......he's still mowing em

good luck :-.

solaras
07-25-2001, 08:40 PM
Hey, Thx Steve, that is real good advice. I think we may offer him 2 months for the accounts. 3 just seems a little unreasonable considering the risks.

Lawn-Scapes
07-25-2001, 09:01 PM
Thank you too, Steve... for acknowledging my post

solaras...

3 just seems a little unreasonable considering the risks.

After you have put your blood, sweat and tears into building your business would you be happy to get 2 months? 3 months is peanuts. Something to think about...

Yes there is risk but if you do things right you will minimize the risk greatly.

The guy I sold my business to doubled his business that year and added on to it for the last 2 years... selling it a couple of months ago for $100,000.

Later..

solaras
07-25-2001, 09:30 PM
I completely understand that. But, our marketing efforts are paying off just fine. This would just be additional business and my offer would be a take it or leave it. Plus, who could guarantee what the customer may do? Nobody! You can take all the right steps to ensure that the risks are minimal with the seller of the business, but ultimatly, it is the customer you're providing service for that makes the final choice.

SLS
07-25-2001, 11:12 PM
There was an interesting thread about this very same subject last week. Lots of varied, and thoughtful, replies.

CLICK HERE (http://www.lawnsite.com/showthread.php?threadid=17810) to check it out!

Good luck to you. :)

LoneStarLawn
07-26-2001, 12:08 AM
I would never buy just accounts...only their contracts....

No contracts..No purchase...(No gurantees)

solaras
07-26-2001, 07:26 AM
Originally posted by LoneStarLawn
I would never buy just accounts...only their contracts....

No contracts..No purchase...(No gurantees)


Great analogy!

couldn't the contract become void at this point? The customer has the option to retain you, NOT the guy you're buying the accounts from.

lbmd1
07-26-2001, 10:18 AM
There is a post titled "Good luck when buying a business" that I started some time ago. Depending on area , circumstances, and needs, everyone will have a different opinion and result. Like Tom said, you built this business and it's worth much more than what most here might pay. If handled professionally during the transition, you won't lose many customers. As for contracts, the ones we bought didn't have any and we still retain them all after 4 years after the purchase because of the quality of work and personable interaction that we have with our clients. Contracts are cancellable after 30 days by either party usually so if you just maintain them like a professional LCO should, there should be no problems. There are areas that we target out of our marketing budget where we would like to gain more accounts, but if another LCO was selling out of a particular exclusive area that we would want to dominate or gain a foothold, we would not think twice about purchasing them. Since our purchase of these 45 accounts 4 years ago, we are now one of only 5-6 LCO's operating in this exclusive seacoast area with average homes priced in the $700,000 -$1,500,000 range, keeping most other LCO's in the outer lying areas. So our measlee $9000 we paid for these accounts payed off further down the road than most can ever foresee. So try to look at it sometimes as an investment, not just as an upfront cost that seems unreasonable.


Mike

kutnkru
07-26-2001, 10:46 AM
General rule of thumb seems to be 30% of the Gross Annual Sales or the cost of the equipment.

As for the contract issue, if you are in good faith going to continue to honor the original agreement between the two parties I don't see why they would negate to do business with you - unless there have been problems or they can use this as a means of adjusting their budgets.

I would anticipate a 40% change of Contractor (LOSS in clients for you) from the homeowners. You might then again anticipate another 15-20% that will price shop in the springtime.

Good Luck!
Kris

LoneStarLawn
07-26-2001, 07:23 PM
Originally posted by solaras



Great analogy!

couldn't the contract become void at this point? The customer has the option to retain you, NOT the guy you're buying the accounts from.

Not really an analogy, but I know what you mean.

I would see that during purchase that a contract would be implicated between you and the current owner...like subcontracting..but in this case the accounts become yours.

Really don't know for sure...that is why I would never buy accounts. I would just go get them on our own.

solaras
07-26-2001, 08:43 PM
Great point lonestarlawn! Thank you all for your replies.

sheppard
07-26-2001, 08:52 PM
Read all the comments on acquiring accounts- most of the information I got on determining the value of accounts was, 2.5 cuts. That's not much. The other was 10% of the annualized contract. Actually works out to about the same when oyur looking at 40-60+ accounts. The risks are higher if you pay more in my humble opinion.

Sheppard

SCAPEASAURUSREX
07-26-2001, 11:20 PM
I have come accross alot of guys saying they are selling their business just to see how much they might get. Not serious sellers. If the company is serious and a professional company they should be willing to come up with a plan for the acquisition of the accts. Say for example 50% of the negotiated price up front. Another 25% after the 1st month and the remaining 25% after the 2nd month. If some accts drop you you subtract that from the remaining two payments up untill the end of that 2nd month. I don't recall where I read this but it makes sense. Also I was told by numerous sources that you should only pay what the accts generate in a month just on maint. not extras and if taking over equip. pay the fair market value for that equip.

sheppard
07-27-2001, 09:04 AM
Dear Scare,
This is an excellent idea! That's exactly what I offered a man who approached me about buying his business. Found out he really wanted me just to help him through a touph financial time. Just used me to keep his business afloat- not that I didn't get some very valuable experience under my belt. When I offered this counter proposal to him it was immediately obvious that he was not serious. Stated he wanted me to give him 30 days notice and 'stick around' more if he could not find good help. Informed him the summer was slipping by quickly and I needed to get my account list growing. That really got his goat. He withheld the final weeks payment for some childish reasons and is pouting like a child. I'll see him in small claims court. In the mean time I'm hearing that he cannot get to all his accounts in a timely fashion. So I'm actively persuing those accounts.

Moral of the story? Don't advertise your business as up for sale unless you really mean it. Not every man who pushes a lawn mower is a blithering idiot- in fact most of us, as evidenced by the informed comments on this site, show we have a good working brain.

Cordially,
Sheppard