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View Full Version : Buying an existing business ... customer valuations


sa1lng
09-04-2008, 12:24 AM
I am considering buying an existing LCO business.

I have significant business experience so the issue of business registrations, administration etc is not a problem

I having some difficulty trying to sort out the value per customers. Can anyone provide some opinions. I have been able to value the equipment and my assumptions for the area is $75/mo average revenue per customer.

Thanks in advance
Brian

bigw
09-04-2008, 12:36 AM
I am considering buying an existing LCO business.

I have significant business experience so the issue of business registrations, administration etc is not a problem

I having some difficulty trying to sort out the value per customers. Can anyone provide some opinions. I have been able to value the equipment and my assumptions for the area is $75/mo average revenue per customer.

Thanks in advance
Brian

Where i come from a customer is worth the value of 3 cuts and nothing more, you have to remember that just because someone is selling you their accounts that does not guarantee that the customer will want or even keep you.
Example an account pays 40$ per cut you would pay 120$ for that account or less! Now this is in my area so i dont know around where you are.

Also make sure you make the LCO sign a no compete clause saying that he will not try to retain these accounts down the road, some guys will sell their accounts and then a year later want to get back into the business and go after those same accounts,now is this clause legal?
I doubt it would hold up in the courts but he dont have to know that!

stroker51
09-04-2008, 12:41 AM
3x is the rule we go by for the most part as well. Market value for equipment, then 3x one time cut for the job. Now if it's a full service contract, mostly commercial jobs here, with fert, mulch, mowing, snow etc, that's a differenet animal, more on a case by case basis, will they award you the contract simply in the purchase? Then how much is that worth to you and is the seller willing to sell jobs like that for whatever you offer?

sa1lng
09-04-2008, 12:42 AM
Where i come from a customer is worth the value of 3 cuts and nothing more, you have to remember that just because someone is selling you their accounts that does not guarantee that the customer will want or even keep you.
Example an account pays 40$ per cut you would pay 120$ for that account or less! Now this is in my area so i dont know around where you are.

Also make sure you make the LCO sign a no compete clause saying that he will not try to retain these accounts down the road, some guys will sell their accounts and then a year later want to get back into the business and go after those same accounts,now is this clause legal?
I doubt it would hold up in the courts but he dont have to know that!

Thanks... that is good advise. The non-compete is perfectly legal in a sale. Although very tough to enforce. This is actually a recent widow selling her late husband's business, so with any luck he won't be able to retrieve the customers ;-)

bigw
09-04-2008, 12:47 AM
Thanks... that is good advise. The non-compete is perfectly legal in a sale. Although very tough to enforce. This is actually a recent widow selling her late husband's business, so with any luck he won't be able to retrieve the customers ;-)

If i was you i would ask to see and speak to every customer before i bought any of them so you can get a feel for one if they want you and two do you want them. You may not want every account after you see the lawn or the customer!