Business value

[DMS]

LCO's-

I have a small lawn mowing business, which I have established to pay for college and now it is a supplemental income to my current job. We service around 75 residential and commercial accounts. I have just recently moved a hour north and would like to start cutting in my new area next year. I have had many people contact me and wonder what I wanted to sell the business without the equipment. I really don't have any idea what the business is worth. We annually bring in around $20K-$25K, but there is probably room to double this amount with the same customers if we offered other services (i.e. spring and fall clean-ups, fertilization, pesticide application, hedgetrimming, etc). Is there a rule of thumb to go by or do you just guess? Any help would be appreciated.


DMS

[landscaper3]

I think the rate is around 10% of gross sales without equipment. Do a search many many posts on this!

[LAWNGODFATHER]

About 3 cuts in all. The rest doen't mean squat.

[parkwest]

Please check my math:

$25,000 gross revenue divided by 75 acounts = $333.33/customer now divide that by 32 cuts = $10.42 a cut average.

If thats correct then this looks like you have a hobby not a business. But don't despair like W.C. Fields is quoted as saying, "theres a sucker born every minute"

My concern if I was the potential buyer is how many customers would you have if they were charged at least enough to cover expenses.

[Lawn-Scapes]

I had to do a double take myself...

75 accounts = $20-25,000. Is that right?

You also mention "we"... Do you split all that with someone?

Something does not seem right.. I hope it was a typo.

Maybe he means net?

Like LGF said... maybe 3 cuts.

[Bladewielder]

I have "bought" a mowing business before. Keep this in mind: you cannot sell clients. All you can do is charge to introduce and recommend someone to your customers. Even if they buy your equipment and name (equipment is not worth retail and names are worth anything or nothing) they have no guarantee the customers will even like the looks of them. They can expect to lose half of the ones they "buy" in a single season-some as soon as is known you're quitting. As far as what an account is worth think about what you'd pay for it. As a buyer I would never pay more than say 3x what an account makes in one mowing. How many times would you want to mow a yard before you made any money?

[LAWNGODFATHER]

Guys try this; use 37 not 75.

I get $20 a cut.

They must be alot of every 2 weekers.

In that case 1 cut would be what I would pay tops, but not sure I would even take them for free if they are bi-weekly.

I missed number as gross/annually.

How did I do that? Hummm.:confused:

I'm sorry buddy, but if you get some one to pay you for these take the money and RUN!!!!! No pun intended.

[rodfather]

75 accounts and only 20-25 grand??? Either I missed something or you're practically working for free.

[yardman1]

Please do not come to my town and offer those prices because you would put everyone out of business and have the largest company volume wise but with no profit. but anyway you may want to consider going up on your prices if you sell and start over in another town. I will not even get out of my truck for less than a minimum of $30 and don't like to do it for that. :blob2:

[landman]

I have bought and sold accts before and this is how we do it. If the company we are buying has signed contracts we purchase them for 1 1/2 months services (lawn maint only). Our payment is made over 3 months. 50% down (of the total cost) paid 30 days after taking over, 25% after 60 days of service, and the remaining 25% 90 days. Now if we don't retain some of the customers after the 90 day period it is deducted in the final payment, if the amount exceeds the amount owed we are entitled to an additional refund for the accounts not taken. We always do this with a signed contract with the seller so we are covered. Equiptment is bought and sold seperately.

[parkwest]

DMS,

Please post current balance sheet and last 3 years income statements. I can give you a true valuation with these numbers.

[Sean Adams]

Selling a business and selling accounts are two different things. There are some businesses that get anywhere from 75%-150% of their gross annual receipts. There are factors to consider - anyone under contract? What other services do they need versus what you provide? It sounds from the number of clients you have and the gross income you produce that selling them as "mowing accounts' is your best bet. Trying to sell accounts for "what they have the potential to be" can be very tricky. If you have 75 accounts and each account on average is paying you $30 to mow each visit , maybe try and negotiate 3 cuts per client. 75 clients at $30 per cut is $2,250 x 3 = $6,750. Piece the equipment out separately and get as much as you can. From the information provided, this is what I am thinking. Maybe I too am missing something.

Sean Adams
www.lawncaresuccess.com
LawnCareSuccess@aol.com

[DMS]

Thank you to all of those who replied. Just for clarification, 55 out of the 75 accounts are at a large, private family campground. These are cut 12X/yr between mid-April to Mid-Sept and take on avg. about 1/2 hr. I charge on avg $20/cutting. No written contract exists, just a handshake and verbal agreement. I have had most of the customers for 5+ years. As far as doing this as a hobby, I would disagree. I am located near no metro areas and people aren't willing to shell out $30/hr (outside of the campground) for lawn care services. I really enjoy the outdoors and mowing, so the extra $10K-$15K is a nice supplemental bonus to my profession. Once again thank you for everyone's help.

DMS

[LawnLad]

Selling on the future value of the accounts is in deed tricky - and is basically buying the good will of the company or accounts. Because you don't have signed contracts and the arrangements are made with you, the owner and are most likely somewhat relationship based, this makes it all the more unlikely that someone will want to pay big bucks for accounts that do not have a great likelyhood of staying on - unless since you're in a specialty niche, you have no competitors. But even then, knowing you won't be in a position to service them, what's to keep the person from just soliciting your current customers directly and just circum-navigating around you?

My advice, if someone wants to sell, it all comes down to negeotiating a price at which one is willing to buy and the other is willing to sell at. Start high and give ground, get what you can. Offer whatever support you can that makes sense at the selling price, or negeotiate this separately. A consulting fee of sorts.