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View Full Version : Thinking about buying a guy out/need some advice


JeffW0011
03-05-2011, 01:01 PM
Hey Guys,

I am thinking about buying a guy out. Aside from a few pieces of equipment I may buy on the side at market value the deal basically consists of his business identity (which I won't be using) his existing accounts, phone number, his domain name transferred to me, his good will, etc.

We have met a few times and I like the guy....We had a few good talks and exchanged several e-mails. I have checked hs business out fairly in depth and from everything I can see he has a good reputation, on the surface his operation appears to be professional and well marketed, etc. His financials look alright...Of course everyone is going to have there own overhead and costs of doing business etc, I see some areas I could probably be a little more efficient than him but all and all it looks like a decent operation and based on information I have learned his customers seem to like him and he has a good name in the local community.

We are kind of stalled out in negotiations...the main problem is he doesn't want to come off of his client list. Obviously, I need to see that to make a decision to move forward. I would be involving an investor to move this deal forward and I really need to show them client list as well.

His contention is that: he has nothing to hide but he is not giving me a list of names, addresses and pricing and an in depth history regarding each account until the very last thing before a deal is ready to be signed. He has given me his total sales, an approximate breakdown what the % of services are toward total sales. Example 50% mowing, 20% lawn applications, etc. The basic areas/neighborhoods the customers are located.

It's my first time buying a business and his first time selling one so I think we both are a little uncertain how best to proceed. And I mean I certainly see his point and I would be reluctant to hand him this information at this point if the situation was reversed. Bottomline is I don't think my investor will consider this further until he see's this client list and I don't think this guy is budging from his position either. He can't see any reason why my investor needs to know the specefic details about the client list until we are very close to a deal and thinks we should be able to decide to move forward based on the information he has provided. He insists that revealing that information is the very last step and that he will also require some earnest money that would be applied toward the sale to do so.

What do you guys think? Can any of you who have bought and sold lawn care businesses offer any insight into the standard operating procedure in these types of negotiations?

Thanks

IndyEarthScapes
03-05-2011, 01:08 PM
Tell him you will sign a no compete clause. I have done this and is the way it should be. You should definitely be allowed to see it and talk to the customers with him before completing the deal. What if none of his customers will resign with a new guy? What if all his revenue was generated as a sub and he no longer has that contract? Both unlikely but you need to protect yourself. There is usually more than one reason someone is selling a profitable business.
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JeffW0011
03-05-2011, 01:19 PM
I am already inbusiness and we are competing in the exact same market. I don't know how I can sign a non compete. I told him I was more than willing to sign some sort of "hands off" agreement and he kind of scoffed at that. His position is once I have this information what's to stop me from pursuing these customers at a lower price...he says he isn't very concerned about losing any of these while he is in business but if he sells to someone else he doesn't want the client base becoming some free for all.

He has several reasons for selling that all seem very plausible.

He has told me what % of the account were subcontract etc. I really don't get the feeling he is trying to screw me or anything...I think he is just hesitant to give me the list..

In a typical transaction like this when would the client list normally be made available??

bobw
03-05-2011, 01:22 PM
See if he can print out a report from his accounting system that shows the revenue by client; then before he gives you the print out, he tears the column of client information off the report. That way, you see the details you want and he is not giving you the details he is trying to protect.

kilgoja
03-05-2011, 01:41 PM
if it were me i would talk to every customer he has and make sure everyone of them were gonna use you after you get the business from him...if not then i wouldn't buy it...take him with you and both of you talk to the customers...why pay for them and then half of them run off and use someone else?...and if any of them aren't gonna keep you then deduct the price you are paying for the business accordingly...i would never buy a business without first talking to every customer i was buying and knowing if they were gonna want to use me for their lawncare...otherwise you will get screwed over big time...it's been said on lawnsite a bunch of times...people buy accounts and then half or more of them end up not using them for service

Roger
03-05-2011, 02:46 PM
What structure do you have for the buyout? Is the equipment and facilities peeled off as a separate part of the business, with its own price tag? And, are the client list, client information separated out? Or, is everything rolled into one package?

What part of the business is most important to you, the equipment, or the client list?

torotorotoro
03-05-2011, 05:00 PM
here is some advise from somone who has sold and bought back.the last thing you will see is the client list. when i sold i first tried to sell to a friend.and stupid me i gave him the entire customer list. surprise a week later he was no longer interested but i caught him mowing two of my lawns.i managed to sell to someone else for .62 cents on the dollar but this guy almost blew it for me. what you need now is to see the numbers. you will verify the customers right before you close the deal.as far as meeting all the customers now that is a stupid idea.if you buy and take over his accounts do a good job and they will keep you suck and they wont. one peice of advise dont tell yourself you will do a better job managing and make more $ then he did. plan on worse case and price your buy offer accordingly. and have a contract that protects you. mabey one third of the purchase price in a escrow account untill all he has told you pans out.get a good lawyer they are worth there weight in gold.if the price is right dont be afraid to go for it. let me know how it goes.

Buddy Buds
03-05-2011, 05:37 PM
If you buy him out he would need to sign the no compete contract for at least 5 years.

kilgoja
03-05-2011, 10:06 PM
here is some advise from somone who has sold and bought back.the last thing you will see is the client list. when i sold i first tried to sell to a friend.and stupid me i gave him the entire customer list. surprise a week later he was no longer interested but i caught him mowing two of my lawns.i managed to sell to someone else for .62 cents on the dollar but this guy almost blew it for me. what you need now is to see the numbers. you will verify the customers right before you close the deal.as far as meeting all the customers now that is a stupid idea.if you buy and take over his accounts do a good job and they will keep you suck and they wont. one peice of advise dont tell yourself you will do a better job managing and make more $ then he did. plan on worse case and price your buy offer accordingly. and have a contract that protects you. mabey one third of the purchase price in a escrow account untill all he has told you pans out.get a good lawyer they are worth there weight in gold.if the price is right dont be afraid to go for it. let me know how it goes.

it's not a dumb idea to talk with the customers beforehand...some may know the guy that is selling or be friends of his family or whatever so that is the only reason they were using him...the person buying on the other hand is not their friend and doesn't know them personally so they may not use him...not saying all of them wouldn't but i would check first to be sure and to make sure things were gonna go smoothly

gene gls
03-05-2011, 10:27 PM
I don't blame the business owner for being skiddish about his customer locations. I spent 5 years trying to sell my business. There are a lot of wacky folks out there. I was hopeing my main man would take it over but he finially decided he wasn't interested. I ended up down sizing 2 times before I finially sold. First time I sold 25 of my best accounts , 50,000.00 gross yearly,to one of the guys that hemmed and hawed about buying me out for 3 years. He had a comerical account directly behind my best commerical account. I ended up selling for the price of 2 mowings. At the same time I gave 15 low end accounts to a friend that was in the area in exchange for doing my mothers property for one season. I ended up getting the shaft from my "friend", he never showed up, even once. Second time down sizing, I just gave 12 accounts to another friend that was in the area of the accounts. When I finially sold the landscaping business I put a price on my equipment that he wanted and asked for one mowing from the customers that went with him for the season. I showed him around all the properties 3 times before he decided to buy. I also gave him a print out of my contract and a 2 year history report for each of the customers. He ended up looseing 2 accounts the first month for doing crappy work. In the end, he is a typical BS'er. I expect him to loose half of the accounts due to shoddy work.

ALC-GregH
03-05-2011, 10:51 PM
You have to have a "no compete" agreement on the specific accounts, otherwise he could come back in and call all his old customers and convince them to use him again. You now have paid him and he's got all his customers back. No compete eliminates all this.

If you have a agreement set up so that you pay him AFTER a given amount of time for each account that stays with you then you don't have to see the customers and talk to them before hand. If you loose some right off the bat, well you won't have to pay for them.

torotorotoro
03-06-2011, 12:28 AM
it's not a dumb idea to talk with the customers beforehand...some may know the guy that is selling or be friends of his family or whatever so that is the only reason they were using him...the person buying on the other hand is not their friend and doesn't know them personally so they may not use him...not saying all of them wouldn't but i would check first to be sure and to make sure things were gonna go smoothly

it is a dumb idea ,how many family members do you think he has.as far as the customer needs to know nothing has changed hands.they come home from work and the lawn is mowed.at the end of the month they get the bill. if you are buying him out you are also getting the companies good will. they dont care who they send the check to. try to keep everything the same for them. hopefully he has the customers send their $ to a p.o. box and you can take that over too.you have to figure you may lose 10% of the customers including his family and friends after the first year. factor that into you bid to buy. im sure every one knows about the non compete but remember that peice of paper is only as good as his word. if he gets back into buisness everyone loses.paper or no paper.facter this risk into the bid.

kilgoja
03-06-2011, 01:21 AM
what happens when you go to cut and they are like..."who are you?"..."where is my lawncare guy?"...lol.....they are gonna notice something has changed...i guess it depends on how big the business he's selling is...if it's a huge company with 25 workers then no they won't notice...you can just say that some of the guys quit......but what if it's a one man operation?...then they are gonna notice...i guess you are talking more about a larger business operation...i'm thinking more about a smaller one man business operation since that is what i am

gene gls
03-06-2011, 10:28 AM
what happens when you go to cut and they are like..."who are you?"..."where is my lawncare guy?"...lol.....they are gonna notice something has changed...i guess it depends on how big the business he's selling is...if it's a huge company with 25 workers then no they won't notice...you can just say that some of the guys quit......but what if it's a one man operation?...then they are gonna notice...i guess you are talking more about a larger business operation...i'm thinking more about a smaller one man business operation since that is what i am

When I sold out, I sent each customer a letter explaining my actions with an intoduction about the buyer and his intent to grow the business. Every customer wants to know what is going on with the companys they are doing business with and who to expect to see on thier property.

Oldtimer
03-06-2011, 01:11 PM
I think a non-solicitation agreement, with geographic limits is preferable to a no-compete agreement.

Oldtimer

tradeyouraccounts
03-06-2011, 03:55 PM
I think if he gives you the figures and other history on the accounts that should be enough to get a good idea as to the value of them, the actual addresses and contact details may only be given of some kind of deposit is made to make sure your really an interested buyer. This may help http://www.tradeyouraccounts.com/dept.aspx?id=8

Mowing Freak
03-06-2011, 06:40 PM
Lots of good advice here, so will give my advice. Buy the equipment at market value, with the understanding the customers come included at no cost. I don't know how you can buy customers in any business. A customer can go with who they want any time they want. When a store is bought out, the buyer gets the inventory and/or the building, not the customers. The store may have their regulars but the customer may not be so regular until a new rapport can be built with the new owner.

kilgoja
03-06-2011, 08:39 PM
When I sold out, I sent each customer a letter explaining my actions with an intoduction about the buyer and his intent to grow the business. Every customer wants to know what is going on with the companys they are doing business with and who to expect to see on thier property.

yeah i agree this is the right way to do it

torotorotoro
03-06-2011, 10:45 PM
yeah i agree this is the right way to do it

if you think that you should do it this way then dont buy it . use the money to gain customers another way. you are buying him out to take over his buisness. you dont want to start from scratch. you can have a transition time when the seller is slowly is phased out .i say no introductions. the people telling you to start knocking on doors want you to end there relationship with the old company and start a new one with you. im telling you to continue the buisness relationship that is already there.that is what you are paying $ for. i have done this before.buying 3 times and selling once. you need as seemless a transition as possible.your success depends on your communication with the seller not the customer. pump him for as much info as you can get . before and after the sale.

kilgoja
03-06-2011, 11:22 PM
lol...you can't continue a relationship that's already there...it's like someone breaking up with their gf and you are the new bf...it's starting all over lol..only way you could is if it was a big company and the customers wouldn't know the difference...otherwise it's a fresh start...you show up and continue the work yes but they have to be happy with your service or they will drop you and get someone else...they will know the business has changed owners when they see a new guy doing their service week after week as well as mailing their check to a different address....unless it's a big business you are buying that has it's own building in town with an address...which i doubt it is...those companies usually don't sell out

torotorotoro
03-07-2011, 01:13 AM
lol...you can't continue a relationship that's already there...it's like someone breaking up with their gf and you are the new bf...it's starting all over lol..only way you could is if it was a big company and the customers wouldn't know the difference...otherwise it's a fresh start...you show up and continue the work yes but they have to be happy with your service or they will drop you and get someone else...they will know the business has changed owners when they see a new guy doing their service week after week as well as mailing their check to a different address....unless it's a big business you are buying that has it's own building in town with an address...which i doubt it is...those companies usually don't sell out

i think im going to be sick. if you think like this dont put out your hard earned $$ to buy someone buisness. have you ever heard of a po box.i could think of a dozen way to smooth over the transition.but this d888 8888 just cant wait to shake hands. oh and that is not what your w*f* said when my buddies came over last night.

kilgoja
03-07-2011, 01:23 PM
not everyone uses a p.o. box.....alot of businesses use their home address including me lol

torotorotoro
03-07-2011, 03:27 PM
not everyone uses a p.o. box.....alot of businesses use their home address including me lol

your right not every one uses a p.o. box. factor this in the purchase bid if he doesnt. even if you screw up and introduce your self to all your new customers.there will be many that send there $$$ to the place they always have. then you will be dependent on getting your $$$ at his convence , or at all. killagogo have you ever taken over anyone buisness.how did all your great ideas work out .

GrassesGuy
03-07-2011, 04:05 PM
Ya get a lwayer and create A contract. If you use a bank all they care about is that the company is making money. Expect to put 20% down if you go the bank route. As far as the client list goes. A good rule of thumb is that you only pay about 1/2 of what the client pay out every year in this market. You have to balance out the fact that some of those customers will leave no matter what you do. A. they don't like you. B. they want to shop around and C. you weren't as good as the last guy. So If the guy wants 100,000 offer 50,000 and make sure theres a contract between the both of you's and that there is a no competion clause otherwise he will steal them all back and you legally can't do squat.

Patriot Services
03-07-2011, 04:46 PM
Oddly in all the years I have been on here I have yet to see a positive post about buying accounts. Non contracted accounts aren't worth anything. Too much risk, no guarantee. Never seen anybody that wants all of somebody elses equipment either.
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gene gls
03-07-2011, 08:47 PM
Oddly in all the years I have been on here I have yet to see a positive post about buying accounts. Non contracted accounts aren't worth anything. Too much risk, no guarantee. Never seen anybody that wants all of somebody elses equipment either.
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When you buy a company out, you buy a customer list. It doesn't matter if the customers are contracted or not, there is always a way out, and most contracts have a 30 day cancelation notice anyway. I found that any one interested in buying only wants to pay pennies on the dollar for the business.

kilgoja
03-08-2011, 12:25 AM
your right not every one uses a p.o. box. factor this in the purchase bid if he doesnt. even if you screw up and introduce your self to all your new customers.there will be many that send there $$$ to the place they always have. then you will be dependent on getting your $$$ at his convence , or at all. killagogo have you ever taken over anyone buisness.how did all your great ideas work out .

i don't really understand what you are trying to say...if you get a p.o. box how does that change anything?...they could still send a check to the old guy's house address....how is introducing yourself screwing anything up?...they are gonna know there is a new guy cutting their grass...why are you trying to get away from them knowing that? lol...toro toro toro!!!! ~waves red flag around~

Patriot Services
03-08-2011, 08:17 AM
I think a non-solicitation agreement, with geographic limits is preferable to a no-compete agreement.

Oldtimer

Nothing says the CUSTOMER can't fire the new owner and hire back the seller. The CUSTOMER can do what they please. Why do you think no bank in their right mind would ever finance the purchase of an existing LCO?
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ncknaklawns
03-08-2011, 10:04 AM
Get a contract that specifies the seller will get a certain % for the 1st year for people that stay with you, a % the second year and another the third year. And a non compete clause.
You want to protect your investment for at least 3 years. If he doesn't trust your quality then he loses something and should sell to someone he thinks will do a good job. If behind the scenes he's letting a few others know about a few here or there it might add up.
Run the numbers and get the details with no names and addresses. Get papers that are signed by him and shows an some kind of account number that will line up with the names and addresses later. If an account signs up, pay him 10% the first yr 5% the second and 3% the third (if these numbers look resonable- when you look at totals). Its not worth anything if they don't sign up. Its not worth gambling on.

torotorotoro
03-08-2011, 12:18 PM
i don't really understand what you are trying to say...if you get a p.o. box how does that change anything?...they could still send a check to the old guy's house address....how is introducing yourself screwing anything up?...they are gonna know there is a new guy cutting their grass...why are you trying to get away from them knowing that? lol...toro toro toro!!!! ~waves red flag around~

im saying if his customers dont already send the money to a po box that this is a negative,and should be taken into concideration when coming up with a price.its like if he wont give you the phone number because it is his home phone. its still worth buying but for less $$$. your silence to the question about if you have ever bought or sold answers for you. why give advice about something you know nothing about.im not saying hide anything from customer, but the more you can keep everything the same the more customers you will keep.

kilgoja
03-08-2011, 07:27 PM
i haven't bought or sold a business ever...i'm just saying what would have to happen for me to do it....if he wants to keep everything secret or not give me his number or the customers numbers then no i would never buy it....what does the seller have to hide?...if he does everything right then he shouldn't be worried about anything...i'm for sure gonna know where he lives before i bought his business...that way if he did try to pull something i could track him down...i'm gonna protect myself and my business first and foremost...not gonna lose money to some guy trying to get some money out of his crappy business that must be losing money or he wouldn't be selling it in the first place....to be honest i wouldn't even buy a business from someone unless i knew them personally...can't trust anyone these days...that's why me meeting the customers first and getting their numbers and such is the safe way to do it...that way it doesn't depend on the seller at all...i can absorb his customers into my already existing business.... i just wouldn't want to pay for customers that chose not to use me for whatever reason

torotorotoro
03-08-2011, 08:54 PM
i haven't bought or sold a business ever...i'm just saying what would have to happen for me to do it....if he wants to keep everything secret or not give me his number or the customers numbers then no i would never buy it....what does the seller have to hide?...if he does everything right then he shouldn't be worried about anything...i'm for sure gonna know where he lives before i bought his business...that way if he did try to pull something i could track him down...i'm gonna protect myself and my business first and foremost...not gonna lose money to some guy trying to get some money out of his crappy business that must be losing money or he wouldn't be selling it in the first place....to be honest i wouldn't even buy a business from someone unless i knew them personally...can't trust anyone these days...that's why me meeting the customers first and getting their numbers and such is the safe way to do it...that way it doesn't depend on the seller at all...i can absorb his customers into my already existing business.... i just wouldn't want to pay for customers that chose not to use me for whatever reason
that was quite along post from someone who has neverbouhgt or sold any buisness and knows nothing about it. you should reread this entire thread and think about what i am saying. when it comes time for you to retire can i get a copy of your customer list. mabey just put it on creigslist . whatwould you have to hide. also i am guessing you are a renter.

kilgoja
03-09-2011, 12:28 AM
why would it matter if i'm going out of business?...it's not like i would need the customers anymore...i would gladly give you all their names and numbers...and i don't use craplist...nothing but spam on there lol...you are missing the point dude...if the guy is going OUT of business why would he be worried about keeping his customers for himself?....i understand you don't want people to go get them out from under you but if they are paying for it then it shouldn't be an issue...that is what a contract is for...to protect you from all that behind the back garbage......i'm simply stating as a buyer i wouldn't want to pay for customers unless i knew they were gonna stick with me...which noone knows for sure...so if you buy the business and half the people split then you are screwed...HOW ELSE ARE YOU GONNA KNOW WHO IS GONNA KEEP YOU AND WHO ISN'T UNLESS YOU CONTACT THEM IN SOME WAY TO FIND OUT?...you are just gonna trust whatever the seller tells you? i'm sure he's gonna say yeah they all are gonna stick with you....lol...then you pay him and he leaves town and half the customers don't use you so you paid more than you should have in the end

kilgoja
03-09-2011, 12:41 AM
personally i would never sell my business...i would just stop mowing the yards and my customers could choose whoever they wanted to replace me which is what people are gonna do regardless

torotorotoro
03-09-2011, 01:30 PM
now that we have established that you do rent your home we can look at what you said about buying and selling a buisness as breif as possible. buying another lawn service is a great way to add customers especially when it comes to adding accounts in a area that you currently work in. lets say you are looking at a company with 50 accounts.giving it a value depends on the some of the following.can you take on his work load.where are his customers.will you get his company name, phone #, and mailing address, how long he has serviced them. are his prices better or worse then yours.if you like the answers you get you will still offer pennies on the $ . it is hard to sell a buisness of any size and it always seems no one has any money. sometimes the seller will have to finance the sale. the equipment does not matter if you have to buy it ,pay market value and sell what you dont want on creigslist. as far as just walking away from customer when it becomes time to retire i have found that they like it when you find someone to take over. why just give away the oppertunity to make some extra $$$$. will you just leave your mower and trailer out side because you wont need it any more. wait, you probly will. some people there is no help for.

MisterBreeze
03-09-2011, 08:48 PM
Why not take a good sum of the money you were going to use on the business and put toward marketing? Flyers, pennysaver ads, whatever. Build your business yourself. You will have more pride in getting the new business. Have you posted a price on the purchase? I'm curious, $5000? what are we talking?

torotorotoro
03-10-2011, 11:58 AM
Why not take a good sum of the money you were going to use on the business and put toward marketing? Flyers, pennysaver ads, whatever. Build your business yourself. You will have more pride in getting the new business. Have you posted a price on the purchase? I'm curious, $5000? what are we talking?

im not sure about pride, all i look at is my bank account for that feeling .if you can get it for a good price then go for it .