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djagusch
01-12-2012, 02:35 PM
My current irrigation guy I use wants to get out of the biz. He's had the biz (equipment/customers/etc) for sale about a year without much interest so he offered to sell the customer list (320 billed customers and approx 200 more of old customers), name, number, inventory/hand tools ($1200 value) for $25K. The company is over 10 years old.

It has approx $10K in spring service, $20K in fall service, average summer service $10K, only had $10K installs last year, and $20K in plowing (last year was a good year for plowing). So $70K in sales in 2011, in 2008 it had $150K in sales 2009 to $110K, 2010 to $86K, and 2011 to $70K. His main reason for the decrease in sales is economy, not willing to bid jobs too low just to get them.

My question is these sales numbers going down is what you have seen do to the economy or is there more behind it?

How much would 320 service accounts be worth to an existing company?

I dropped P&L's and tax records to the accountant yesterday, so that will take a couple days to get his value.

SoCalLandscapeMgmt
01-12-2012, 02:57 PM
The inventory is worth whatever you can buy it for (obviously), the equipment would only be worth it's current depreciated value. The clients are the hard part. Unless he has all 320 billed customers under contract it's hard to palce a value on them. Even if they were under contract I'm sure they have the ability to terminate the agreement should they choose. I'd ask to see the last couple of years of actual invoices. Look them all over real closely so that you can get a feel for what each customer is actually generating in terms of revenue and you may be able to determine why revenue has dropped. In my opinion, the brutal truth is that the 320 customers aren't really worth anything because they can call anybody that they want for service.

Is the guy who is selling going to come work for you after the sale? If not, do you have somebody on your staff who has the knowledge to do the work?

Those are just my random thoughts and questions. Fimco and Mike Leary would be probably be better at telling you what the value of the clients are since they have both sold irrigation businesses.

ALSO.... most importantly.... if you do buy, do NOT buy his business. Just buy the equipment, inventory and list the clients as goodwill on the sale agreement. You don't want any of his potential past liability so you don't want to buy the acutal business.

mitchgo
01-12-2012, 03:00 PM
Sounds like a bust to me

A 10 year old + company and he's willing to sell it for 25k? Do you really think you're going to turn this around and make some serious cash with it? Particularly with 3 years of annual revenue falling. Blaming the economy is a hard thing to do because it can be location specific.

What is your experience with irrigation? Doesn't help to have that list and not be able to do the things that your old irrigation guy does.

You're going to have to assume that you are going to have a certain percentage of that customer list not use this company anymore due to the fact of the company switch

I could see this being a long turn around.

Then again I'm not a business owner so what do I know.

FIMCO-MEISTER
01-12-2012, 03:05 PM
So Cal summed it up. Sadly a business rarely gets its real value based on the sweat equity put into it and the customers may skedaddle. I'd be curious to know how many of my customers stuck with John.

One thing is for sure don't bid against yourself on buying a biz
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djagusch
01-12-2012, 05:12 PM
Part of the deal discussed was going to the home show together to explain to clients we see there. He is willing to help with scheduling for the spring and fall service. We do have some overlap of our client base.

I have been doing most repairs for the last 3 seasons on my accounts, spring start ups, and water management. He has done the blowouts as he owns a compressor(I have thought of renting one this last season).

Main thing I have not is add zones, install a system, or design.

I have been attending classes on irrigation by local associations. Have a means to get the plt license (low voltage). Thinking of getting the clia cert.

This last season he had used my employees for install labor so I got some free training off him

Planning to put a pay schedule based off of retained customers/sales. Also put xx amount of hours by him working on the transition at my discretion.
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Mike Leary
01-12-2012, 06:25 PM
ALSO.... most importantly.... if you do buy, do NOT buy his business. Just buy the equipment, inventory and list the clients as goodwill on the sale agreement. You don't want any of his potential past liability so you don't want to buy the acutal business.

Excellent point, unless you have signed contracts for new contruction and service, the business is worth jack. The rolling stock in most firms (mine included) was about at the end of it's service life. So, how to buy a business? In my case, I had a group of clients (1%ers) that I'd hand-fed for years, they trusted me and when it came time to sell, they were personally introduced to the the new owner. This was after I'd got to know him over a few years in his related gig as a grounds management service. In short, it was a slam-dunk; one you only get once. After his six years of ownership, he's expanded the biz and kept the majority of clients that brought him to the dance.

greenmonster304
01-12-2012, 07:22 PM
A friend of mine bought an irrigation customer list from another guy we both know from school. They came up with a price for each customer which I think was the average turn on price and blow out combined. They put the money in an escrow account and if a customer didn't go along my friend got that money back. It forced the old owner to help with the transition.
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greenworldh20
01-13-2012, 12:43 PM
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greenworldh20
01-13-2012, 12:47 PM
Buy it...I mean who does not have decreasing revenues the past few seasons? come up with a price per customer. If customer does not stay on for one season, you don't pay for that customer. Don't pay purchase in one lump sum...spread Payments over 12 months...have owner assist with change over...think of it as 350 new customers you can cross market your services to...seems like a winner to me.
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Mike Leary
01-13-2012, 12:49 PM
My CPA advised me to put my (small) company up for sale for what my best net profit year was. Seemed fair to all parties. :clapping:

sprinklerchris
01-13-2012, 01:07 PM
The going rate buyers are paying is about 75 cents per dollar of steady service sales. Steady service sales of $100,000 = $75K enterprise value.

Equipment and "install business" is not worth much these days.

FIMCO-MEISTER
01-13-2012, 01:36 PM
I'm sure there are exceptions but rich folks aren't looking for irrigation companies to buy. In most cases it's a struggling just started usually young entrepreneur. If you can being able to sell it to your employee or employees seems the most viable. When I sold my biz money was secondary. I was more concerned with my customers getting a fair shake in the deal with continued good service. So I paid Henry 10% to stay on and had arranged a percentage of gross profits for me to stay on for a year to help with the transition. A couple of the original partners who are no longer with them didn't like my riding their butt because I wanted to make some good money for all my effort. So after a couple of months I was phased out. I suspect if John had it to do over again he'd have taken more advantage of what I had to offer from an experience stand point. Besides having Henry I'm not so sure my customers are happy from the few that called my cell phone. Thank goodness I was stingy about giving that number out.
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Wet_Boots
01-13-2012, 01:39 PM
my CPA advised me to learn the phrase "Do you want fries with that?"

djagusch
01-13-2012, 02:02 PM
Buy it...I mean who does not have decreasing revenues the past few seasons? come up with a price per customer. If customer does not stay on for one season, you don't pay for that customer. Don't pay purchase in one lump sum...spread Payments over 12 months...have owner assist with change over...think of it as 350 new customers you can cross market your services to...seems like a winner to me.
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The last 3 years I have increased sales approxiamtely 20% each year (mow/fert/plowing). So seeing the decrease trend shows me that there is potential if properly ran.

Trust me the cross promotion of fert/weed control I see being huge. Of course after I treat them with great service.
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Mdirrigation
01-13-2012, 09:13 PM
ask yourself how long would it take to accuire 320 irrigation customers from sctatch , how much advertizing money would you spend . That price sounds a bit cheap to me , all depends on the equipment and supplies . I spent that much on my vibratory plow back in the 1980s with no customers , just a wing and a prayer . Like some one said dont buy the business , buy its assets , customer list and phone number . Rename the business something very similar . That is a great start for customers , it gives you a foundation to build on. Work out a financial arrangement with the guy , since there arent many takers , its only worth what you are willing to pay for it .

Mike Leary
01-13-2012, 09:30 PM
I sold mine on a wing and a prayer; held paper for six years. I think we had a couple of glitches, they paid the late charges and they now own the business. Bottom line: trust.

muddywater
01-13-2012, 09:33 PM
If the guy hasnt sold it in a year, it seems like a ripe time to lowball him. 5k would be worth the risk.
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GreenLight
01-14-2012, 09:58 AM
From a distance, it looks pretty interesting. 320 BILLED customers for $25,000 and an old 200 customer list. Then if you do some number crunching I would be quickly scared off, in fact this company probably borders on losing money after overhead. Im not sure what his rates are, but they certainly don't appear high enough.

Just adding up all billable service customers and including the plowing customers you have a grand total of $60,000. That means each of those 320 customers you just inherited is worth $187.50 of sales per year or roughly $16.00 a month / $48.00 a quarter. The total value of each customer is simply nowhere near the incurred headache, accounting, billing, insurance, licensing, labor, etc, cost.

For $60,000 of service work, you basically have to be a one man show to make any money. There are 320 possible headache calls per day that might not be billable or worse yet, you might occasionally make a mistake and face some liability. 320 customers can keep a phone pretty busy with just neediness and unbillable time. It sounds like to me, unfortunately these customers have no real value to you.

Wet_Boots
01-14-2012, 10:32 AM
Act quickly! Before a big conglomerate steps in....

http://img201.imageshack.us/img201/8140/frommelbrookssilentmovi.jpg

Mike Leary
01-14-2012, 12:59 PM
For $60,000 of service work, you basically have to be a one man show to make any money. There are 320 possible headache calls per day that might not be billable or worse yet, you might occasionally make a mistake and face some liability. 320 customers can keep a phone pretty busy with just neediness and unbillable time. It sounds like to me, unfortunately these customers have no real value to you.

Agreed; the smart buyer takes a hard look at the owner, the books and the clients.

txirrigation
01-14-2012, 10:49 PM
Also-

If he was a one man show, the clients are going to be pissed when a tech shows up and they do not get to have a "talk" with the owner.

You will end up having to go to every job to talk to the customer and pick up your check (that now does not cover time spent).

I would ONLY buy a company with good employees, relationships with builders, service contracts, and a commitment from the current owner to clean up his messes when they arise (in writing). Also, 10yrs in business and only 12k in inventory/hand tools???

Sounds like to me your buying a telephone number.... not a good idea. Sometimes I wish I could change mine!

biodale
01-15-2012, 01:05 AM
I don't understand why people think a customer list without the customers under contract is not worth anything. The customer list is the heart of a service business. Anyone can buy a few mowers, trimmers, a blower, and a truck and call it a business. Many do. But they don't have a viable business, they just own a few pounds of iron. Contracts only last a year generally and if the customer is not happy he will not continue to be a customer. Purchasing the customer list when buying a business' equipment is invaluable. Having the customer list saves time. You can walk the streets hanging flyers, knock on doors, take out ads, or whatever it takes to start and grow a business. For sure do these things. A targeted customer list does all that for you.
Let me give you an example from my own experience. I blew sprinklers out for many years part time and had a customer list of 750 customers. Grossed about $20,000 a year. Lost my job and decided to offer yard services. Bought a mower and 2 trimmers from a guy who was quitting. Sent out postcards to my customer list advising about the new services I was offering. I offered mowing, yard clean ups, and shrub pruning. Myself and 2 part time employees and 2 seasons later I am grossing $127,000 a year. My margins are good and I am making more money than I was at my previous job.
I now own a 60" mower with vacuum bagger, a Scag v-ride, a new 16 ft. covered trailer (with wrap), a van equipped with inventory for sprinkler repair, 2 diesel trucks, a spare 14 ft mowing trailer, and 2 spray skids. All paid for except one of the trucks.
I could not have done this without the customer list. I do NO advertising. Just work the customer list. I call the entire list twice a year to communicate my services and offer to help them with any of their yard problems.
By the way, I am licensed, bonded, insured, pay employment and L&I taxes.
To succeed is hard work. I work with the crew and then go home and do paperwork til 10:00 at night. If you work this as a business and not a hobby it is a good career. I am 58 and I wish I had started this when I was 30 years old.
Sincerely,
Dale

mitchgo
01-15-2012, 03:35 AM
The original post is a different situation from yours . Experience plays a huge role in this too. I know he's learning sprinklers at the moment, but he doesn't know that much- at least not enough to own a business that provides a service to customers. Buying someones business is of course a gamble. I guess it's up to the person buying it on how much time and effort they want to invest into it

I don't get your post. You had a list of 750 customers and lost your job but still retained the customer list?

I don't understand why the lawn guys feel the need to tell everyone everything they own.

greenmonster304
01-15-2012, 10:11 AM
I don't understand why people think a customer list without the customers under contract is not worth anything. The customer list is the heart of a service business. Anyone can buy a few mowers, trimmers, a blower, and a truck and call it a business. Many do. But they don't have a viable business, they just own a few pounds of iron. Contracts only last a year generally and if the customer is not happy he will not continue to be a customer. Purchasing the customer list when buying a business' equipment is invaluable. Having the customer list saves time. You can walk the streets hanging flyers, knock on doors, take out ads, or whatever it takes to start and grow a business. For sure do these things. A targeted customer list does all that for you.
Let me give you an example from my own experience. I blew sprinklers out for many years part time and had a customer list of 750 customers. Grossed about $20,000 a year. Lost my job and decided to offer yard services. Bought a mower and 2 trimmers from a guy who was quitting. Sent out postcards to my customer list advising about the new services I was offering. I offered mowing, yard clean ups, and shrub pruning. Myself and 2 part time employees and 2 seasons later I am grossing $127,000 a year. My margins are good and I am making more money than I was at my previous job.
I now own a 60" mower with vacuum bagger, a Scag v-ride, a new 16 ft. covered trailer (with wrap), a van equipped with inventory for sprinkler repair, 2 diesel trucks, a spare 14 ft mowing trailer, and 2 spray skids. All paid for except one of the trucks.
I could not have done this without the customer list. I do NO advertising. Just work the customer list. I call the entire list twice a year to communicate my services and offer to help them with any of their yard problems.
By the way, I am licensed, bonded, insured, pay employment and L&I taxes.
To succeed is hard work. I work with the crew and then go home and do paperwork til 10:00 at night. If you work this as a business and not a hobby it is a good career. I am 58 and I wish I had started this when I was 30 years old.
Sincerely,
Dale

I don't think a customer list is worthless it's just not a sure thing. You had success with your list because it was YOUR list and the customers knew you. If I bought your list from you the customers would be like "who the **** is this guy trying to sell me ****, and what happened to Biodale? Half the list will move on to another company.
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Mdirrigation
01-15-2012, 11:04 AM
if you blew out 750 systems and only grossed 20k , you were losing money

DanaMac
01-15-2012, 11:17 AM
if you blew out 750 systems and only grossed 20k , you were losing money

Yup. Less that 30$ per. A company that works harder, instead of smarter, for their money. Build a business, not a job. As an owner, there should be high reward for the risk, liability, long hours, sleepless nights. Lots of money left on the table there.

I'll weigh in later on paying for a customer list.
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GreenLight
01-15-2012, 11:29 AM
I don't understand why people think a customer list without the customers under contract is not worth anything. The customer list is the heart of a service business.

I would be much more concerned about the "value" of the customer list before I had any other questions. The numbers that were presented for the discussed irrigation company that the original poster gave are not very good considering how large the billed customer list is (320).

Example, let's say he bought the billed customers only and paid $5000.00. Some people would argue that is a no brainer, but it also very well might put you out of business. I would argue that for 320 customers, $60,000 might barely cover overhead and pay one person $25,000 salary. Everything points to these customers "costing" more than any investment made.

DanaMac
01-15-2012, 12:12 PM
Back in 2001 or so, I paid a retiring guy for his customer list. It was good and bad. We came up with a deal, heavily weighed on him trusting me. I paid $xx.xx for every start up and repair throughout the year when each of his customers called for service, and $zz.zz per blow out. I don't recall the dollar amount, probably $15-$20 for the s/u and repair, $10-$15 for the blowout. This was for one year only. I kept an ongoing spread sheet and paid him three times through the year. I don't recall the number of customers though from the list, or the percentage that we actually worked on. I think it ended up being between $1500 and $2500, but really I don't remember. Doubt it was more than $3000.

Good issues - Quickly added to my list at a time when I was adding employees. I still have many customers from that list that we service (which is also a bad thing). I did also buy his inventory for not much money, and a snowblower for personal use. He had the same first name as me, so it was easy for them to remember my name. Not many guys named Dana to start with.

Bad issues - His prices were lower than mine by about 25%-30%, which caused a problem with many folks. Some which I lost due to this after the first service call. Many many older junk systems, and he never pushed to upgrade and make them better. Lots of older aged customers, that preferred him because he was older, and I was 30 at the time.

I have been considering selling my biz for a few years. And have been changing things the last few years in case that happens. So I am putting together better business systems, writing service manuals, creating procedures for employees to follow. And distancing myself from the business a little. Don't make the business Joe's Sprinklers, if you want it to be a future investment to sell. Make it Sprinklers XYZ and don't personalize it. This may be different for someone like Mike Leary who had higher end folks that wanted hand holding. But for a market where traditionally customers come and go, it's not necessary

Mike Leary
01-15-2012, 12:30 PM
This may be different for someone like Mike Leary who had higher end folks that wanted hand holding.

Existing systems that I took over had been run by the hubbie and only serviced when something broke. I convinced most of them that it was in their best interest (cost and performance-wise) to have us do regular checks and adjustments with upgrades as budget dictated. A lot of my installs were NOT high-end, but they got the same kind of parts and service as my megas did.
Irrigation is not only a service-oriented business, it's salesmanship that keeps the clients around and throws the referrals your way. I took on one where the clients said, "the neighbor said you were expensive, but always took good care of them." Bingo! :clapping:

FIMCO-MEISTER
01-15-2012, 01:57 PM
I've always liked your company name Dana. Wish I had not used my last name with my biz.

TheBetterDoorhanger
01-15-2012, 02:27 PM
You can never underestimate the value of a good client list. Clients definitely make the business! If you end up acquiring the business you will certainly want to breath some fresh life into it your advertising. I'm Robin with Adeas Printing & I want to quickly tell you about our innovative products. We offer Band-It & Stick-It as reasonably priced add ons to our Door Hangers, Postcards, Brochures & much more. They will truly make your new business stand out from the competition and really impress your new & existing customers. Take a look at our short video explaining what we offer: http://www.adeasprinting.com/perforated-door-hangers

We have fantastic specials going on right now too. For example 1,000 door hangers with Band-It for only $99.00! Call us with any questions :)

Sincerely,
Robin

muddywater
01-15-2012, 05:28 PM
I don't understand why the lawn guys feel the need to tell everyone everything they own.

Because they judge success by the number of depreciating assets they have acquired.

muddywater
01-15-2012, 05:29 PM
I would be much more concerned about the "value" of the customer list before I had any other questions. The numbers that were presented for the discussed irrigation company that the original poster gave are not very good considering how large the billed customer list is (320).

Example, let's say he bought the billed customers only and paid $5000.00. Some people would argue that is a no brainer, but it also very well might put you out of business. I would argue that for 320 customers, $60,000 might barely cover overhead and pay one person $25,000 salary. Everything points to these customers "costing" more than any investment made.

Well I think you buy it for 5k and absorb them into your pricing structure. That way it is only a 5k risk.

muddywater
01-15-2012, 05:40 PM
I have bought a couple business in the last few years. I haven't regretted it. I guess they really depend on the type of situation. Sometimes these clients are impossible to reach with advertising, I think I would have missed out on some major revenue if I hadn't of taken the risks.


On my next buyout, if they are average clients I would really want to try to get the list for next to nothing. Nobody can get financing, this business is hard, its not like buying a McDonalds franchise, margins are not incredible... so I think this needs to reflect in the price.

On the other hand, if it was business like Mike Leary's I think it could be an amazing opportunity. To truly build a brand in this industry, it seems to take 10-20 years... and you are essentially buying 10-20 years of someone's life.

JACIRR
01-16-2012, 12:08 PM
Part of the deal discussed was going to the home show together to explain to clients we see there. He is willing to help with scheduling for the spring and fall service. We do have some overlap of our client base.

I have been doing most repairs for the last 3 seasons on my accounts, spring start ups, and water management. He has done the blowouts as he owns a compressor(I have thought of renting one this last season).

Main thing I have not is add zones, install a system, or design.

I have been attending classes on irrigation by local associations. Have a means to get the plt license (low voltage). Thinking of getting the clia cert.

This last season he had used my employees for install labor so I got some free training off him

Planning to put a pay schedule based off of retained customers/sales. Also put xx amount of hours by him working on the transition at my discretion.
Posted via Mobile Device

You will want to make sure that you are even eligible to take the PLT testing. The state requires that you need to be an unregistered individual for a min of 3 years before you are eligible to take the PLT test. I have looked into buying companies in MN, and you usually need to account for a 20% customer loss, and buying only the customers at about 50-60% of what they were charging to come out in the end.

FIMCO-MEISTER
01-16-2012, 06:36 PM
You can never underestimate the value of a good client list. Clients definitely make the business! If you end up acquiring the business you will certainly want to breath some fresh life into it your advertising. I'm Robin with Adeas Printing & I want to quickly tell you about our innovative products. We offer Band-It & Stick-It as reasonably priced add ons to our Door Hangers, Postcards, Brochures & much more. They will truly make your new business stand out from the competition and really impress your new & existing customers. Take a look at our short video explaining what we offer: http://www.adeasprinting.com/perforated-door-hangers

We have fantastic specials going on right now too. For example 1,000 door hangers with Band-It for only $99.00! Call us with any questions :)

Sincerely,
Robin

Welcome to the site. Sorry about my last post. On my IPad it doesn't indicate the sponsor under the avatar.

Wet_Boots
01-16-2012, 06:45 PM
buy a new computer, you piker :mad:

TheBetterDoorhanger
01-16-2012, 08:27 PM
Welcome to the site. Sorry about my last post. On my IPad it doesn't indicate the sponsor under the avatar.

Not sure what you are referring too, but no worries & thank you! :)

-Robin

Wet_Boots
01-16-2012, 08:31 PM
And you, fix your links. :realmad:

zimmatic
02-18-2012, 02:21 PM
Did you ever buy the company?

djagusch
02-18-2012, 03:37 PM
Did you ever buy the company?

In the process of it. Should be done by the end of the month.

Mike Leary
02-18-2012, 07:27 PM
On the other hand, if it was business like Mike Leary's I think it could be an amazing opportunity. To truly build a brand in this industry, it seems to take 10-20 years... and you are essentially buying 10-20 years of someone's life.

That's the point, my clients were the "1%ers", who paid their bills and expected nothing but the best, including me putting down my fork to cruise over to see what the problem was. If you can't take on that service load, then, it's all moot. I sold my business for over a hundred thousand dollars. :clapping: