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View Full Version : Selling accounts - pricing?


maxrep12
06-09-2003, 12:40 PM
Just wondering what some of you have charged for accounts that you have sold for lawn cutting. I know that the value varies based on the dollars per hour a lawn brings in and the travel time between lawns.

I have made a pretty solid commitment to a company to sell my accounts. My route is UNUSUALLY compact. One subdivision I cut in we service aprox. 100 lawns. Quite efficient! Another small sub we cut 45 bite size lawns - string of ten in a row, that kind of set up. I spent a lot of time canvassing these subs and knocking on doors to be able to work in one area all day. This = more profit per hour.

How many cuts per account do I charge?

gogetter
06-09-2003, 01:29 PM
These are all on a signed contract?

maxrep12
06-09-2003, 10:15 PM
Actually, the 185 accounts are not on contract. I have thought many times about using contracts but have done well without them. The main reason I have opted not to is that I feel like I have been able to talk more home owners into accepting service with out a contract. After a home owner goes a few weeks with the luxury of not doing the cutting themselves, they seem to be hooked for good!

Lawn DOG
06-09-2003, 10:23 PM
How do you sell an account that has no contract?

That's like saying "here's an empty glass take a drink".

I understand you are servicing these customers but don't see how you can sell them......

nlminc
06-09-2003, 10:58 PM
If the co. taking over provides the same or higher quality of service at the same price. those customers will stay. Why wouldn't they? The seller saved them the aggravation of finding another reliable service provider! Contracts can be broken anyway. If you're close to your customers, they will trust you to leave them in good hands.
I would say you have a potentially profitable business sale on your plate. Talk to your accountant. How much do you profit or gross from these accounts yearly?

I sold my account list (without contracts) last fall for 30k and that was for 36 accounts. I ended up getting alot more for the equipment the buying co. decided they wanted also. I could have earned more from the sale. I had two businesses that were fighting over my list. I just came up with the figure and I wanted out fast. I was moving out of state. Money talks.

What do you want out of it? Talk to an accountant that understands how to price a business.

I understand where these others feel your accounts are not worth anything based an the fact that they have no contract. But look around.......there are people out there that will buy anything! Drop hints to a few large or growing LCO's in the area and I bet you will have some of them interested. If your accounts are profitable and your route is as tight as you say, you'll have no problem.

maxrep12
06-09-2003, 11:05 PM
Were those 36 accounts commercial? I would guess that they were!

nlminc
06-09-2003, 11:07 PM
They were all residential.

Lawn DOG
06-09-2003, 11:09 PM
Originally posted by nlminc
Contracts can be broken anyway.


This may be true but as a business professional I would not touch it. I am sure whoever you sold your accounts to had a contract with you. If not what was stopping you from coming back and taking your accounts again. Please don't tell me a hand shake.......

nlminc
06-09-2003, 11:17 PM
You are right Lawn Dog. He had his attorney (at his cost) draw up a closing on the business. I was an inc. He researched...for leans, outstanding loans on the equipment and I had none. I was moving 1300 miles away, but still signed a non compete agreement for 5 years at the attorneys advice. There was no gaurentee on the accounts staying with the new owner......his attorney even informed him that I could not gaurantee them! I never said I would. These customers stayed with me brcause of the service and personalized attention I gave them. He understood that had he do the same these customers would be his for a long time to come. Unfortunatly for him, he didn't do that.
I did have some customers call me afterwards asking if I would take them back. They had given him plenty of chances to correct his mistakes, but he didn't have a clue on running a LCO business. He was in the home building and gen. contracting business.

Lawn DOG
06-09-2003, 11:31 PM
nlminc,
Thanks for your explanation.
It makes sense now.
I hope this dialog helps you (maxrep12).

maxrep12
06-09-2003, 11:32 PM
nlminc, forgive me, but how on earth did you sell 36 residential accounts for 30k? I must be missing something here. I have 185 accounts that I gross 114k each year just from cutting. I was going to sell my customer list for 21k. Now I feel a bit foolish, but still cant see 36 residential accounts worth 30k. Maybe I'm just out to lunch!

nlminc
06-09-2003, 11:57 PM
Do you want a real laugh! I had 2 accoutants look at my business and advise me on how much it was worth. They came back in the 180k range!~ just for the accounts........I nearly hit the floor. Their explanation made sense based on the money my business was taking in over the years and I had only a small number of accounts that grossed almost 150k - 200k per year over the course of the last 5 years. to keep it short..... My business was an investment to the buyer. I had worked hard to get my business to this point and I deserved to be rewarded for the hard work I performed. The new buyer would also be buying a business that was growing $$ wise and they would be able to increase profits year after year.
Now I had to be realistic. I knew that I wanted out within one month. I was eager to go! I knew most of the LCO's in my area and knew 180K was a crazy price to ask. It may look great on paper, but, I figured out that 30k was where I wanted to be for a quick sale. And 30k was a great price for the buyer. After all if I had sold to the other guy who is a well established LCO in the area. He would have grossed at least 200K this season on my accounts, because I know what his sales staff is capable of. $200k on a 30k investment is not bad! That is the way the accountants look at it. Only they feel 180K and earning 200K and more over a few years brings the buyer into check with his investment.
When you buy stocks, are they a safe investment?? Maybe? Who is in control?? Buying a business is a risk, but if you work your tail off your in control, you run the show.

maxrep12
06-10-2003, 12:19 AM
If your 36 accounts are grossing 150-200k then your selling price of 30k for the customer base makes sense. I would not have guessed you were able to extract so much from the 36. Good job!

gpriddy
06-10-2003, 01:10 PM
In my previous life, before following my passion, I had received an MBA, and worked with several small businesses as a consultant. It was a general rule of thumb that small service based businesses were valued at 0.8 to 1.2 times annual gross revenues ( or 3 times net b/4 taxes and Dep.) plus equipment. As stated before, contracts are meaningless in this industry.

I see too many businesses on here selling their accounts they worked hard to build for chicken feed. THen give advise to others buying in or selling out to do the same. You want to build the industry --- value your business like any other industry would for the profit and $$ turnover you generate.

Gary

CMerLand
06-10-2003, 02:08 PM
GP,

Since you brought up the matter of your MBA, and how I wish I had one, let me ask you this question. If a business is grossing 100,000 per year, yet losing $ 15,000 per year on those earnings, meaning that company spent $115,000 to earn that $ 100 K, what is the net value of that company?

Next, lets say you purchase that business at the bargin price of $80,000 and because of your excellent business acumen are able to improve effeciency so dramatically that after one season you are able to reduce expenses by $30,000, or 25%, which would be quite dramatic, and that company now earns a profit of $ 15,000.00.

It would still then take you over 5 years to BREAKEVEN on your investment in that company before you made your first profitable dollar, while at the same time retaining every client. And that doesnt include the money you may have made had you invested the $80 K in some other stock, bond or CD.

And this sounds like a good investment to you, when you could likely drop $ 80,000 into your exisiting business, ramp up your marketing efforts and secure profitable jobs right from the get go?

Hmm, maybe I dont need an MBA after all.

CMerrick