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MR. Nomo
02-17-2004, 10:51 AM
Just got off the phone with a friend that has a friend that is getting out of the buisness because of health problems. I dont know the man personally.
His gross is about $38,000 a year. All are year around contracts except around $5,000. His largest is a 10,800 per/year.

He is wanting $10,000 for all clients.
Not sure what the state of the contract are at this time. (renewals)
I am just a part timer (lco) at best with a full time job. I dont think I could both, my job and all of his contracts, but in "his" words he can service all his client in 2 1/2 days.

I know this isn't alot of detail info. but what percentage would the contract be worth?

Thanks for your guy's help!!

Rook00
02-17-2004, 12:57 PM
Is it $10,000 for clients only? If so, you might have to purchase more equipment. Also take into account how profitable your full-time job is. It is not worth working 75 total hrs a week if you're all beat up afterwards. The deal doesn't sound to bad if you can really gross $38,000 more dollars/yr. Most likely, however, you won't capitalize on all of those clients.

qualitylandscaping
02-17-2004, 01:02 PM
only give him 1 month gross max. for each account.. I would never pay 1/3 of the entire season unless it was a 3+ year contract..

Lux Lawn
02-17-2004, 01:35 PM
Its tough when you try to buy someones contracts if you pay him for all of them and then only receive half then what?Work out a deal if you really want them.Send out all the contacts with your name and info on them explaining the situation and pay him on the ones you receive offer the customer something free for switching over to you.Thats what I would do good luck with whatever you decide.

MR. Nomo
02-17-2004, 02:33 PM
Thanks for all your comments!
I done a search after I submitted the post and found several threads on this topic.

Does'nt sound like there's any one way of doing this transaction. There are so many variables and what works out for you may not work for me.

I will continue to do some searches and let you know what happens latter.

Thanks for your replies!!!

lawnguyland
02-17-2004, 04:34 PM
I hope that all the people that always post answers like "don't pay anything for the accounts", or" pay him two weeks max" get nothing for their business when it's time for them to sell. I'm not talking about anyone in particular, but I've read hundreds of posts on this subject. Especially with contracts I think the accounts are worth a lot. I know that around here businesses are bought and sold each day for more than a year's net. It's in the paper all the time. I just know that when it comes time to sell my business that I won't be selling it on lawn site!

qualitylandscaping
02-17-2004, 09:59 PM
Originally posted by lawnguyland
I hope that all the people that always post answers like "don't pay anything for the accounts", or" pay him two weeks max" get nothing for their business when it's time for them to sell. I'm not talking about anyone in particular, but I've read hundreds of posts on this subject. Especially with contracts I think the accounts are worth a lot. I know that around here businesses are bought and sold each day for more than a year's net. It's in the paper all the time. I just know that when it comes time to sell my business that I won't be selling it on lawn site!

There isn't a problem with paying more for an account.. But it all depends on how long the contract is for.. A one year contract (April-November) equals out to about 24-28 cuts up here. If I pay for 2-4 cuts, I am a good amount for that customer. If someone is on a 3-year contract, I would be willing to give almost a full year for the account.. It's just not reasonable to dish out a ton of money for an account you might not have next year...

J Hisch
02-17-2004, 11:26 PM
It worth what your willing to pay....

Ryan Lightning
02-18-2004, 12:16 AM
I dont think the contracts are even transferable unless it was stated in the contracts when the customers signed.

Mdirrigation
02-18-2004, 12:34 AM
As long as its stated in the contract that it cans be sold . The terminology would read something like this: This agreement between Joe homeowner and XYZ lawn service , its successors or assignors.

Written Contracts are the key to the success of your business.
It gives you leverage , you can borrow against them , and you can sell them.
If you ever sell your business what are you selling? Well written signed contracts make your business more valuable . If you don't have contracts and go to sell the business all you are selling is equipment and goodwill. I sold the maintenance end of my business 4 years ago and made good money ,only because I was selling the contracts.

spin2098
02-18-2004, 01:00 AM
Find out if this guy has told his customers yet. If and when he does see how many of his customers currently sign contracts this is key. If possible try to get him to have the customers sign a two year contract with you. If he has had the customers for awhile and he recommends you then most likely they will take his word for it and trust him and go with you. When I bought out a business I bought only the customers and got all of them and had two year contracts with them all. I am currently in my second year with these customers now. When the two years runs up they are going to know you and trust you as long as you did a good job and getting them to renew should not be a problem. Hope that made sense and helps.

MR. Nomo
02-18-2004, 08:42 AM
I talked to my friend last night, the guy that introduced me to the guy that is selling out.
He sware's this guy is on the up and up, very trustworthy! All his accounts are high end stuff. Upscale lake lots and several commercial contracts.
He has been in the business as long as he has known him. (10-12) years.
He also said that the $10,000 was very negotional.
As stated in the first post basicly over 80% of his business in under contracts. My friend stated that he knew some the contracts begin in October.
I spent about an hour or more last night reading past post on this subject. Some good advice and some great advice.
Plan to meet with the guy Friday and see what the contract look like and view some of the property.

Thanks for your post's,

Shaun

dishboy
02-18-2004, 09:20 AM
I have sold accounts and bought accounts , when I bought them I did not loose a single account and none were under contract. The key is a smooth transition, like having him accompany you on the route a few times [you split the money] and then he writes a letter of introduction praising your work and charactor. They already have seen your work now, if they trust him the should keep you especially if you do better work than him. Someone has to take care of thier yard when you leave.
When I sold my accounts it was to the biggest outfit in town who had a good reputation and the transition was easy with just a letter.
You do not have to pay what he wants, only more than anyone else is willing to pay. I would start with a months gross and negotiate from there.

MacLawnCo
02-18-2004, 03:03 PM
Originally posted by dishboy
I would start with a months gross and negotiate from there.

How did you arive at that figure? I really want to know cus at that rate there is no reason to continue in this industry with intention of selling out.

MacLawnCo
02-18-2004, 03:52 PM
Just for the record, it is possible to search outside of lawnsite for business topics ;)

A few minutes at dogpile.com rewarded these noteworthy articles:

Entrepreneur article (http://www.entrepreneur.com/article/0,4621,312644,00.html)

1000 ventures article (http://www.1000ventures.com/venture_financing/small-business_valuation.html)

Not saying these are the best way, but it is a substantial argument to the 4 cuts method so commonly thrown around here. Just to stay on my soapbox a hair longer, id be offended if someone offered me 4 cuts worth for an account.

mowngrow
02-18-2004, 11:26 PM
first i would have him sign a three year no compete clause then and only then i would approach the customers with a contract if they are willing to sign a contract then i would pay him for one months worth of service. thats it