Have opportunity to buy 100 lawnmowing accounts. How do I do this?

[Emerald]

I have a person who is willing to sell me 100 lawn accounts that generates $100,000.00 a year in gross income from weekly lawn mowing, snow removal, spring and fall cleanups. He is asking $50,000.00 up front for accounts only. This includes no equipment. Is that over priced? He says if I don't buy it someone else will. I am very interested but have no idea how to pursue this. I've spoken with the bank and they have approved the $. Do I need to get a lawyer to write a legal purchase agreement or offer? How do I get this guy to give me more info on the accounts? How do I know that I can keep these customers after I buy the company? How do I keep the previous owner on my side? Any advice would be greatly appreciated? Has anyone ever done this? Thanks in advance!!!
Emerald

[bob]

Way too much money! In my area, accounts sell for 7 to 8 weeks worth of cuts. Do you want to work for 1/2 price next year?

[mdb landscaping]

i dont know much about the pricing end. but once you obtain the accounts there is no binding contract for the customers to stay with you. i know a guy who sold out and not a lot of the customers liked the new guy and got someone else. sounds risky to me.

[thelawnguy]

In the past, I have heard figures around 5-10 per cent of the annual gross, make some sort of arrangement where you pay as you go, you dont want to buy 100 accounts but only have 50, work it out so you wont be paying for those who go elsewhere.

[ronslawncare]

dam 50,000 someone over the summer approached me 100 acounts and a 32 lesco 10 garbage cans two trimmers echo hedgecutter a redmax backpackblower and like a littlecrappy trailer 6000 my friend bought it in a seconds i was just starting i didnt no if i was gona get involved this much he said that he lost alot of acounts when he tried to price higher.but that was a deal of a lifetime .tell that guy to take a walk if there not contracted wouldnt even bother ever.

[CCLC]

Way too much money!! I would set up a payment plan over the next year for no more than 5% to 10% of the gross. Make a contract that if you lose any of the customers that you will not pay for them. You don't want to pay for 100 lawns and only have 20% to 30% stay on. My customers are loyal to me and the work that my company does for them. I would guess that if I sold out that 70% would review their options and "shop around." You also need to look at his books. Make sure that he isn't inflating his gross trying to get more out of his sale. See a lawyer

[Toddppm]

Run away run away! Spend that money on some good advertising and take on the customers you want. I passed along a deal to a friend of mine earlier this year, guy had 35- 40 yards $1200, he bought it , they were all smaller yards where the guy was doing a crappy job, no edging string trimming, my friend showed these people what it should look like , raised the prices and he kept most of them. It was right near him so it worked out good for him, too far for me to go.

[Skookum]

I would agree. That is too much money for just accounts and no equipment and no way to know if you'd keep those accounts next year. Maybe he already lost half of them for next year?

I'd say, you'd be better off using $50,000 on YOUR business. You could get those 100 accounts yourself for less than $50,000.

Just my opinion.

[Ssouth]

I purchased five accounts in mid Feb.. Those five accounts had an annual income of approx. 25K. I payed 3K for them. The payment arrangement was like this: The first month I worked; the seller billed the customer( that was my down payment). And then the rest was split up into eleven monthly payments. Has worked great so far. I've even picked up five more accounts in the area. Be sure to put a non-competition clause in your contract with the seller. I think 50K is way too much. See if someone else will buy them (doubtfully). Then go back and offer him the 5-10K. Make sure the contracts are really worth what he says.
Hope this helps.
SSouth

[curlawngreen]

I wouldn't look at it twice. No way. Give Phil Nelson or Bill Phagen a call. Think, think, think, then think three times. 3%-10% would be all I would pay with a no competion clause.

[Richard Martin]

I agree with everyone here. Pay only 5% to 10% of money received over the course of 12 months. Accounts are easy to get now and that makes a customer list almost worthless.

[LoneStarLawn]

Never purchase accounts unless they are under a contract...otherwise over 50% will leave due to change of hands.

Plus that is way to much for no equipment...

A word to the wise ..if someone is selling you something and says that if you don't buy it at that price someone else will...used car saleman line..bad deal..

[Edited by LoneStarLawn on 11-15-2000 at 12:17 AM]

[bdemir]

Dont do it. Take it from me. Do not do it you will be sorry. 50k is probably around what you will make in a year and a half after everything is paid for. And i dont mean the 50k you owe the lucky lotto winner either. So you will be working for free for the next 1.5 to two years and it will not be easy work. There is more to lawncare than people think. You have to learn the business slowly. Not jump in like i did and take a swan dive right into the ground. Beleive me you can do better by building a business from the ground up and starting out with minimal; equipment. Ok this will be the last thing i say. Its better to make a profit from the start and love it than to wait two years of hard work and patience and then still have no gurantees. There are no gurantees in this business. One day your customer next day someone elses. DO not pay someone 50k its a scam and you will be sorry.

[bdemir]

Tell that guy to go take a hike.

[crew]

I HAVE DONE IT TOO !
I purchased a buisness with numbers almost identical to yours and paid 40k.This price included 5 52 wb's,1 36" wb,2 16' trailers,4 trimmers,4 blowers,1 sweeper,2 edgers,1 thatcher,2 hedge trimmers, 2 push mowers,2 F250's with plows,etc.
The seller financed 15k at no interest and 400.00 per month payments.

The only customers I've lost either moved or I fired. I doubled the sales in less than two years and have no regrets(other than those Fu**ing Fords).
80% of the client list had been with this service for 6 years or more and that was the kicker in my mind. I've heard people say you should be ready to loose 50% of customers in a deal like this. My belief is that if you dont give people a reason to change, they wont.

Dont run away - just walk slowly backwards and see if the guy flinches and when he does, NEGOTIATE.

[Emerald]

Thanks everybody. I figured this was the advice I would recieve. Just wanted to confirm my gut. I am running!!!!

[bdemir]

OK crew you got ten pieces of equipment probably worth half of what you paid or probably more but hes not getting any equipment and hes paying 10k more. So how does that work out. Would you have paid that much just for accounts. I know around here they pay 16k to 20k for that much work. I cant see 50k in 100k yearly gross of work. Thats like giving him one years cut for just giving you accounts. Its not worth it.

[KirbysLawn]

I had a guy give me all of his accounts, free. Every thing looked good at first, then the problems arose. Lawns not fertilized, weeks or months behind on pine needle installs, broken promices, under bids, and such. I have 1 of those customers, I returned all of his contracts back to him but this guy wanted me to do his service. He is out of business.

Maybe approach and offer 10% of sales directly related to the accounts he gives you, each payment paid at the end of the month. If all goes as he says he will make $10,000, if not you have not lost anything. Could be some good accounts there, look over contracts, walk properties, just make sure.

Ray

[crew]

bdemir - that was exactly my point. This deal as it exists is a looser. I was merely sharing my experience to show that running away is not the only option. When I tried to value the accounts if figured maybe two months net.
Get the guy to have an interest in your succeeding and the chance for that increases.
IMHO the questions to ask are -
how long have the customers been with the service?
Are they happy?
What is the configuration of the route?
What is the current guy NOT selling them?
Can you afford the man power and equipment to pull it off if half, or more bail out?

Call the guys bluff. Costs you nothing and the potential gain is good. If the deal goes down prepare for the worst and work your ass off to keep them happy.
When I imagined the worst case scenarios the one I did not consider was all the employees(2) quitting or being worthless.This is exactly what happened.
Take your time, be careful but dont run away. The asking price is usually the starting point in any negotiation. Make him a counter offer based on what youve seen here.

[Twotoros]

Spend 10k on an aggressive ad campaign instead. Who knows how many new accounts that will get you. I spent 16k to buy some accts and equiptment and it was a big bust. I wish I had spent the money elsewhere. Even a trip to Vegas would have been better. I agree 50k is way too much money . 20k sounds more like it and then plan on losing 25% or more that are a pain , underpriced compared to the good ones or have overly difficult owners.By the way I spent 8k for 50+ accounts and 8k for an extra truck and equipt. Just my thoughts.

[greenlawncare]

what's the long term outlook. How many years until it pays off. For example, are you going to be better of finanically 5 years from now because you made the move or not. What is the limit of funds? Maybe you could do both a campaign AND buy out.

Three things:
1) Seems kind of high. Probably still worth it if you keep them, but could you possibly get twice the number of similar quality accounts somewhere else for the same price?

2) If he's a one crew company he'll be able to profit more than you from the route if you are just adding the route as an extra crew. If he made 60,000 clear, you'll make 40,000 clear. Loss in productivity. Was he paying himself or not?

3) What's the quality of the accounts...as in, what kind of profit can YOU expect.

[jaclawn]

I talked once with a marketing co that specialized in lawn care accounts. Through direct mail and telemarketing, the average cost to aquire a new customer was in the neighborhood of $60-$65 each. They had stats on response rates, and close rates.

$50,000/$65=769 accounts.

[Premo Services]

I purchased an established co. from someone. When we went out to talk to customers, they were saying that they were tired of his shotty work and since he was selling they would find another co.( lost 6 that day. what I really wanted to do was bust his head wide open ,but I was in it and was determined to make it work, it took 4 years and I have a lot of the toys that I wanted, But I picked up 8 new customers early this year and justified buying a lazer, and still making a pretty good profit too.During the first year I considered going bankrupt, & then forgot about it, I have never second guessed my decision. I would have to say that if I did it again, there would be a much wiser, less trusting person buying the business. Everyone that finds lawnsite before doing this is a very lucky person!

[Edited by mow money on 11-17-2000 at 02:49 AM]

[landscaper3]

I would only pay him 10% of the income, you will loose 5 to 10% just for the change of ownership. A local landscaper did this and went bankrupt, he lost to many accounts and couldnt keep ends meet. Personaly id make up 1000 fliers or do the door hanger advertising like we do. The hangers come from nebs, and there can be a chance to get 5% to 10% of those in return which is 50 to 100 lawns and cost was under $200.00 big difference from 50k.

[Twotoros]

I will add that the biz I bought this year was 113 customers and the deal was that I pay only for the ones that would go for the change of ownership. The other service and myself sent out a joint letter explaining about the sale and an introduction by me with a sign-up for the seasons services. Only half responded. A good many told us up front that the resented being pawned off on someone else.
some were planing to change anyway and would do their own picking.So I only paid for what I bought . However a good 25% were what I call klinkers. BUYER BEWARE!!!!!!!!!!!

[Tony Weston]

Totally Ridiculous! Absolutely not without contracts and a written legal statement signed by a notary stating that he will not operate a lawn maintenance service within 100 miles of your nearest contract, then I still wouldn't pay that kind of money. Is your banker and this guy friends?
Tony Weston

[Edited by Tony Weston on 11-18-2000 at 03:41 AM]