PDA

View Full Version : Buying equipment and accounts from another company


Drew Gemma
10-31-2004, 09:28 PM
I am buying a few pieces of equipment a trailer and truck. He also has 35 accounts and I am wanting 30 of them. These 30 fit into my current route and all average the dolar a min. rule. I know there not all five star customers I am sure some are gonna be a pain. So how do I pay for the accounts what do I need to do to cover my rear what to look out for. Plan on sending out a letter to his customers sayiong who I am what is going on describing my degree expirence and current clients plus what I offer. For many of these clients my service will be an improvement. Thought suggestions help please. This is a big move for me. Thanks

Greenservice
10-31-2004, 09:48 PM
I got started in business by buying 22 accounts from my old boss who was relocating out-of-state. I paid him 50% of what he made on each account the previous year. I didn't know what the general rule was, but a couple of people I asked about it said it was a fair deal. I had the advantage of already knowing the customers personally, so it was not a problem to make back my money in the first season. However, even though I was a long-time employee and friend, he still stuck me with a couple of deadbeats that I got rid of after the first year because they were more trouble than they were worth. I had never seen his books before the sale and didn't know what I was in for with them. All in all it worked out for me. It's always a risk.

grassworks
10-31-2004, 10:18 PM
In my previous experiences , Customers don't like to be bought or think they have been SOLD .Customers want to choose . Since they have little say in the decision some are resentful and from the start are just looking for problems. Even if your work is superior expect to lose some of them ...

kickin sum grass
10-31-2004, 10:41 PM
Also ask the other guy to send out a friendly letter saying that you will be taking over the accounts for him. Don't use negatives like you have been sold to xyz company. They don't need to know that but with him explaining that and then you sending a follow up letter a little later before season starts saying that you are excited to take over where the other guy left off etc etc etc....

I did this for a guy last year. I down sized by about 20 accounts or so. I sent out a letter saying JOE was taking over these mowing accounts next year and then JOE followed up later. He kept 100% and will do so next year as well. I never told the customers they were sold, just somebody else is going to service them as I could not. I gave a great recommendation for JOE and I beleive this helps.

Good luck to you,

mastercare
11-01-2004, 11:21 AM
I sold some accounts awhile back (not knowing I was going to be getting BACK into the business).

Here's how we did it: We came up with how much I wanted for each account. I figued a total. I got half of the money up front and the other half I got based on the $$ percentage of jobs he kept. He ended up keepin about 80% of my accounts, so I got 90% of the total price I wanted. I knew I was getting paid, he knew that his rear was covered if my customers didn't use him. Win/win.

We put together a letter in the fall, which we wrote together, and both signed. Simply stating that I was moving towards a new career (graduated from college) and have arranged for a good friend/employer to service their accounts "to ensure a smooth transition" This new company will be contacting you in Feb-March to give you more details. We sent out the letter, he picked up new accounts, I got paid, everyone's happy.

MMLawn
11-01-2004, 11:28 AM
I got started in business by buying 22 accounts from my old boss who was relocating out-of-state. I paid him 50% of what he made on each account the previous year. I didn't know what the general rule was,


WOW!! No Double WOW!! You got reamed then because the going rate is between 5%-10% in nearly every case.

JustMowIt
11-01-2004, 12:11 PM
I am buying a few pieces of equipment a trailer and truck. He also has 35 accounts and I am wanting 30 of them. These 30 fit into my current route and all average the dolar a min. rule. I know there not all five star customers I am sure some are gonna be a pain. So how do I pay for the accounts what do I need to do to cover my rear what to look out for. Plan on sending out a letter to his customers sayiong who I am what is going on describing my degree expirence and current clients plus what I offer. For many of these clients my service will be an improvement. Thought suggestions help please. This is a big move for me. Thanks

We have bought accounts on 3 occasions and there were big surprises the first 2 times! You really never know exactly what you are buying (i.e. what has the current co. allowed the customer to do (slow pay, excessive skips, watch while they mow, etc.). We discovered all the small hidden details as you begin to service the account (oh by the way, Ms. Jones likes to talk for 30 minutes to the crew every time they mow & she pays 3 weeks late every month because she is on a fixed income & her little dog runs out the gate whenever it cracks open!)

The last time we purchased accounts we agreed to pay $100 for any of his customers who contacted us & agreed to our terms (i.e. credit card after each mow, no side deals, explained all policies about pets, gates,etc....). We signed up about 80% of his customer base after he mailed out his letter. This way these are our customers, not customers that we inherited all the previous companies bad decisions.

This is our experience.....good luck! :waving:

tinman
11-14-2004, 11:30 PM
We have bought accounts on 3 occasions and there were big surprises the first 2 times! You really never know exactly what you are buying (i.e. what has the current co. allowed the customer to do (slow pay, excessive skips, watch while they mow, etc.). We discovered all the small hidden details as you begin to service the account (oh by the way, Ms. Jones likes to talk for 30 minutes to the crew every time they mow & she pays 3 weeks late every month because she is on a fixed income & her little dog runs out the gate whenever it cracks open!)

The last time we purchased accounts we agreed to pay $100 for any of his customers who contacted us & agreed to our terms (i.e. credit card after each mow, no side deals, explained all policies about pets, gates,etc....). We signed up about 80% of his customer base after he mailed out his letter. This way these are our customers, not customers that we inherited all the previous companies bad decisions.

This is our experience.....good luck! :waving:

Agree with Justmowit. I bought some equipment from a friend & he wanted to sell his customers. But I did not really want any of them cause they were not "MY" customers. So I agreed on a fair price for the equipment & did not figure any extra for the few customers. Glads I did not as 95 % were the biggest PITA's I have ever had & the worst yards too. About 2 were good clients but the rest I wish I had never met!

DuallyVette
11-15-2004, 12:28 AM
If you would pay 50% of the annual take...just offer that to all the houses in a neighborhood. You should be broke in a couple of months. IMHO

ICE
11-15-2004, 01:28 AM
I actually just talked to a friend of mine in the biz right down the road from me. I asked how he did this year, and he said great, they are still mowing and had fall cleanups out the wazoo yet. He runs two crews, a two man and a three man crew.
He asked me, and I said, well, my two customers want me back for next season and that I hope next year will turn a better profit then this year (being my first year and all).
He then told me to drop of some of my biz cards to him as he will be downsizing for next year. He told me that it just got to crazy this year and that he definately wanted to slow down for next year. He also runs another biz that takes off around August and he said it is like working two full time jobs. I just have to get with him to make sure that the customers that he is giving to me are not going to be at opposite ends of the state!! :cry: I'll keep ya'll posted on that! LOL

Tim

YardPro
11-15-2004, 07:58 AM
WOW!! No Double WOW!! You got reamed then because the going rate is between 5%-10% in nearly every case.

here is's 30%

brentsawyer
11-15-2004, 08:10 AM
2-4 cuts which is about 8-15%. At 50%, you might break even for the year. Basically, the guy made as much money selling them at that rate as he would working all year.

Green Pastures
11-15-2004, 08:20 AM
I've never understood this process of "buying" accounts from an outgoing LCO.

I'm sceptical and do not trust this practice. Frankly I do not see why it happens. If you do not buy the contracts out you will eventually get at least some of them for free. The people got to go somewhere right......

The former LCo does not own these people.

He may have a contract with them, but that does not guarantee that they will want to continue the agreement with you. If I were the customer I would not continue a contract with a new guy who just comes along and buy's out some other guy's contacts. I would want a new contract. I would ultimately want to choose the company I contract with myself.

What's to stop them from firing you a month after you just "bought" them?

I just don't get it.

wayne volz
11-15-2004, 09:29 AM
The Value of someone's customer base should be judged on several factors. Before you decide what to pay for the accounts, take a look at the company's P&L (profit & loss) sheets. They should have that information available.
Be sure to consider a few things:
1) Are they profitable? - The dollar a minute rule that you referred to is not a good rule. Every business operates at a different level of overhead. So to generically say that a dollar a minute or fifty cents a minute or three dollars a minute is not a sound method of operating your business. You owe it to yourself and your company's profitability to know why you charge what you charge!

2) Are the accounts within your area of service or within a market that you are willing and able to expand into? Don't ask yourself if you are big enough to do it, ask yourself if you are big enough to loose it!

3) Is the current owner of the accounts willing and able to introduce you to those accounts. The letters written are a good way as suggested by many others here. However, a personal introduction goes a long way toward retention. I've helped many services buy & sell and a personal introduction will considerably increase your retention after the sale.

4) Are the clients under a service agreement with the existing owner. If so, this increase the value of that account to you and to the current owner.

5) A few different ways to consider your purchase: Asset approach (Assets minus liabilities = value
Income approach = earnings divided by percent you want to pay or sell
for = Value
Market Approach = find companies like yours and make your approach.
These go for 35 - 70 cents on the dollar as an average.
Higher end clients bringing the higher rate and lower
end clients going the other way.
With any of these methods the seller and buyer must consider the value of goodwill, on-going contracts and accounts receivables.

I realize this may be more in depth than the answer you were looking for, but I wanted to make sure you had enough working knowledge to make a good decision.

Last but not least, the definition of a good deal. When the buyer and seller are both happy!

Good luck - luck is where skill and preparation meet.

Wayne

Green Pastures
11-15-2004, 01:48 PM
4) Are the clients under a service agreement with the existing owner. If so, this increase the value of that account to you and to the current owner.

Wayne


Wayne,

No flames but I do not understand how this helps you the buyer.

UNLESS there is a clause in the exisiting contract that say's the contract may be sold to another LCO, the homeowner is not obligated to continue service with any other than the company he originally signed the contract with.

My point is you can buy all the contracts you can afford but that is no guarantee you will keep those contracts.

Am I being clear?

Does anybody else see the inherint problem with this arrangement?

wojo23323
11-15-2004, 02:06 PM
Wayne,

No flames but I do not understand how this helps you the buyer.

UNLESS there is a clause in the exisiting contract that say's the contract may be sold to another LCO, the homeowner is not obligated to continue service with any other than the company he originally signed the contract with.

My point is you can buy all the contracts you can afford but that is no guarantee you will keep those contracts.

Am I being clear?

Does anybody else see the inherint problem with this arrangement?

So what you are basically saying is that if you were to sell your business, you would just ask for the value of the equipment? What is the real reason to get into business? My reason I got into business is to build a profitable business then one day sell it and retire.

PR Fect
11-15-2004, 02:59 PM
here is's 30%
50%----30%, thats nuts! Would you go to a new customer and say " I will mow your lawn the first year at 30% off " And then hope to get them the next season?

Metro Lawn
11-15-2004, 03:27 PM
WOW!! No Double WOW!! You got reamed then because the going rate is between 5%-10% in nearly every case.

I agree with MMLawn
We have bought out dozens of companies through the years. Back in the mid to late 80s we use to give or get 2 weeks service rate for accounts. Say a customer is a $25 per week cut, then $50 and that's it. Since then it's up to 3-4 Cuts now. I would never pay anyone 50%, that is just plain crazy. We have been around awhile and over the years we keep records on where our clients come from. When we get a call for an estimate, they are asked how they heard about us. If they end up being a client, these figures go in the computer. We have found that our advertising works like this. We get one new client for every $42.50 we spend on advertising. These are straight numbers. Not how many people called for a free estimate, or word of mouth cusomers. Only new customers that saw our advertisement and called from it. So why would we pay ( example = 25.00 cut x 30 weeks is $750 per season divide by 50 % is $375.00 ) $375.00 per customer, when we could get like 9 for that price. You guys need to wake up a bit. I was taking to a guy the other day that was selling his accounts. Has around 30 accounts that net about $750 a week. He wants just over $10,000 for them. Sound like a bargain? Not to me..... I told him that I could get over 200 accounts by spending that much money, he looked puzzled. It's there in black and white. Don't get me wrong, I have gone as high as 5 cuts which would be just over 15% of annual gross. The point with those jobs is that they were in or close to my existing routes and I wanted them. Our rule of thumb here is about 10% of the gross.

lsylvain
11-15-2004, 03:47 PM
When I sold my accounts last year so I could move. I broke everything up. I wanted to keep a 36" W/b blower and trimmer to do my own yard. I sold some equipment to a couple of people and about 1/3 of my accounts to a guy that just did residential and another 1/3 to a commercial guy. I final third were either crap accounts that I wouldn't give to anyone and the one that some @#$%ing #$%$#%# stole from me. I don't know how this guy found out I was moving but he did and went to the customer and told them I had packed up and moved even though I wasn't going to do so until the end of the season. I could have sold that one job for $5000 seeing that it was a HUD apartment building that I billed $30k a year.


anyway...

I let them take the accounts and I billed the first 2-3 cuts as if I had mowed them. Then we made the switch and he paid me 1/2 the price for the next 4-6 cuts. It worked really well. My customers got to test out the new guy for 2 weeks and he got to test the customers for two weeks. If a customer left him there wasn't any revenues to give me half of so he didn't get screwed. I still got money he didn't have to come up with $30k all at once to pay me for them, just some gas and time.

lsylvain
11-15-2004, 04:00 PM
Metro Lawn,

Although it is usually cheaper to pick up your own accounts, buying accounts has some advantages. I'm sure you have experienced them. The prices have already been negotiated so you don't have to give 30 estimates at 30 minutes each costing you between $15 and $50 each depending on how much you charge.(lost time) They all come in one big bang so you know you can afford new equipment to handle them. And best of all you can pick and choose them. I would rather pay $10,000 for $20,000 worth of great accounts than pay a couple of bucks for $30,000 worth of accounts that make me want to jump in front of a 72" reel mower.

GrassBustersLawn
11-15-2004, 04:57 PM
BUYING ACCOUNTS DOES HAVE SOME ADVANTAGES........

If they are in your "territory"...

If they are "suitable properties" to your operation...

If they cost less to purchase then what it would cost you to obtain them thru advertising.

IF you can handle the additional jobs without reducing QUALITY!

Mike

GrassBustersLawn
11-15-2004, 04:59 PM
PS

I forgot to add....WAYNE (VOLZ) is the man! I saw him give a presentation during the off-season last year. He knows what he is talking about!!

Mike