Register free!
Search
 
     

Click for Weather
Reply
 
Thread Tools Display Modes
  #1  
Old 03-02-2011, 07:59 AM
GREENITUP GREENITUP is offline
LawnSite Member
 
Join Date: Jun 2004
Location: SouthEast, VA.
Posts: 215
Purchasing Customers - Pointers needed

I have just been presented an opportunity to purchase about 200 fert & squirt customers from another local company who is closing down. At this point, I have almost no background data to go by (or give you here) - we will talk later today. What I can tell you is he is asking $40M for them and says they are all signed on for a 7-step program. He is also offering everything as turn-key for like $75 ( this I do not want, as I have my own already). I know there is a lot to consider and the quality of the customers in my biggest concern (along with why he is quitting). So can anyone give me pointers to setting up a deal like this? Is it common to pay part up front and the rest at the end of the season less customer drop-offs? Should you keep the company name active for the first year ( for the 200 anyway)? How? Thanks for any input
Reply With Quote
  #2  
Old 03-02-2011, 09:04 AM
Ric's Avatar
Ric Ric is offline
LawnSite Fanatic
 
Join Date: Sep 2001
Location: S W Florida
Posts: 11,231
Quote:
Originally Posted by GREENITUP View Post
I have just been presented an opportunity to purchase about 200 fert & squirt customers from another local company who is closing down. At this point, I have almost no background data to go by (or give you here) - we will talk later today. What I can tell you is he is asking $40M for them and says they are all signed on for a 7-step program. He is also offering everything as turn-key for like $75 ( this I do not want, as I have my own already). I know there is a lot to consider and the quality of the customers in my biggest concern (along with why he is quitting). So can anyone give me pointers to setting up a deal like this? Is it common to pay part up front and the rest at the end of the season less customer drop-offs? Should you keep the company name active for the first year ( for the 200 anyway)? How? Thanks for any input
Green

I can't tell you about your Market, I can only tell you a little about what is SOP here in SW Florida.

Accounts here sell on average for 100% of a years Gross income. Tighter routes in upscale areas with a high margin can go 125% or higher. Less desirable routes can go as low as 50% of a Years Gross. But 100% is the most common selling price given the accounts have a good margin.

Of course any time you see a company going out of business you want to ask WHY! Therefore I would want to take a hard look at the quality of those accounts. Pricing level for the same services jumps all over the place here in Florida. A simple insecticide spray on a 80 X 120 lot can vary in price from $ 30 to $ 90 from one company to the next.

I never purchased Pesticide Accounts, but I purchased a bunch of mowing accounts for 25% of a years gross or the normal price back then. My advantage there was to up sell the accounts Pest Control. But the rule of thumb is to plan for a 10% account loss simply because some people won't like change. I don't think I ever loss 10% (I culled 60%) but I have had people quit me before I started.

Any time you purchase accounts you are in fact purchasing future income. Therefore a whole set of valves and number can come into play. The size deal you are talking about, My best advice is to find a GOOD CPA to help you with those numbers.
__________________
.

"TG doesn't give a rats ass about being "Responsible" as long as sales/production quotas are met. That's it in a nutshell. A recipe for disaster IMO." Ted Putnam 2/28/14

You can lead a Donkey to water but you can't make the Jackass Drink

"As Americans you have the right to be stupid." John Kerry

"Life is tough, but it's tougher when you're stupid.” John Wayne.
Reply With Quote
  #3  
Old 03-03-2011, 07:34 AM
GREENITUP GREENITUP is offline
LawnSite Member
 
Join Date: Jun 2004
Location: SouthEast, VA.
Posts: 215
Thanks for the info, Ric. I have since spoken with them and have more detail. They started as landscapers and gradually moved into fert & squirt only for the past 5 years. He said they lost some customers due to the recession, but these 200 have been loyal the whole time. The route is a lot more spread out than my current lawns are..... I don't care to do business in a couple outlying cities that they have a few accounts in... but the majority are in my preferred areas. Here is the big catch - he said they do contracts and pre-pays at the beginning of the season. They didn't send out the pre-pay form to everyone this year, just some... and out of those 65 pre-paid. I asked how he intended to handle those and he said that after researching what he could sell his accounts for ($65-75 according to him)... he set his price to $40M to account for that (basically keeping the money). I think he is in some financial bad times and is keeping that money for whatever. I guess anyone that assumes the accounts is liable for any work not done on those pre-pays??? It just puts a damper on things to anticipate doing 65x7 apps @ no charge for a year! What do you think?
Reply With Quote
  #4  
Old 03-03-2011, 07:59 AM
grassmasterswilson grassmasterswilson is online now
LawnSite Gold Member
 
Join Date: Mar 2007
Location: nc
Posts: 3,332
^ There is no way I would buy 65 accounts treat them 7 times and not get a penny for doing them. Maybe you deduct that from the purchase price but in my neck of the woods on the low end that's over $22k worth of work! Doesn't matter that you are getting the other accounts with them.

If I'm understanding this correctly you will acutally be buying this business for ---$40k + the gross of the 65 pre pays you don't get paid for
__________________
GrassMasters, LLC
Wilson, NC
www.grassmasterswilson.com

Last edited by grassmasterswilson; 03-03-2011 at 08:05 AM.
Reply With Quote
  #5  
Old 03-03-2011, 08:05 AM
LawnsRUsInc.'s Avatar
LawnsRUsInc. LawnsRUsInc. is offline
LawnSite Senior Member
 
Join Date: Jan 2003
Location: midwest
Posts: 912
A fert company did that here a couple years back 200 customers prepaid and the other 200 didnt the company gave it away and kept the other half. IDK if 40k would be worth it in my eyes for 40k you could prolly get 200 customers on your own in the spring.
Reply With Quote
  #6  
Old 03-03-2011, 08:28 AM
fl-landscapes's Avatar
fl-landscapes fl-landscapes is offline
LawnSite Silver Member
 
Join Date: Jan 2009
Location: SW Florida
Posts: 2,381
just a thought in general. Seems a lot of people in this industry frown on or are afraid to buy up another business to grow theirs. The yard boys mentalilty. The biggest companies in this industry get achieve the most growth through the purchase of smaller companies. They buy em up all the time!!
Reply With Quote
  #7  
Old 03-03-2011, 08:58 AM
Ric's Avatar
Ric Ric is offline
LawnSite Fanatic
 
Join Date: Sep 2001
Location: S W Florida
Posts: 11,231
Quote:
Originally Posted by GREENITUP View Post
Thanks for the info, Ric. I have since spoken with them and have more detail. They started as landscapers and gradually moved into fert & squirt only for the past 5 years. He said they lost some customers due to the recession, but these 200 have been loyal the whole time. The route is a lot more spread out than my current lawns are..... I don't care to do business in a couple outlying cities that they have a few accounts in... but the majority are in my preferred areas. Here is the big catch - he said they do contracts and pre-pays at the beginning of the season. They didn't send out the pre-pay form to everyone this year, just some... and out of those 65 pre-paid. I asked how he intended to handle those and he said that after researching what he could sell his accounts for ($65-75 according to him)... he set his price to $40M to account for that (basically keeping the money). I think he is in some financial bad times and is keeping that money for whatever. I guess anyone that assumes the accounts is liable for any work not done on those pre-pays??? It just puts a damper on things to anticipate doing 65x7 apps @ no charge for a year! What do you think?
Green

So he has a few account in other towns, CULL THEM. If you can't sell them give them away. Take the Wheat and dump the hulls but work those numbers into your total cost per income purchased.

I am not quite understanding the prepayment thing in relation to the purchase price. Has he collected a total higher than the selling price?? If not then it should be deducted from the total purchase price and you will be responsible for servicing those accounts. Understand what you are purchasing. You are in fact purchasing OPPERTUNITY AND FUTURE INCOME.
__________________
.

"TG doesn't give a rats ass about being "Responsible" as long as sales/production quotas are met. That's it in a nutshell. A recipe for disaster IMO." Ted Putnam 2/28/14

You can lead a Donkey to water but you can't make the Jackass Drink

"As Americans you have the right to be stupid." John Kerry

"Life is tough, but it's tougher when you're stupid.” John Wayne.
Reply With Quote
  #8  
Old 03-03-2011, 09:02 AM
GREENITUP GREENITUP is offline
LawnSite Member
 
Join Date: Jun 2004
Location: SouthEast, VA.
Posts: 215
Thanks for the input. We all know that these types of customers are pricey to come by.... and I don't mind paying what is fair. But as some of you have said - the fairness is questionable. So lets do some math..... you have 200 customers x 7 apps a year @ average price of $58..... that's $81.2M plus aeration's/seeding, fungicides, and insect control for a good portion of them.... I'll estimate and round that part to $25M. Total is $106M per year gross. At that same average rate of $58 per app.... the 65 x 7 would be $26M. Year one less the pre-pays is still 106 - 26 = $80M gross. A lot of assumption here about retaining most of the customers, but do you think $40M for $80M in year one (50%) is reasonable for what i am told are very good and loyal customers (again - another assumption on my part)?
Reply With Quote
  #9  
Old 03-03-2011, 09:10 AM
GREENITUP GREENITUP is offline
LawnSite Member
 
Join Date: Jun 2004
Location: SouthEast, VA.
Posts: 215
Quote:
Originally Posted by Ric View Post
Green

I am not quite understanding the prepayment thing in relation to the purchase price. Has he collected a total higher than the selling price?? You are in fact purchasing OPPERTUNITY AND FUTURE INCOME.
Ric, what he is implying about the sale price is that he knows he can get more than $40M for these 200 accounts - he believes $65-70M. But because he is planning on keeping all of the prepay money himself.... he is only asking $40M. I think his pre-pay / pocketed money is probably about $25-28M.
Reply With Quote
  #10  
Old 03-03-2011, 09:12 AM
Ric's Avatar
Ric Ric is offline
LawnSite Fanatic
 
Join Date: Sep 2001
Location: S W Florida
Posts: 11,231
Quote:
Originally Posted by GREENITUP View Post
Thanks for the input. We all know that these types of customers are pricey to come by.... and I don't mind paying what is fair. But as some of you have said - the fairness is questionable. So lets do some math..... you have 200 customers x 7 apps a year @ average price of $58..... that's $81.2M plus aeration's/seeding, fungicides, and insect control for a good portion of them.... I'll estimate and round that part to $25M. Total is $106M per year gross. At that same average rate of $58 per app.... the 65 x 7 would be $26M. Year one less the pre-pays is still 106 - 26 = $80M gross. A lot of assumption here about retaining most of the customers, but do you think $40M for $80M in year one (50%) is reasonable for what i am told are very good and loyal customers (again - another assumption on my part)?

Green

Read my first post. I said even poor margin account that were spread out went for 50% on a years Gross here in Florida. Premium account might go 125% or higher. I also said I can only tell you about MY market area not yours. I am trying to help you BUT the final decision is YOURS.

BTW Whether you purchase the accounts out right of sweat equity, be sure you have the cash flow to CYA.

In Edit

I always was happy to purchase accounts. First I looked at the cost of not only advertising but CHASING the TIRE KICKER. But some of those newly purchased accounts were also in Neighborhoods I might not have been in. After a few months of providing excellent service I would start to clover leaf the new neighborhood for more customers and of course up sells.
__________________
.

"TG doesn't give a rats ass about being "Responsible" as long as sales/production quotas are met. That's it in a nutshell. A recipe for disaster IMO." Ted Putnam 2/28/14

You can lead a Donkey to water but you can't make the Jackass Drink

"As Americans you have the right to be stupid." John Kerry

"Life is tough, but it's tougher when you're stupid.” John Wayne.

Last edited by Ric; 03-03-2011 at 09:16 AM.
Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump





Powered by vBulletin® Version 3.8.6
Copyright ©2000 - 2014, Jelsoft Enterprises Ltd.
Copyright ©1998 - 2012, LawnSite.com™ - Moose River Media
All times are GMT -4. The time now is 08:00 PM.

Page generated in 0.11807 seconds with 9 queries