buying a lawn care bussiness

Discussion in 'Lawn Mowing' started by lawnman20, Mar 14, 2003.

  1. lawnman20

    lawnman20 LawnSite Member
    Posts: 14

    do you think buying 52 accounts for $15000 .00 is to much? the accounts make $40000.00 per yr just cutting grass and the are close togather
     
  2. stevo22

    stevo22 LawnSite Senior Member
    Posts: 344

    just my thoughts here...first as someone else might suggest, do a search and you will find alot of info re purchasing other gigs...

    my input--not sure how long your season is there but here 52 accounts should bring in roughly 60k-70k yr..that is w/ and average yd price or $38-$45 cut for 30 cuts..that is just an average..doing the math on 30 cuts yr yhose numbers only show about 25 bucks a cut..imo not woth it...some if not most are prob underpriced..some might not stay w/ you after the swap...i would want to personally inspect each property vs the $ charged..i would only give maybe one month's worth of cuts for those that stayed with me..i would only pay maybe 1/3 up font, 1/3 2months later, last 1/3 two months later...something like that..i would have an attorney draw up the info on your terms..include a no compete clause etc etc..personally i would not pay for a bunch of accounts priced by someone else...i might take a few yds here and there from some friends in the business but i would be very careful buying that many yds at that price...something is not adding up there...does it include any equipment??
     
  3. dklawncare

    dklawncare LawnSite Member
    Posts: 80

    One piece of advice...make sure they are all under contract and make a deal with the guy that says you don't pay for anyone who leaves before 1 or 2 months. An Army reserve guy tried to sell me his supposed $30k/yr business but didn't have any contracts. I felt really bad but buying a business is a big risk. Make sure all the paperwork is there...
     
  4. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    Heck no. I think that is WAY too much for those accounts. But that's just my op.

    Three ways to think about it.

    First, I always figured if I bought a lawn care account from someone I'd be willing to give them the first month's wages for that account. Suppose you mow 40 weeks out of the year, that's $1000 per week, or $4000 per month, roughly. So that's what I'd pay using my method. If it were any higher, I wouldn't buy the account.

    A second way to look at it is this; How much does it cost you to get a new client? At this rate, you'd be paying $288 per client. I don't know what kind of marketing you do, but I sure as HECK don't pay anywhere near $288 in marketing costs for each client I get.

    Third way to look at it is this; What else could you do with that $15,000 in regards to getting new clients? Well, for $3,000 you could buy yourself about 30,000 FULL COLOR DUAL SIDED FLYERS with pictures, cool graphic design and all. Then, you could pay someone $2000 per month to hand out flyers door to door 40 hours per week. You could do this for 5 months straight and STILL not have spent $15,000!!! And how many new clients do you think you'd get out of 30,000 full color flyers? Even at .5 % return, you'd have 150 new clients!!! At 1%, you'd have 300 new clients!!!!!

    The only good thing is that the clients are all close together. But at that price, that's WAY WAY WAY too much money to spend, regardless of how close they are.

    Just my 2 cents.
     
  5. SLS

    SLS LawnSite Bronze Member
    from Mars
    Posts: 1,540

    ditto what jimlewis just said.
     
  6. Shady Brook

    Shady Brook LawnSite Bronze Member
    from Indiana
    Posts: 1,517

    I am buying 50 to 60 accounts that will gross in the neighborhood of 50,000 - 75,000/ year for right under $5,000! I will not pay any of that money until a customer signs a contract, and is mowed a min. of 6 times. The amount I pay hinges on how many customers of the 50-60 sign my contract, and receive the agreed number of mowings. I am protected this way, as it will pay for my labor, some profit, and the cost of a new enclosed trailer. Should I lose every single account after 6 cuts, I will at worst have a new Enclosed trailer for my efforts.

    Don't do it at that price!

    Jay
     
  7. LawnGuy73

    LawnGuy73 LawnSite Bronze Member
    Posts: 1,945

    Thats way too much money....and yes, make SURE they are under contract
     
  8. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    I suppose I differ from most people on this forum. I have to disagree on the whole contract thing. I don't see a need for a signed, long-term contract at all. In fact, I think it scares more people away than it does any good. We've operated for 7 years without any binding contracts. I still have many clients from our first year. And many from our second, third, etc. People stay with us year after year (upwards of 90% retention from year to year) NOT because of any contract we make them sign, but because they like our work, our professionalism, and our depenability. When you have a lot to offer, I don't think there's any reason to have a contract.

    Just my 2 cents.
     
  9. rkk95

    rkk95 LawnSite Member
    from west PA
    Posts: 165

    lawn care contracts are worth about as much as the paper they are written on. What are you going to do if they cancel take them to court to get your money? You'll have at least double the amount in your lawyer, or you can take half a day and go yourself.
    If you do a good job and know what you are doing, you don't have to worry about contracts.
     
  10. Clay

    Clay LawnSite Member
    Posts: 236

    Buying and selling a service type business has to be (along with marketing) one of the most mis-understood concepts...

    Lawnman, ANYTHING of quality has value... You have to make sure that what you are buying is quality or it does not have value. If the accounts are underpriced they are more than worthless... they will cost you money.... but a turn-key 40,000 dollar a year business (especially just mowing) that produces at or above the hourly rate for your area is worth buying... The question is, "At what price?"

    Although I have sold 8 businesses at 6 months gross plus the equipment value, mine were in a 12 month region where the price stayed the same each month, but the normal rule is a third of the annual gross plus equipment value.... So in your case it would be fairly close to the norm... If they are of value and it is something you really want, I bet you can get it for $12,000 cash with a non-compete agreement and not pay for any customers who don't transfer and give you a try....

    Most everyone on these boards look at it from the buyers side and say that they would not pay upfront and have to have contracts and only pay for the ones that stay longterm... First, I must agree that a contract is of no value to keep a customer (only good, consistent work can do that)... a contract can help both the customer and you know what is to be done and expected by both parties....

    The seller of any service type business would be a fool to not take cash up front and guarantee anything more than a transfer of the customer to the buyer... The seller can't take the chance that they buyer will do a good job and keep all the customers for the next year, nor should he be asked too...

    It takes a great deal of time, money and extra energy to set up a profitable route (especially when you are not familiar or confident in how to do it).... So to many, buying a turn-key business is a win-win situation... But you must only buy quality, you should be trained on the routes (and equipment if you are buying any), and state the fact that you are already familiar with the accounts and are keeping the same price and schedule as before in the letter of transfer to the customers.... People do not like change so they are most likely going to give you an honest chance as they will have to get someone else anyway, and they can try you by doing nothing.... :)

    After selling 8 businesses (with over 500 acounts) in 12 years, I am happy to say that only 1 customer quit because of the transfer and they were all a win-win opportunity for myself and the buyer... so it can be a good thing if done properly....

    If you have any direct questions, please feel free to email me at clayvaughn@hotmail.com

    Best of luck, Clay
     

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