Buying accounts.. what do you think?

Discussion in 'Business Operations' started by spitfire3416, May 8, 2012.

  1. spitfire3416

    spitfire3416 LawnSite Senior Member
    Posts: 520

    I started the business this year and gained 12 accounts so far. I'm in talks with a guy about buying his accounts. He wants $8000... here are the details.

    25 accounts - Gross: $3000 per month. 7 months out of the year

    Spring clean ups - Gross: $5,000

    Fall clean ups - Gross: $7000

    Side work - Roughly $5000 per year

    7 Plow accounts - He gets $300 per inch.. says he makes anywhere between $1000 - $5000. Depends on how good the season is.

    So he grosses about $40,000 per year
     
  2. Mowingkid35

    Mowingkid35 LawnSite Senior Member
    Posts: 286

    The only way i would feel comfortable making the aquisition is if all the accounts are on board with the sale and you have a guarentee that they will stay with you, some people arent fans of situations like this, some homeowners have personal relationships with the previous owner and will not like to change. If you were to do such a thing make sure that there is something in there about him not being able to start a lawncare/landscaping/plowing company within 50 miles of where you are, when i bought out a company last year that was in there because there are a lot of people out there who will sell, turn around and go back to the accounts they just sold you with a different company name and start mowing for them again and there you are stuck with a loss and nothing to show for it.
     
  3. spitfire3416

    spitfire3416 LawnSite Senior Member
    Posts: 520

    thanks for the feedback dude.. I'm really more concerned if it's a good deal financially though. this guy is getting out completely and just doing construction.. also he is a retired cop just collecting pension so he doesn't to do it anymore. He happens to know my family and is telling all his clients that I'm his cousin. He thinks this well help with them not bailing on me as long as I give good service. Also were signing a contract stating they won't quit for at least the season.
     
  4. Mowingkid35

    Mowingkid35 LawnSite Senior Member
    Posts: 286

    Then hopefully you should be set :cool2:
     
  5. jrs.landscaping

    jrs.landscaping LawnSite Silver Member
    from Maine
    Posts: 2,716

    Who is signing the contract? Because if the customers didn't sign it they can walk at any time. What did he net last year? Also take the "side work" right out of the equation because it is a variable you can't control. I would offer him 5k and go from there or do so much up front and so much a month provided you keep all of the customers... Just an idea.
     
  6. Mountain Peak

    Mountain Peak LawnSite Member
    Posts: 203

    I'd offer him one month worth of mowing. Half paid when you shake hands and the second half paid when two months have gone by and you see who stays with you.
    That's the going price for accounts around here, one month revenue.
     
  7. ptjackson

    ptjackson LawnSite Member
    Posts: 211

    I agree that whatever deal you cut should be an "earn out" it's very typical in the business world. If there are no contracts many might leave or want to redo their deal with you.

    What does it cost you to acquire a customer today, how much did you have to spend to get those 12 customers in time, ads, flyers whatever? This is just a quicker way to get customers so I wouldn't pay much more than what you could acquire them for otherwise. Think of it this way if he just gets out completely without selling those customers will go somewhere and they'll search google, yellow pages, classified to get a provider. Every business has a cost to get customers.

    Short story pay over no less than 3 months.
     
  8. Glenn Lawn Care

    Glenn Lawn Care LawnSite Silver Member
    Posts: 2,647

    I'd have a lawyer look over his books and see if the price is worth it. But to me it seems like a good deal.
     
  9. larryinalabama

    larryinalabama LawnSite Fanatic
    Posts: 16,464

    I looked for a deal like that when I started 5 years ago. It took a few years to get to that point.

    I think its an excellent deal.

    I did a similar deal when I had my business in the early 1990s, I paid 10k and 4 years later sold it for 10k. Made a decient living along the way.

    I do remember around 20% of the people dropped me in the first 6 months the rest became loyal customers and stuck with me till I sold the business.

    Be sure to run the route a few times with the feller your buying it from and get all the customer contact info. You should do real good provided you do quality work.
     
  10. spitfire3416

    spitfire3416 LawnSite Senior Member
    Posts: 520

    thanks for the feedback! I went ahead and did it.. he's getting great money for all these accounts and making great money on all the side work they are giving him. I know people said not to count on the sidework, but these customers he has have a lot of money to spend on their lawns which was really the selling point for me. Go where the money is.. that's what I'm learning more and more
     

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