buying accounts

Discussion in 'Lawn Mowing' started by wissel_landscaping, Jan 12, 2006.

  1. wissel_landscaping

    wissel_landscaping LawnSite Senior Member
    from ohio
    Posts: 262

    I have a friend who is looking at buying accounts from another lco i know he said the route would bring in $80,000 a year they are asking $60,000 i told him that is way to much to pay i told him i would pay $8,000 to $10,000 what do you guys think is a fair price?
     
  2. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    I'd have to see their books before offering a buyout price.
     
  3. Jpocket

    Jpocket LawnSite Silver Member
    Posts: 2,278

    Yea but what if you buy them and end up with half of them staying with you? so instead of $80,000 you make $40,000.
     
  4. Metro Lawn

    Metro Lawn LawnSite Silver Member
    Posts: 2,112

    $7500 or so would be the going rate, not to say some idiot that doesn't have a clue may give more. We bought an 80,000 dollar route last year for 13,000 but it included about 8,000 in equipment.
     
  5. dcondon

    dcondon LawnSite Silver Member
    Posts: 2,246


    I'm with you, or it could even be less accounts that you end up with. NO way would we buy accounts from another lco. You can find plenty of other work besides doing that. JMO
     
  6. crzymow

    crzymow LawnSite Senior Member
    from Pa
    Posts: 378

    Ive talked to my accountant before about this. She told me some places pay a certain percentage of what each account makes a year, for so many years. so if you lose an account you dont have to pay for it. just a thought.
     
  7. Lawnworks

    Lawnworks LawnSite Fanatic
    from usa
    Posts: 5,407

    I have bought accounts before, and I would say it is worth 10% of gross. BUT you really really have to look at all of the properties and see if they are priced right. Alot of times I think people get out of this business b/c they are undercharging and do not have a man hour rate.
     
  8. Mustang

    Mustang LawnSite Member
    Posts: 36

    So why do you go into this industry if you don't think the very business in which you are working so hard is worth very much? What's your incentive if you are not building any value in the business itself? Are you making so much more money in this biz than you could make working for someone else? And don't forget to take into account all the benefits that typically come with working at a job. Health, pension and, quite possible best of all, both physically AND mentally leaving at the end of the day. Are you making enough to compensate for all this and then some?

    When you go into business for yourself shouldn't you expect a payoff in the end? Or are you just buying yourself a job? Truck, trailer, equipment, advertising, etc. Jobs are free!!!! Why buy one? One should be in any business venture in hopes of coming out ahead of where you would be had you went to work for someone else. Some people may argue "I am my own boss and I call the shots" or "I've never worked for anyone else before". Both statements certainly have merit and exactly how much can only be determined by each individual. But to go into an industry that gets very little respect from the "outside" world and then devalue the efforts of others who are operating the same businesses as you is something I do not understand.

    A common argument is that you do not know how many customers will stay with you. I agree, you do not know. But in ANY business you do not know how many customers will stay with a new owner! Yet other businesses sell for far greater multiples than those in this industry. And why do you fear the customers changing companies? Is the service you provide subpar? What would be the reason for a customer to change companies just because it was sold? If they did that wouldn't they be getting someone new anyway? And they will have to make a considerable effort to do that. They must call a few companies for estimates, wait around to meet for those estimates and then take a chance on a new guy anyway? Sure, there will be a couple that switch for any number of reasons but to worry about half disappearing is a little extreme IMHO unless you know the quality of the work you provide is going to be below the level they were receiving prior to the sale.

    To go even further I would argue that in this industry you are more likely to keep the customers if you buy a biz. We make it so easy for the customer to buy our "product". They do not have to get in their car and drive to a location, park their car and walk into a building, look around, gather everything they want, wait in line to give their payment, carry their purchase back to their car, get in the car and drive home. At each step of the way their minds have to make a conscious decision on their next action. At any point they can change their mind and go in a different direction. You want the services we provide? Just say so and we come to you, you don't have to do anything. You are taking the decision making process and it's many possible outcomes away from the consumer thereby giving them much less of a possibility to choose to go in a different direction.

    One last point- I don't think many people pay all that much attention to who cuts their grass. At every estimate I go to I always ask who was your previous landscaper. Most people do not even know the name of the company! They just want someone to maintain their property. Put yourself in the customer's shoes. If you got a letter saying your landscaper has sold the businesses and now Joe Schmoe is going to be cutting your grass would you immediately call and cancel? You very well may pay a little more attention to the next few cuts but to actually call and cancel just because it's someone new?

    Remember every time you tell someone that another company in this industry is worth little or nothing, you are saying your own operation is worth little or nothing as well. Doesn't make much sense.
     
  9. Lawnworks

    Lawnworks LawnSite Fanatic
    from usa
    Posts: 5,407

    I take it that you have never bought any accounts before?
     
  10. Mustang

    Mustang LawnSite Member
    Posts: 36

    Yes I have.
     

Share This Page