Buying Accounts

Discussion in 'Lawn Mowing' started by Tn Lawn Man, Apr 16, 2006.

  1. Tn Lawn Man

    Tn Lawn Man LawnSite Senior Member
    Posts: 479

    Another LCO in the area is wanting to get out of the business and would like to know if I would like to buy his accounts. He is getting older and is tired of the heat and the hard labor involved. He wants to move to an air conditioned desk job.

    His business is a one man operation with about 70 residentials, with the average cut price of $30 (weekly). Our area averages about 32 cuts per year.

    His average customer retention time is about 5 years and longer. But, he does not have any contracts. FYI, nobody and I mean nobody does contracts in this area. So, that is very normal.

    He is willing to accept payments over the next year or two.

    I was planning on offering him a down payment of a certain amount and then monthly payments for the remainder based upon the percentage of clients that stay with me and do not leave. And, believe me, I realize that no matter how stellar my services are some are going to leave for whatever reason.

    A little background into my business. I have a steady business that is 3 years old with enough accounts to have 2 employees and me. Absorbing his accounts will not be that difficult.

    What I would like to know is based on the information given:

    1. What are his accounts worth (no equipment - I have my own)?

    2. What is a good down payment to start?

    3. How would you figure percentage for retained customers?


    Thanks for the info everyone.:)
     
  2. lawnboyblake

    lawnboyblake LawnSite Member
    Posts: 89

    Well, I just bought out another guys business about a month ago. The deal we made was he wanted $10,000 for the accounts. We also setup a payment deal with that. I gave him a check for $5000 and then I am going to pay $1000 a month starting in June until paid off. I got 50 full time mowing accounts and also there are about 30 other accounts that I do either every other week mowing or bushes or other jobs like that. I know it's a possibility that I paid too much, but I dont really think so. Some will say that but I dont believe it. Many other businesses get sold for way more in price than lawn businesses. Some it takes 2-3 years to get the recovery in price paid for it. Also, the guy I got it from didnt have contracts either. I myself have never used contracts and I believe you have to trust and know how to judge people because if someone isn't going to pay you, thats the fact and it doesnt matter if there's a contract or not. Not worth going to court over $240 mowing bill. If I were you, go for it. I couldnt be happier right now.:waving:
     
  3. Hermanator

    Hermanator LawnSite Member
    Posts: 223

    Most business' are worth approximately 2 times the yearly income. Plus or minus, depending on the profit involved. You should be some where around 30%, so you will need to use that to determine what you can afford to pay or how long you want to mow them with no money in your pocket.

    For me, if I was having a hard time in getting new accounts, i would purchase them. However, if accounts were not to hard to pick up, then I wouldn't offer him more then what new ones cost you.

    Last year was our first year and we picked up almost 400, so it is really not hard to gain new accounts.
     
  4. nobagger

    nobagger LawnSite Gold Member
    from Pa
    Posts: 3,065

    We bought out a company at the beginning of the season, I gave him 5k, $2500.00 down and making payments until June. I figured his customer list was worth about 2 months worth of revenue but I offere him 1 month worth of revenue and he took it. I got his equipment and all. We have doubled that amount back already:clapping: just in spring clean ups he didn't get to, plus about 5k worth of projects lined up. But if your buying accounts, I only "bought" the ones that have been with him for over two years. I bought all of them but only counted those customers.
     
  5. JRAZ

    JRAZ LawnSite Member
    from NW
    Posts: 143


    400 accts in one year. That is pretty damn good. Please explain how you did that and what your attrition rate is like on that many new customers in one year. Also, with that big of growth over the year how did you handle all that work, already had guys sitting and waiting to go? Also, this must be mainly maintenance?


    RZA
     
  6. Tn Lawn Man

    Tn Lawn Man LawnSite Senior Member
    Posts: 479

    I appreciate the information. Anyone else purchase any accounts?
     
  7. SWD

    SWD LawnSite Senior Member
    Posts: 989

    Yes, I have.
    I did not follow accepted business practices when acquiring these accounts as I bought out the whole company - equipment and all - and recovered my costs with-in two months.
    The price was ridiculously low, the guy was in both health and financial problems, and I gave him what he asked as he wanted a quick sale.
    Depending upon how motivated the seller is, offer no more than 25% of the accounts and see what happens.
    It would not fly with me, however some people want out for a whole host of reasons - who knows - you might get lucky.
    The problem I am facing with my business being for sale - the market value of my business is way beyond the local LCO's ability to finance.
    I am entering into initial discussions with a broker, and the main sticking point is that I will not pay the broker, the purchaser will.
    I am selling as I have received a very lucrative offer to teach agronomy at a college and quite frankly I would prefer air conditioning to sweat at my age.
     

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