buying lawn accounts

Discussion in 'Lawn Mowing' started by Heavenly Green, Feb 7, 2003.

  1. Heavenly Green

    Heavenly Green LawnSite Member
    Posts: 171

    Ok heres the deal this guy I know has a lawn bizz but wifey is being relocated to another state so Im trying to buy his customer base.
    He has a total of 70 accounts , but anly has 40 of those signed to a contract for 2003 season so we are using those 40 as a garranteed base. he wants to introduce me to each of those 40 and get them signed over to my contract. For however many of those 40 sign with me Im supose to pay 2mo. of cutting revenue for each so 1 $25. account would cost me $200.
    We are going to get everything formalized thru my cpa.
    The other 30 account that he doesnt already have signed will be like a bonus cuz hes agreed to direct all his bizz calls to my bizz line. So any potential client calling his # automatically gets my #.
    Weve agreed that Ill pay for the accounts signed during the first 2mo of cutting after that its all mine.
    Heres some #s The 40accounts = $1500. per wk. x 8wks = $12,000. = $6000. 1st. mo. & 2nd mo. but this is only if all 40 sign with me Im only paying for however many of the 40 do sign.
    The rout is supose to be pretty tight And were going to do a drive by of all 40 next week so I can decide if they are priced where I need them and to make sure there not some scrub lawns that I wouldnt be interested in buying.
    Well enough for now I want your honest opinions is this somthing that will pay for itself and is 2mo revenue too high?



    :dizzy:
     
  2. bob

    bob LawnSite Platinum Member
    from DE
    Posts: 4,254

    Thats the formula that I'd use (8 weeks worth of cuts). If your CPA says the numbers are good and you can handle that ,take it. However , see if you can spread your payments out a little bit. Two months isn't very comfortable.
     
  3. devildog

    devildog LawnSite Senior Member
    from sc
    Posts: 270

    This worth pursing, the 30 other are icing on the cake. Suggest you see the other 30 and starting going after them, will he write a letter of introduction for you to use with the other 30?

    Can you handle the expansion. Is he receptive to spreading the payment out to 90 days. Do you have the cash to handle the cost of sales, with these new start-ups?

    with regards... devildog
     
  4. kutnkru

    kutnkru LawnSite Silver Member
    Posts: 2,662

    Youve got a couple of things to consider.

    You should be prepared to lose up to 25% of what you purchase w/in the first 3 mos. For whatever reason, regardless of the quality of your service many clients deal with a particular contractor because THEY get along. Therefore amongst whatever reasons, once THAT relationship becomes null and void so does the contracts -- for whatever reason we dont know laws of physics I guess -LOL!!

    You need to review HIS tax statements for the past 3-5 years so you can get an average (feel) for what each client produces in sales generally. Then you should evaluate the equipment, to see what its value is and what if any you will need.

    Employees should be taken into consideration as well. Quite often I have seen if employees make the transition its usually much easier to maintain your invest. They also should have a fairly good idea of who is a PITA and who is worth the time (valuable info when purchasing), if they have been with the company for any length of time.

    Heres what I would suggest you do:
    Contact your attorney(s) and your CPA to discuss this venture.

    For illustration purposes lets say the averages for the past 3-5 yrs is in fact $1500/wk so the asking price will be $12,000 (8wks).

    You should give him a down payment of $4800 at the time of signing the contract between your parties at the beginning of the first month.

    Then at the end of the second month, your second payment becomes due ($3600). You will ONLY be paying for those clients you retain, as you cannot guarantee the clients will stay regardless of quality/value of your services.

    Then at the end of the thrid month your final payment becomes due ($3600). Yet again ONLY paying for those clients you have retained, as you still have no guarantee clients will stay regardless of quality/value of your services.

    As Bob stated above, if you can get him to give you two months between each payment is even better still.

    Best of Luck in your new venture!!
     
  5. Heavenly Green

    Heavenly Green LawnSite Member
    Posts: 171

    Thanks for you replies guys! There is no equipment involved in this deal just accounts that are already locked in for this season (40) Of that 40 I will pay bsicaly 8wks of mowing for each one that we get signed over to my contracts. and the other 30 that havent signed yet not paying anything for those and all potential clients that would be calling him so those two aspects will be icing on the cake. He has aggreed to send an into letter to all client that havrnt signed yet letting them know whats going on and reffering them to me.
    Basically the first two mo. of the season all the cutting revenues will be paid to him. So I think that its going to cost me time and labor for the first 2 mo. but after that ill start making some money. Oh ya those 40 that have already signed for this season have all been with him for atleast 2 seasons were gona do a drive by of all the properties next week sometime I should know more later
     
  6. precisionlawn

    precisionlawn LawnSite Senior Member
    Posts: 254

    If I had a deal like that around here for next season, I would be all over it. Sounds pretty good to me. But to be honest I can be wrong. It just sounds like a helluva deal. After those two months you will be making some pretty nice cash.:rolleyes:
     
  7. brentsawyer

    brentsawyer LawnSite Senior Member
    Posts: 663

    8wks, way to high. Your paying $200 for a $25 account, you should be able to get them for half or less than half if you were to do it on your own. I'd offer it up at one month and not a bit more, if he presses, leave, he probably won't find anyone else so close to moving time to at that $$$.

    PS If you think 8 times mowing value is fair, I'm out the door and working for you this year and I'll get you 70 accts working as a salesman on commission.
     
  8. kutnkru

    kutnkru LawnSite Silver Member
    Posts: 2,662

    I have to ask you this question: Who Is This Guy That Hes Got You To Work For FREE??
    You wouldnt work for anyone else in the world for FREE so why should you work for HIM?? HUGE Mistake IMHO.

    And I have two problems with your theory:
    A.) In order to generate revenue from his client list you will need operating expenses.
    You cant operate anything you own if he gets ALL the moneys earned. Where does your fuel money come from to cut them ech week?? Hes got ALL the money.

    Its not a good idea IMHO to work for FREE thats one. And two, you shouldnt rob peter (your accts) to cover operating costs of Pauls (his accts).

    B.) If you dont have a clause where youre NOT paying him for lost clients thats purely foolish IMHO.

    Reason being, he could tell them to stay with you til the 7th week and then they ALL cancel. He could pay them one months services to get another guy on the hook for $12k and your standing there with your belt in your hand -- left with nothing.

    Would he do that?? Probably not. But Ive seen it happen to guys just like yourself, who KNEW they could perform as well as the last LMO (in fact they did twice the job) and still lost a major portion.

    Remember Rule#1: Cover thine own, first.

    If hes not willing to help you with the transition, then you should move on. His clients will become available - you already know hes leaving then its simply the law of averages and some will call you when they arent happy with whomever buys it.

    Worst case scenario if you want it that bad -- and think its the deal of the century
    -- then at LEAST make him give you half til its paid off (however long that would take) that way you have operating capital.
     
  9. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    The biggest thing that I would be worried about if whether these customers like the idea of switching or being forced over to another LCO.

    I had a guy that was going to go into partnership with me this past year that wanted to sell me 60 of his accounts. But get this, those 60 were given to him FREE from another LCO because they didn't have time with them. So I considered buying them but first I talked with that LCO that gave them to him free and they said that they had talked with some on the customers and the customers were upset that they were being handled down to someone else. I am glad that I didn't buy those accounts because 42 of those accounts went back to the previous LCO.

    You really need to find out what the customer feels about the whole situation. They might be upset at the fact of being constantly sold off to another LCO.
     
  10. lsylvain

    lsylvain LawnSite Senior Member
    Posts: 777

    I say go for it. If you are going to meet the customers and have them sign a new contract for your business then it would be no different than having a new customer sign for your services. I would put a clause in the aggreement that protected you for lost customers. It looks to me like you are paying 25% of yearly gross on the 40, so make it be exactly that if they drop halfway threw he gets 25% of half.

    Put the numbers to it:

    70 new customers. 40 basically garonteed

    70 customers at 1% return on doorhangers = 7000 Door hangers

    thats a good $500 for ok door hangers
    plus about 60 hrs of putting them out
    70+ hours of estimating
    6 hours of phone calls
    18 hours of hunting down houses
    plus andother 70 hours to convince

    224 hours @ $25 per hour + 500 = $6100

    6100/70 =$87 each

    And you don't have any garrontee what so ever.
     

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