Buying out another LCO maybe?

Discussion in 'Business Operations' started by PaulJ, Nov 17, 2005.

  1. PaulJ

    PaulJ LawnSite Bronze Member
    Posts: 1,776

    I got a call from another solo operator the other day. He wants out. Mainly because he's going through a divorce and can't live off his wifes income for the winter.
    I know this subject is a dead horse that has beaten over and over. but after an extensive search I guess I'd just like some more opinions.

    He has some nice equipment but nothing I need and not what I would buy.
    So what I am looking at is about 40 accounts grossing grossing $2500-$3000 per month. Most have been with him at least two years. He is willing to do an introduction letter and maybe a personal intro. The accounts are priced in the $20-$30 per cut range with some $15 ones That he said are expecting increases. I haven't seen them but I think they are all under 10k sqft with many under 5k.
    He wasn't really sure what he wanted for it but was throwing %20 of a years gross around. after reading here i'm thinking that %15 might be an ok offer and spit it up with part up front and the balance after the first full month of cut (may) based on the ones that actually signed with me for the full season.
    He has a few fert accounts also but they are way under priced for me.

    My problems are:
    1- I think these are all on the small side of what I do. Some have to be done with a 21" which I have been trying to get away from.
    2- I don't think that I can handle my current work load plus 40 more mowing by myself. And I really didn't want to add employees .

    The up side would be:
    1- These seem to be pretty good loyal accounts, priced right around where I would price them.
    2- I have been wanting to add to my mowing list but have had almost no luck with advertising. Ivv'e been stuck between 25 and 30 accounts for 3 yrs now. picking up just enough each year to replace the ones that have moved or passed away.

    If I look at the accounts and they fit my operation and are priced ok, and if I can justify adding an employee at least part time, and if he would take %15 of gross based on the accounts that sign up with me for next season.
    Should I?
    I think the idea of adding an employee is my biggest objection. with just me I can keep it simple and have no strings on through the day. And that's IF I can even find someone trainable and willing to work.
    Thanks in advance for your input.
  2. JMB

    JMB LawnSite Member
    from Texas
    Posts: 51

    Most of the LCO's that I know will not pay more than 2 1/2 times the mowing price for accounts. If an account is $20 for mowing, the the going price is $50. You have no guarantees that the clients will stay with you after you take over and as you said, they seem to be on the low side anyway.
  3. nlminc

    nlminc LawnSite Bronze Member
    from GA
    Posts: 1,671

    Stay away!
  4. PaulJ

    PaulJ LawnSite Bronze Member
    Posts: 1,776

    I know this might not look very temping in most areas but let me give the background .
    We work in a city of only 20,000 people with at least 15-20 (that I know of )
    companies doing lawn care. only a few of them with multiple crews. So most have low overhead and keep the prices down.
    I have had almost ZERO response from newspaper and yellow page adds.
    last spring I got more calls from people looking for a job than from potential customers. The only business I got off the add was some small landscape rock jobs at a town home complex. Fliers have had similar results. I even tried ersonaly contacting several small comerciaol accounts last winter with no luck. Word of mouth referrals have been the best way of getting new business.
    The price range of the yards may seem low but if a $15 yard can be done in less than 20 min or a $25 yard can be done in 30-35 minutes, that's good for here. I will look close at the prices and times to make sure they are priced where I want to be.
    One thing I know is that I would only pay for the accounts that actually sign my aggrement for next year and the final payment would be like the end of May '06 based on only the ones that are still wiht me.
    I really think this might be the best way for me to grow right now, If I want to grow that much.
    It will be a big step for me to go from solo to working with someone.
    Who else has done this?
    how has it effected the way you work?
    does the second employee take most of the profits from the extra work?
    has efficiency gone up or down?
    Maybe I am better just staying with the work I can handle on my own.
  5. Popper357

    Popper357 LawnSite Member
    Posts: 217

    Employees are a huge profit maker. But your market is different than mine. I ran a helper last year and would never go back into mowing without one.
    Sounds like your market is less profitable than mine, even though we have like 4 LCOs at every stop light in the spring. My min. was 25 and now it's 35 and my market handles it w/o a hiccup. And springtime will be heavy with new mowing leads.

    Why are your worried about having an employee? They are a pain at times, but when you get a decent guy to show up and can put him to work, it's the easiest way to make money. I'd have kept the mowing business if I'd found a good foreman. In retro, I gave up searching too early.
  6. PaulJ

    PaulJ LawnSite Bronze Member
    Posts: 1,776

    I guess if have bad memories of haveing to train the new guys when I was a forman at a couple of different comapanies. The last one I worked for had big turnover. I think I trained 5 people for the same position one season. and the training time always slowed things down. I am worried that I won't be able to find a decent employee. and I will lose some of the freedom that I have had working solo.
  7. Popper357

    Popper357 LawnSite Member
    Posts: 217

    So did you buy out the LCO? The more employee hours you hire, the easier it gets. Trick is to find someone motivated (has a child to pay for, needs to pay lawyers fees, or wants to learn the business) and pay him more than average.

    It's tough when you've got sixty hours worth of mowing a week in the mowing season and your help no call no shows. Try to meet as many potential employees and let them know you may call at any time. Then when your backed up, hit the phones and try to get somone in.

    When I had a slow week and I knew my helper needed money, I'd chip him an extra fifty or hundred on top to keep him happy. I paid cash or check every week. Cash to temps and check when you've got him on the books. My CPA setup a payroll cheap. And I always gave out a bonus every month, usually 50-100 bucks. Mowing business is much better with good help.

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    If you do buy out the other LCO, I would strongly advise hiring someone with some experience...I hired my first employee this summer, college kid, never done it before...never quite got the hang of it. You don't necessarily need someone with 10 years experience, but someone that can operate all the equipment, someone that can jump right in and make you some money. When it's just you and a newbie that you gotta train, it gets REAL frustrating...
  9. topsites

    topsites LawnSite Fanatic
    Posts: 21,653

    I'm sorry to say but it sounds like the reason the other Lco is going OUT is because he can't make it. For all that the story with the wife and the divorce, what does that have to do with anything if the money is good? I done heard this one before, different sob story, different day, but it's always the same old song and dance, then they cry me a river hoping I'll help bail them out, but I don't bail nobody else out no more... Maybe a good friend, but certainly no stranger.

    My minimum charge is 30 dollars and I'm strongly considering 35 because I done got sick and tired of that mickey mouse crap for 15-20 even 25 dollars where it takes more time to load/unload/start everything up than it takes to do the work... I can't even get any of my equipment up to SPEED because I hardly push the T-bar or the throttle and there's the end of the stretch...

    That alone to me is an indication of someone who took on accounts mostly for the sake of having them, not so much because he couldn't get any larger accounts (that too) but because it was his first MAYBE second year and he either failed to realize what I just explained OR he couldn't get that many larger accounts because old-timers hang on to those like crazy glue.

    But I did just read about the 20k city with 15-20 Lco's, not sure what to think... This county here has 250k households (not ALL have lawns, an apartment is a household) and we have at least 200 Lco's around... It took time to find the correct way to advertise, that much I do know, and in my first 3 years I had my share of 20 dollar accounts to be sure (and still have 2 or 3), so I wish you the best of luck.

    And yes, the yellow book this year S*CKED lol
  10. PaulJ

    PaulJ LawnSite Bronze Member
    Posts: 1,776

    Well here's the continuation of the saga.

    I met with the guy again and got some more info. As it turns out there are only 30 accounts that are still on his list.
    He was averaging around $30-$35 per man hour with a 36" belt WB or a 21". That's about where I was pricing two years ago with the same type equipment. The average price was $19.27 per lawn for a total of about $578 per week.
    As we talked he seemed less sure of actually wanting to sell out. I think he just needs some money to get through the winter and doesn't have another income to fall back on. He even said that if he could sell his trailer he would have a buddy build a new one in the spring and keep mowing. The trailer he has is a nice one 7' x 17' #7000 tandem with side ramp on the front and the back 2/3 has high wood sides for grass and he has a ramp for the back if needed. He wants $3500 for it, and about $4500 for the rest of his equipment. I think if he finds a temp job for the winter he won't want to sell.
    After Looking closer at the size of the accounts and prices I am much lees interested and have pretty much talked myself out of it. Instead I am going to advertise more and earlier and put out more fliers and just keep trying. If I end up needing help I'll cross that bridge then.

    I want ot thank every one for their input. That's what is great about this site. many different views, opinions stories , and experiences.

    thanks again.

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