Buying out another LCO

Discussion in 'Starting a Lawn Care Business' started by lwcmattlifter, Oct 13, 2004.

  1. lwcmattlifter

    lwcmattlifter LawnSite Senior Member
    from NC
    Posts: 859

    A local lco is thinking about getting out of the business. What would be a good price to offer him for just his accounts? They are all residential and he is selling in groups of 30. The prices average about 40-45 per yard per cut. He is asking 1 months salary for the jobs (4800-5400) Is this a fair price? All of his customers would have to sign contracts with me (1 yr min). What about payment? I'm thinking quarterly payments. Anyone got advice?

    Thanks

    Matt
     
  2. eruuska

    eruuska LawnSite Senior Member
    Posts: 454

    I read another thread where someone sold his business for 15% of the annual gross. That sounds right in the same ballpark, give or take.

    Payments, I can see several ways of doing it. What's he asking for?

    Eric
     
  3. Wreak

    Wreak LawnSite Member
    Posts: 90

    If you can keep up with the extra 30 then go for it but offer $$ on the lower end of his range. Just make sure all of the customers know who you are and make sure the money gets sent to you. Some people have automated online check payments and forget to update the "Pay to the order of" section and it's a PITA to have to meet with the old owner each month.

    In early June my buddy bought a lawn business with 35 accounts (all residential) 5x8 trailer, troy-bilt 42" rider, 21" Honda, Echo trimmer, Echo hand held blower, and names of 15 more customers that called in the past couple of days. He was selling it for $6400 but ended up selling it for $4100 due to him already being paid for the next month. So we ended up mowing a month for free. Granted, the mowers werent commercial but we've managed to stay current even with that equipment. We ended up with 50 customers right off the bat with more calling each week. It was pretty tough playing catch up with all of these yards since all yards were practically a month behind. This was back in early June.
     
  4. tonygreek

    tonygreek LawnSite Gold Member
    Posts: 3,475

    i would lower the offer and go with a quarterly offer based upon kept customers. you're buying nothing more than the addresses/leads of people you need to pitch your services to.

    search on the topic and there are quite a few opinions on here of people who have come up with multipliers for this type of business.

    Tony,
    Dayton, Ohio
     
  5. midtnstone

    midtnstone LawnSite Member
    from mid tn
    Posts: 76

    imo i would try to do something like figure up a price for the equipment lets say $1500.00 pay that much down and the equipment becomes yours try to get this number pretty low. then in 30 day or 45 or whatever length of time you pay for the clients that you keep because you may lose some and you may not. if not like tonygreek said you are just buying a name and number nothing to get a return on investment on. just imo
     
  6. lwcmattlifter

    lwcmattlifter LawnSite Senior Member
    from NC
    Posts: 859

    Thanks for the replies. I did more searching and found some good info. I am not going to buy his equipment, just the accounts. I want to make a deal so that his customers sign a contract with me first then I pay him quarterly based on the ones that sign.
     
  7. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

  8. Mower63

    Mower63 LawnSite Member
    Posts: 65

    Like Tonygreek says, it all depends on what you're willing to pay. I just bought an LCO down here (large operation) and paid 75% of the annual gross. However this included about 40K in equipment. I valued the accounts at 35% of annual gross but some of these have been customers over 10 years.

    And...it all depends on what you do once you buy it. I had a plan for marketing and advertising out of the gate. In the first 2 weeks I've been able to land almost $ 4K in landscaping jobs priced w/40% gross margin.

    I'd offer a bit lower, have the owner hold a small note with the account performance tied to the note...meaning if the accounts he sold you drop within...say 90 days...each one reduces the amount you owe him by a relative percentage. That is what I did with my purchase BTW

    Good Luck
     

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