Final Stages of Negotiation! Need Advice!

Discussion in 'Lawn Mowing' started by sheppard, Jun 2, 2001.

  1. sheppard

    sheppard LawnSite Senior Member
    Posts: 542

    I'm trying to form a good counter offer to a man wanting to sell me his lawn business. Question: how do I determine the value of the account list to make a good counter offer on it? There are 65 accounts (10% commercial), monthly revenue is approx. $5,500.00. He is asking $18,000.00 for the accounts and $27,000.00 for a slew of equipment. I'm concerned here about the value of the accounts. Is his price realistic? All have contracts but most are outdated- going by relationship with the owner. I've been working the accounts for 6 weeks so I know most of the peculiar aspects of the accounts. There is a 30 day cancellation (by either party) in the contract. Also, is it realistic for me to ask him to finance the account list and assume some of the risk for 6-12 months? There must be some loyaty from the customers to the owner. Some may bolt if they get wind he is selling.

    Thoughts?

    Cordially,
    Sheppard
     
  2. smburgess

    smburgess LawnSite Senior Member
    Posts: 469

    If you have been working the accounts, why don't you just ask the clients what their intentions may be? One thing to point out as you are talking to them is that you have been working the accounts for the last six weeks+. I've bought a couple smaller companies over the last few years and the clients never had value, because of the reason you stated. The money we talked and dealt on was for the equipment only. And to your thought about financing, it is too hard to try to say "If I lose X amount of clients before a year, I'll only owe X amount of dollars to you." If you lose clients, it was your fault not his because he left. I would see a battle about it if it happened.

    One way to help with the transition is that you are "merging" the companies together, I did that with the company I bought last fall. It went over really well. Sidebar; Without all the details, it averaged $10K per month and I paid $16000 cash, and didn't lose one customer because I kept his crew on to cut. He rarely went out into the field, so to the client nothing really changed except I offered more services and the mailed their payment to a different address. I thought it was a steal! The equipment was worth way more than that, I just caught the guy at the right time.
     
  3. kris

    kris LawnSite Bronze Member
    from nowhere
    Posts: 1,579

    Don't do it!!! 18,000 for the accounts...he is out of his mind...don't go a cent over 10% of contract value and even then I would look long and hard at it...once had a guy wanted to sell me his contracts...after long look, I found out he was happy making $15hr gross... very risky buying contracts...let me know what you decide
     
  4. 65 accounts at only $5.5k a month is $84.61 avg per month per account.

    Little white trash trailer park accounts have no value.

    Run away from the deal as fast as you can.
     
  5. Eric ELM

    Eric ELM Husband, Father, Friend, Angel
    Posts: 4,831

    I would think if you spent just $8,000 in advertising, you would have more work than you could handle. $18,000 seems way to high for this. I spent about $8 for flyers when I started out, so this is the biggest reason the $18,000 for those lawns seems way to high to me. I realize you don't have to run all over bidding, but with flyers, you can target one area. Bringing in $5,500 for that many accounts seems low to be paying $18,000 for them. You would be working for 6 months just to pay that off by the time you take out for expenses.
     
  6. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Posts: 7,547

    Sounds like a ok deal to me, i have known people that bought or sold accounts for 3months value, that wound be 17.5, but you can probably get them for a bit cheaper. P.S. Before you call someones accounts "Little white trailer trash" and say they have no value, drive down from the mountain and take a look at the size of lawns in FL.
     
  7. David Gretzmier

    David Gretzmier LawnSite Gold Member
    Posts: 3,645

    It seems as though when we talk of buying we all want to buy the other folks out for equipment only, and then for wholesale. compare this desire and feeling it is a good deal to when you put the shoe on the other foot- someday you will want to sell YOUR business and guess what- you better not want more than the wholesale cost of your equipment or you better have a HUGE business, maybe 800-900k, because you set a precedent in years past of paying little or nothing for accounts. It kills me that these accounts are so cheap to buy, but it scares me into a reality that I am only building equity in my business in property only. Dave g
     
  8. BRIMOW525

    BRIMOW525 LawnSite Member
    Posts: 215

    It really makes no difference what everyone else thinks, but what you think is a good deal. BUT.... get a lawyer to draw up a no compete contract....basicly saying that if you take over these customers and his equipment .. he can no longer do business in this field PERIOD. Make a heavy fine is he is caught working or trying to take back customers ...on and on....cover yourself from all angles.
     
  9. kris

    kris LawnSite Bronze Member
    from nowhere
    Posts: 1,579

    David..

    I believe that is the nature of the maintenance business..why the heck would I pay anyone that much when there is no way you will know if you will be doing those property's in a years time.. hopefully you are building your business , making a decent living and perhaps have something to pass on to your kids if there interested... like I said in my post...PERHAPS 10% ... so many things to consider... if there are so many guys interested I could go out and lowball a bunch of sites and then sell them.
     
  10. linky

    linky LawnSite Member
    Posts: 151

    Last spring i purchased customers and equipment for 20k. It was a not so great choice. The accounts looked good on paper but their was too much driving time.At the end of the year i figured that i worked for pennies. I did not lose any accounts and all customers were pleased with my work. It did get my name out and i picked up good accounts from that. If i did it over again i would go to other guys in the biz and ask them if they had any customers that they were planning to get rid of. I would give them my card and say if you get too busy to handle any customers i will pay you for a refferal. I get lots of work that way and its always been free. With his asking price i would be concerned about not getting a paycheck.
     

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