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Guidance Please!!

Discussion in 'Lawn Mowing' started by Lech615, Nov 15, 2001.

  1. Lech615

    Lech615 LawnSite Member
    Posts: 105

    OK, I searched the site and haven't found what I was looking for. Here is my question.

    Last night I was approached by a friend who knew someone who was selling his biz. He is selling because he got a job working for the county. Good gig. Anyway, I need to know if buying accounts is worth it. I mean, how do you tell his clients that he sold them to you. Sounds kind of rediculous. Is there a large amount of clients that will drop me because they don't really knohire me. If I decide to buy the accounts (no price discussed yet), how do I approach these clients? Do I do it now or in the spring?

    Also, what do you think the going rate for 60 accounts should be. His equipment is for sale too, but again not sure how much. Your advice is greatl;y appreciated. As stated in the post "Why some people make it and others don't" I want to be well educated in this before I make a decision. I know I could attract my own clients, but buying accounts sounds very tempting to get me going next year. I am not working in the biz now, I am planning for next season to get started. Again Thanks for the help.

  2. Runner

    Runner LawnSite Fanatic
    Posts: 13,496

    How do you buy his accounts? YOU DON'T! This is a great way to lose your rear end! You pay for all the accounts, you knock on their door, and they say something like, "Oh, well, we have a friend that's going to do it now." or "We were looking at someone else, already." They can rid theirselves of you for whatever reason they wish, and there is nothing you can do. If they know a transistion is in the works, what better time would they have to do some "price shopping." I've seen it happen before. Another thing is, is he will "sell" you the "contracts" (and I use that term loosely) and then he tells his buddy to go knock on their door in a month. Trust me, it is just to easy to round up your own work without having to "purchase) work from someone else.
  3. 65hoss

    65hoss LawnSite Fanatic
    Posts: 6,360

    I agree with Runner. If you buy accounts like that your asking for trouble. Some can and will replace you. They don't know you so they have no loyalty to you.

    On the other hand, here is what I did that worked out very well. I bought some of the equipment from a guy getting out of the biz in March 2000. I paid a fair (not high) amount for the equipment, but in return he gave me the customers. He called them all and told them he was getting out of the biz and that he knew me and my abilities. He recommended me. His prices were good, so no price increase was needed. Most all of them I still have. The others were lost due to moving or death.

    If your interested in his equipment you may want to attack it from that direction. If not, I would say leave it alone. You can find customers.
  4. Fantasy Lawns

    Fantasy Lawns LawnSite Bronze Member
    Posts: 1,913

    I guess we're all never going to retire someday ..... long as buying accounts makes no sense ..... one day when we can no longer do this ..... we'll just close the doors ....

    But it is true ...you can't buy accounts .....your buying the opportunity to perform & present your ability, it must be an open communications between the customer ….the seller ….and the buyer ……

    Sure it’s a risk ….if it’s not a solid investment ….if you have not check it out ….lots of things make the decision more solid …..the over-all appearance of the yards …..the sellers ability to sell himself …(if he comes off weak ….then his accounts are maybe the same) ….what the equipment is & looks like

    Buying accounts takes a certain personal characteristic, self awareness & ability to perform n sell one’s self ….. it’s not for everyone ….n if one has ANY hesitancy …..I say pass …..

    If you have great confidenance in your self …..n have check into the deal beyond just …..”yep they pay this n they pay that” ….feel real good about it …..than it can be a great asset

    Carl I know this maybe very tempting .... for a 1st year full time start out ....I'd be very careful n hesitant to take on more than ready for ….providing the service …..keeping up with the competition …which can always get em if you drop the ball
  5. bruces

    bruces LawnSite Senior Member
    Posts: 648

    If you want to pursue it, make a deal where you pay him for the accounts as you bill them next year. Don't pay cash up front.

    It seems that sale price for accounts discussed here is typically 3 weeks billings.

    I know you can develop your own business eventually, but if you can strike a deal where you pay him as you collect for the work, I don't really see how you can lose.

    Example, buy the accounts for three weeks billings.

    Assume 30 cuts for the year. This means you are paying him 10% of the years revenue (30/3).

    Pay him 10% of the collections from these accounts for the first year.

    If the accounts leave you, you don't pay. You just pay based on the collections from the accounts during the year.

    If the accounts don't stay, he doesn't get paid, you aren't out anything, and he really didn't have much to sell to start with.

    As for the equipment, don't buy it unless it fits what you think you will need.

    If it works you have a great base to start with, if it doesn't, you aren't any worse off.

    I know others say don't buy, but 10% of revenue generated might not be terribly high compared to the advertising & other costs associated with generating 60 new customers from scratch.

    Other consideration, do you have the experience and ability to service 60 accounts if they stay with you since you are just starting?

    Good luck!
  6. dmbhmg

    dmbhmg LawnSite Member
    Posts: 18

    I would have to agree with the rest, buying accounts sounds like a high risk deal.

    Is there any other options?

    Maybe you could buy the whole company, and leave the customer out of it, such as take over another company, and over the years mesh your company and the new one together.

    Maybe for a small fee, say $10.00 per account, you can ask this guy selling these accounts, to give you a reference to do the work as his will no longer be doing it( give him some business cards...). And also other specials to the new customer as you get them, such as first years trimming for free, or fertilizer application.

    Hope this gave you some ideas, I had a guy ask me to buy his accounts once, and I just gave him a stack of cards and said no, but that if he wanted to hand out my card that would be okay.
  7. Kent Lawns

    Kent Lawns LawnSite Senior Member
    from Midwest
    Posts: 870

    I fear many who say you should not buy accounts never had customers of much value.

    Here's how it's handled (in your situation):
    You transition (this is key) - Both you and your friend (business seller) go and meet each customer telling them of his new job and your eagerness to take over.

    You only have to pay for the customers that sign up with you for the season.

    Then you have a whole year to prove yourself or mess up.
    You control the risk based on your performance.

    Seller wins, got money for his business.
    Customer wins, have you to transition into doing their lawn.
    You win, you pick up a lot more work than going it alone.

    The devil is in the details, determining HOW much to pay and that can vary greatly.
  8. Lawn-Scapes

    Lawn-Scapes LawnSite Silver Member
    Posts: 2,810


    If you had 3 years experience and knew the biz (bass-ackwards).. maybe

    With no experience in the field.. my advice would be no.

    Maybe you could look for something smaller with a lesser investment. Try calling other LCOs and asking if they have some accounts they want to part with..
  9. kutnkru

    kutnkru LawnSite Silver Member
    Posts: 2,662

    I recently spoke with my uncle who retired from the biz in 88 and now resides in sunny Florida. I mentioned to him that many guys put their clients and equipment up for sale each season and what his thoughts were.

    He said first you need to see what his clients are worth by his tax statements from the previous 3-5 seasons. Then you must determine what YOU perceive his equipment to be worth. Then you give him an offer based on what you are willing to pay for his equipment and the clients come with it. If hes not going to sell his equipment and let the list go you have just overpayed how many thousands of dollars for his machines.

    Something to think about since we have no guarantee that the clients will stay and have to figure on an immediate 30% drop rate then followed by probably another 40-50% during the next season as they price shop. :rolleyes:

  10. Ric

    Ric LawnSite Fanatic
    Posts: 11,956

    SORRY I HAVE TO DISAGREE WITH EVERYONE accept Tom who added the experience thing.

    To say buying accounts is not worth it is to say your own business is worth nothing. All the good will you have built up over the years is gone with the wind. Corapate America buys accounts all the time. If you are sharp and know what you are doing buying accounts can either increase your business or get you started. Sure you will lose 20-25% of the customers for what ever reason. But you have instant income and a market on which to build. Advertiseing, Lead Chasing, and esimates are both expensive and time consuming. Time that can be spent making money not spending money and chasing leads. If you already have a good base you can pick and choose you customer and the area you want to work. How do we get most of our customer now??? word of mouth or because they see our work, our truck in their nieghborhood. You had ALL better think twice about telling someone not to buy accounts or business. You may be the one selling one day. Yes I have bought accounts and yes I have made money on them. Yes in the next 3 to 5 years I plan to sell my business and I am proud of it. My price will be proud also.

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