How do you place a value on customer list

Discussion in 'Starting a Lawn Care Business' started by boomhower1, Jul 10, 2013.

  1. boomhower1

    boomhower1 LawnSite Member
    Posts: 62

    Hey folks. I'm looking at buying a mowing business. I have a value on the equipment and I'm fine with that. But how do you value a customer list? What value would you place on a list of 26? All customers are in the same small town of 12,000. Avg mow is $30. Can be completed in 2 days with one man (which is what my business currently consists of). I know what he is asking for the business. I know what the equipment is worth. Therefore, I know what he values the customers at. But I'm wondering if that figure is fair. Your thoughts are appreciated.
     
  2. WellDone

    WellDone LawnSite Member
    from Texas
    Posts: 13

    Honestly, I wouldn't pay for customers. I just acquired a company and paid only for the assets. I could see a customer list being worth something only if they were under contract. You may wanna offer him 6 mos or a year of a cut/percentage of the profits from the clients that decide to stick around after the change. And make sure you have him sign a legal non compete agreement. Or he is liable to come back around and swipe those customers back out from under you.
     
  3. GOATMAN GEORGE

    GOATMAN GEORGE LawnSite Member
    Posts: 88

    I paid 27% gross for 1 season off.a list.almost that exact size . I had the guy finance it over the season tho to make sure they stuck it out. Worked out great i try And find others all the time. Most think they got the best business & equipment out there.
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  4. boomhower1

    boomhower1 LawnSite Member
    Posts: 62

    He said there are no contracts and most of the customers have been with him 10 years. That tells me they are loyal people. But loyal to him. Will they be loyal to me because I bought his business? I don't know. Also, I have known this man for my entire life. I grew up with his son. He said if I buy it he wants me to be successful. So he said he would write a letter, or visit customers to introduce me. Assure them I will do right by them etc. A kind of character reference. There are no guarantees in this business, there is inherent risk in nearly everything we do, I'm just trying to evaluate that risk.
     
  5. jsslawncare

    jsslawncare LawnSite Bronze Member
    Posts: 1,674

    I'd offer 1 months pay. They are loyal to him because he is cheap and or good.
     
  6. kirkmue

    kirkmue LawnSite Member
    from Ohio
    Posts: 6

    This number can be anywhere. With a list that small I would offer a few months and see what he says. I would not go any higher than 6 months. I bought a small list of clients for a couple months of revenue and about half have switched/cancelled. But, the money I made from them and the ones that have stayed have made it worth it. It was ONLY a list purchase though, no equipment. Imagine half your new customers walking after a month...what number makes sense?

    What is he valuing the list at?
     
  7. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    $30 x 26 is $780 a week.

    Problem I see is to average $30 a week means he has to have a lot of $20 lawns.

    My minimum is $35. I can see why he is selling out. He is not making enough money because his prices are too low.

    If your prices are higher then his. All of his customers are going to drop you like a rock.

    How good is his equipment?

    Sounds as if you will not needs his used equipment. Though if cheap enough they would make good back ups.
     
  8. daniel1132

    daniel1132 LawnSite Member
    Posts: 29

    I bought a customer list this winter for 1 month's worth of revenue. There were about 75 names on the list, 40 or so are regular mowing customers, the rest were spring/fall cleanups, etc. He took the average revenue for the active working season (April-November) and that's what I paid. I paid half down, and then the other half was based on what percentage of the customers actually kept me to do the work. In the end I'd say 95-97% stayed on.

    I promised them that I would keep the prices the same for the first year :hammerhead:. I found out after the fact that his prices were really low (I looked at the lawns in the middle of winter) and many of them are very picky. I've been able to win most of them over, and some of them are great customers. Next year prices are going up, and I hope I lose 10-15 of the worst ones.
     
  9. 32vld

    32vld LawnSite Gold Member
    Posts: 3,984

    How much do your prices differ from the old LCO?

     
  10. daniel1132

    daniel1132 LawnSite Member
    Posts: 29

    If anyone is reading this two months later...

    I shoot for minimum $60/hour to send a 2-man crew to a lawn. I'm shooting for $100/hr for that crew, a rate at which we are currently bidding and getting accounts. He has lawns where his prices are $30 for over an hour's worth of push mowing, and yes, it is customer demanded push-mowing. I'd be charging them $35 to mow it with the 60". Another pushmowing account, takes 30 min to mow, charges $20. A bigger lawn that takes over an hour with the 60" he was charging $42. I mow another lawn down the road that takes the same amount of time and get $75 for it.

    He was a solo LCO, so no workman's comp insurance, no unemployment, no FICA contributions on employees, windshield time costs the price of gas, and at the end of the day you take home all $30 you made for your hour worth of pushmowing. I have 2 full time employees besides myself, it adds up. I had one day this spring that I lost money mowing the accounts.

    Prices are going up next year, and I hope to lost some customers, maybe 5-10%, and pick up more accounts at our price rate.

    To top it off, the cheapes priced lawns are often on the pickiest customers.

    There's a reason the guy got out of the business. I would have too.
     

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