How much would you pay for a route?

Discussion in 'Lawn Mowing' started by Mowmoney00, Feb 22, 2005.

  1. Mowmoney00

    Mowmoney00 LawnSite Member
    Posts: 134

    Ok got a question for you guys?

    If someone was to sell you there route and you wanted to buy it off of them what would you pay? This route is already highly concentrated in the areas you are currently servicing.
     
  2. promower

    promower LawnSite Bronze Member
    Posts: 1,232

    Is this guy getting out for sure? If so I would just market the areas the rout is in and see what happens. His customers may be looking for someone new if they know he is selling out. To answer you question I wouldnt pay more then a months gross of what hes getting for the accounts.
     
  3. Mowmoney00

    Mowmoney00 LawnSite Member
    Posts: 134

    Nope this guy is getting out for sure and the route that he has left is one that has been "well worth" his time and effort.
     
  4. TScapes

    TScapes LawnSite Senior Member
    Posts: 453

    I heard that when selling a business, especially in our industry, that the average ranges from 45-60 cents on the dollar. So, if this route is currently paying $5000.00 per month, it should go for about $2250-$3000. Basically, you are giving him half of what his annual income is on his route (based on sales only - no equipment). Not 100% sure on the exact rate, but if you are serious I would definately talk to an accountant before buying.
     
  5. westwind

    westwind LawnSite Senior Member
    Posts: 444

    i just sold about 50 accounts and recieved 2 months billing for each. these accounts are contracted and the average customer has been with me for 4 years. :)
     
  6. MMLawn

    MMLawn LawnSite Gold Member
    Posts: 3,569

    And that is about the going price and then as yours were ONLY if they are under current contract. If they aren't their worth Zero really.

    TScapes somebody mislead you REAL bad at the price of 45-60 cents on the dollar as only a Fool would pay that price. Half the yearly Half to more of the yearly income? No way. The going rate for contracts only is around 10% to a tops of 20% in nearly every case. Which means in the average case a $5K a monther would be worth $500-$1K per month not $3K. Using 2 months revenues is also a wise way to buy and then payable in installments in either event so that you know truly how many clients will stay with you as that is the only ones you want to pay for.

    ALso make sure if you buy that you get a Non Compete signed. About 2 years and 50 miles will hold up in court all day. No matter what someone may tell you more than that and most judges will not uphold it.
     
  7. Precision

    Precision LawnSite Silver Member
    Posts: 2,995

    Are you getting this from audited books, does the guy work a cash business, are you getting a no compete clause written by a lawyer, are you willing to go to court to enforce it.

    make your buy out a payment upon performance. $xxxx.xx for 100% retention at 6 months. and break points for each 5% below that. Pay half up front and set amounts each month forward based on retention.

    So say $5000 is the agreed price for 50 accounts. He gets $2500 on day one and $500 per month going forward. If after 5 months your retain over 95% he gets the last payment. If after 5 months you have lost 25% Then his purchase price is reduced proportionally ($3777).

    If he gets back in the business before 2 YEARS he owes you double the purchase price. In writing, notorized and written up by a lawyer.
     
  8. Mowmoney00

    Mowmoney00 LawnSite Member
    Posts: 134

    This is all just preliminary talk right now. I told him that I would have to talk to my lawyer and accountant before anything is done. He gave me income figures yesterday.....4 man crew / 2 days worth of mowing = 3550.00 per week. It sounds great and all, but yes I am concerned about the retention rate. Its not that we don't do good work, its the fact that the customer feels scandaled and wont stay with us because it not there original service provider.

    We bought 2 other routes last year (at the time I paid for 2 weeks of services - up front). Our retention rate on those new routes are both at 100%. Everyone is more than pleased with our work. Of course this is dealing with alot more money than I can pay up front. Thanks for the info guys.
     
  9. lawnguyland

    lawnguyland LawnSite Bronze Member
    Posts: 1,108

    Why the hell do people always try to devalue our businesses. Like home prices up here (crazy) I've seen LCO businesses go for 50%-70% of year's gross. If I were to sell with equipment I would want 65-75k easily for a business grossing low 100ks. Say what you want, look in the paper here and you will see it's all true.

    In "real" business companies pay multiple, multiple times yearly revenues (gross) to acquire another business. Don't listen to all the nay sayers here. They're all over. Talk to a business broker if you want to sell.
     
  10. ksland

    ksland LawnSite Senior Member
    Posts: 927

    I sold 40 residential lawns priced 30-65 most all weekly mows no contracts for $5k last year.
     

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