Purchasing customers soon

Discussion in 'Pesticide & Herbicide Application' started by The Turfinator, Oct 15, 2006.

  1. The Turfinator

    The Turfinator LawnSite Member
    Posts: 93

    A local Lawn service approached me looking to sell off 140 customers in a location I am looking to expand. The asking price is one year of revenue minus anyone who cancels during the first application. Has anyone ever made a business purchase like this and have any sound advice on ways to make a smooth transaction. Also I was wondering what percentage may cancel just due to a change in companies? The company said they will send out a pre pay letter along with a letter stating the change of companies. Any advise is very appreciated.
    Thank you
  2. J Hisch

    J Hisch LawnSite Senior Member
    Posts: 952

    I dont know that I would change the name right away. Keep the same name buy the phone number and just run it for the time being. Then as time goes on you could merge the name into your business. If that is not an option then announce you are mergeing with your company. A far as price is concerned pay what your willing to pay and what they are willing to settle for. Dollar for dollar on 140 account I dont know if I would go that high, unless revenues were well above the average. Also I would be conceredn with why they are selling?
  3. RigglePLC

    RigglePLC LawnSite Fanatic
    Posts: 12,233

    Good advice Hirsch. Sounds like a fair deal to me. Have new customers send payments to a Post Office box. (Yours).Anounce the merger middle of the next season--when fewer customers are inclined to cancel. In the merger letter emphasize the advantages to the customer of the new arrangement. I suggest add some kind of freebie or increase in the guarantee to help retain customers. Make sure they are completely confident you will treat them fair and at least as well as previous company.
    How are you going to finance the deal? Need a loan? Will the seller accept monthly payments? What interest rate?
  4. It's my opinion that one years revenue is the upper limit of what the sale price could be. I would pay that price only if the account is a high value customer with a good pay history and with good service conditions. Basically if I am going to pay the ideal price, I want the ideal customer. I suggest that you evaluate every single lawn and make sure that the customer is paying a realistic price according to your pricing system. If an account is underbid then you must adjust the sale price to reflect the quality of the account. J Hisch's question about why they are selling is very important, you need the answer to this question. One last thing if you smell bull$hit then keep asking questions, keep digging. It is better to make no deal then a bad deal.

    DUSTYCEDAR LawnSite Fanatic
    from PA
    Posts: 5,137

    i would bet they r not the best lawns or they r problem customers beware
  6. n-green

    n-green LawnSite Senior Member
    Posts: 362

    Hey Turfinator, I had a similar deal a couple of years ago and everything worked out fine. The guy was willing to finance me and I figured instant cash flow. However, I wish I had borrowed the same amount and invested in direct advertising instead. I would have netted 3 times the amount of customers. In my area 140 chemical customers would sell for 40-50 Gs. Thats alot of marketing! Good Luck!
  7. sclawndr

    sclawndr LawnSite Senior Member
    Posts: 326

    Dollar for dollar is way too much. 50-80 cents on the dollar for base business (weed/feed only) is more reasonable. Extras, such as aeration, lime, etc. shouldn't be included - that's how you recover the cost of the sale. Things to find out - who are the customers, is the program and pricing fair and standard, are all the customers in good standing, etc.
  8. stumper1620

    stumper1620 LawnSite Bronze Member
    Posts: 1,889

    I don't know about Ohio, But around here that wouldn't work without getting the business name in the deal and changing it all at the state level, so you could license the bus with the MDA, My current License name cannot be used for a different name company, and you must disclose to the customer who really is doing the apps. If we sub. the customer has to be fully aware of who is doing the work, a lot of lawn mower guys really don't like that because they want the illusion that their company is doing everything.
    Also, the company name, phone # and base city or DOT # must be on the truck.
    oh, And I think the price is too high.
  9. J Hisch

    J Hisch LawnSite Senior Member
    Posts: 952

    getting the name means nothing unless you add it to your exisiting corporation and list is as a DBA. I operate under 2 different front names but under one corporation. The coporation holds the business license etc.
  10. pesticide

    pesticide LawnSite Member
    Posts: 51

    smells fishy to me. buy the equipment and chemical inventory and get him to toss in the customer list. you cant buy customer loyalty. ive been offered customer bases for sale and have always refused, half of them end up calling me anyway. money better spent on marketing like the other post said or invest it in expanding your own abilities.

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