What price can I expect to get when selling customer accounts/contracts

Discussion in 'Pesticide & Herbicide Application' started by mikesturf, Nov 15, 2007.

  1. mikesturf

    mikesturf LawnSite Senior Member
    Posts: 795

    I've been fertilizing for 5 years and I have built up my business where I need to "weed" out the lower priced customers and customers outside of my area. I'm raising my prices and want to eliminate the lower priced/lower level customers. I'm looking to sell 60 customers who I charge around $16,000 total per year. I would be selling signed one year contracts-fertilizing and aeration only. I would like to hear from other members who have done this-what type of money should I be looking to get.
     
  2. lawnservice

    lawnservice LawnSite Senior Member
    Posts: 589

    I've been involved in a purchase of another company once, serveral years ago.
    First thing we looked for was how profitable were those customers?

    Now I'm just gonna throw some things at you (mainly because no one else has responded to you) dont get all upset with me.

    Having signed contracts is definately a plus...but if those contracts are not profitable they wont be worth a whole heck of a lot. I mean if you want to ditch them because of low profits, unless you find a buyer who just wants to increase customer count and isnt to concerned with profit (isnt that why we do business...profit?) you might have a real let down on how much some one may be willing to pay for them. You might find someone who is willing to pay you a small fee thinking that they could upsell a weekly mowing service, i dont know, but for a stand alone lawn care customer who isnt generating much profit for you....sorry, I cant see you getting much? Or maybe a newbie starting his own lawn care biz might offer you something...but if they crunch numbers and find out profits will be low...not good.

    Or, maybe I'm just misreading your remarks??, could be. You said 60 accounts that generate $16000. What is the total sq ft? Are these in one town or seperated by towns?
    Anyway, I wish you the best
     
  3. turf hokie

    turf hokie LawnSite Silver Member
    Posts: 2,744

    I bought about 30 accounts my first year in business and only paid 10 cents on the dollar. Probably not what you are looking for. I bought them only to get my truck into those areas.

    I was approached this spring with 100 accounts from an LCO that seems to be in the same situation as you. I offered him the same 10 cents b/c the profit margins werent there and they were not in a tight route. I actually told him that if he did not want them to raise his prices to his current rates and whoever resigned keep and whoever dropped was not a problem.

    Now he lost about 1/2 but makes the same money. Also, now they have some value and would fetch quite a bit more than what I offered. B/c he tightened the route and made them profitable.

    But you need to keep in mind that like the other post said. Only a newbie or someone looking to gain market share would purchase these accounts. Your potential buyers are going to be limited.
     
  4. mikesturf

    mikesturf LawnSite Senior Member
    Posts: 795

    There are 2 companies that I am looking to contact: Spring Green and NatureScape. On NatureScape's website http://www.naturescapelawncare.com/lawnprogram.html they show their 2006 prices: fertilizing for $139 under 5,000 sf + $49 for aeration then 5,000sf to 10,000 sf $199 + $79 aeration. My prices are higher so I would assume that they would be interested; under 5,000 sf with aeration $239-5 apps per year. As far as distance, they are reasonable close together. So if my accounts fit another companies routes and pricing structures, what would be a "normal" value? I also am looking to have an ongoing relationship with this company because I routinely past up over 30 accounts per year.
     
  5. RigglePLC

    RigglePLC LawnSite Fanatic
    Posts: 12,339

    You do not mention weed or crabgrass control. On chemcial lawn care accounts--you might get around 75 to even 100 percent of yearly sales--if there was an aggressive expansionist company like truGreen interested. If there is a smaller company interested, you might have to self-finance the sale. Let any purchaser pay 35 percent a year for three years (and no payments during the winter), plus substantial interest. If he doesn't pay on time though--you can't really repo your customers. Potential purchasers will feel more confident if you can offer some kind of guarantee. Can you guarantee the sqft is accurate, (within 10%)? Customers will be more likely to stay if you offer an incentive--extra free ap or better guarantee with new company.
     
  6. mikesturf

    mikesturf LawnSite Senior Member
    Posts: 795

    Yes my program includes crabgrass and weed control, extra for grub protection. Now just looking for some feedback on what to expect from potential buyers.
     

Share This Page