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Buying a local lawn business out

Discussion in 'Business Operations' started by chris brauch, Jan 27, 2014.

  1. PenningsLandscaping

    PenningsLandscaping LawnSite Bronze Member
    Messages: 1,853

    People try and sell their accounts for huge money all the time. 6k for 27 mowing customers and a handful of fertilizer? Dude is bananas. Offer him less than half that. 50 front, 50 after 6 months.
  2. JDGlandscape

    JDGlandscape LawnSite Senior Member
    Messages: 512

    honestly, i think it is a good deal. i mean people on here alllll the time pay a few grand in advertisement for a 1% return. in that case a 6000 grand investment is aboubt 600 dollars. so honestly most people on this site(not this thread) always say that it is stupid to buy accounts, but they are happy to pay for advertisements that dont return crap, and i think they dont think it all the way through. even if you only retain half of the customers, you are doing better than the average advertising campaign. really, for the return you could possibly make, 6k is not a whole lot.

    Do you think you can take the considerable time and 6 thousand dollars in an advertisment campain and get more than the 30 customers?

    with all that being said i would offer 4700-5k and be happy to get it for that
    Posted via Mobile Device
  3. JDGlandscape

    JDGlandscape LawnSite Senior Member
    Messages: 512

    i will say it depends on the average price of the lawn for the year... you need to see if it is worth the gamble and how long it will take to make a profit. i bought almost the same amount of accounts quite a while ago for much more than you are looking at and while i admit i paid way too much, i dont regret it at all. i made back way more than i paid. i mean hel if just one place has you do a landscape job you can cover the amount you paid. and i like overpaying a little bit to get a more secure chance in buying accounts than paying for cetain advertisments that may yeild zero results.

    another thing to think of, when customers hear that their current company is being bought out, they would much much rather give you a chance than try and find someone else and have to go through that whole ordeal
    Posted via Mobile Device
    Last edited: Jan 28, 2014
  4. umbaugh1

    umbaugh1 LawnSite Member
    from GA
    Messages: 1

    In past experiences you never pay someone for clients/accounts. If any equipment is in the mix figure out what the value is of the equipment. Is there a spray rig etc. Im in the middle of a merger myself. Ive been in the business for nine years and this is my second buyout or "merger".

    Here is my advice. Find out how your seller of the business came up with the price he is asking. Secondly make him a counter offer. Treat this transaction as if you were buying a house. Last, agree to give him 30% of the profit for a period of 6 months. This will be your "trial period" During this time you will tell the customers that you will be merging. After six months give him the remaining balance. This helps ensure that you don't loose all of the customers. People don't like change. Even if he has these customers on contract they can end the contract once ownership has changed. Here is a quick example

    Business Nets $5,000 per month
    Business expenses $2000 per month
    Business Profit $3000 per month

    This is just an example here so remember that. This will make you pay $900 for six months totaling $5400.00

    After the six months you will cut him a check for the remaining balance. Kind of like renting with an option (on a house) The monthly payments come off the amount you agreed upon. You must also be able to call the seller at any point during the six months to ask any questions you may have. Hope this helps. If you do end up buying the accounts this would be the only way to do it
  5. jc1

    jc1 LawnSite Silver Member
    Messages: 2,061

    "Yeah I compared my return on investments with my current marketing campaign versus buying these guys accounts and I'm paying $14/customer versus paying $224/customer buying from him. Hmmm....which one should I choose??"

    If you are marketing and your cost is really $14 dollars per customer acquired there are a thousand guys on here that will hire you for your marketing ability. I would love to gain 27 accounts in one day for less then $400.

    Doesn't sound right.
  6. CNYScapes

    CNYScapes LawnSite Senior Member
    Messages: 916

    I understand these deals you guys want to do where you hold some of the payment until so many months down the road to make sure you keep the customers. This is safe for the buyer.

    Look at it from the sellers side. He has no idea if you are capable of maintaining the accounts. What if you dont keep the customers happy and they leave shortly after because of your service? The seller is $#it out of luck and the customers are now gone and you dont want to pay for them.

    I have bought out 3 companies over the last 10 yrs and always paid in full up front. I usually keep all the customers for at least that first year and then maybe lose a couple the following year but generally keep 95% of them.

    Lets get real. Its not hard to keep most maintenance customers happy. As long as you show up every week, cut the grass, dont miss any trimming, blow off the drive, they will keep you. I think alot of people overthink buying accounts and worry too much about losing them. If you can maintain your current customers and keep them happy then you will most likely do the same with the bought customers.

    I would never enter in to a deal where a buyer paid me based on HIS performance on the customers properties.
  7. unkownfl

    unkownfl LawnSite Gold Member
    Messages: 3,837

    I'm not saying it's a bad deal. I just don't know how anyone could fathom purchasing a business without having numbers or a seller even price their business for that matter. If he's collecting $3030 a month in mowing yet working more than 90 hours per month there is no profit that I can see. I'm not saying that it doesn't take him 40 hours per month. I just figured 1 hour solo per yard at 22 yards per week as he stated some are bi-weekly comes out to 22 yards@1hr*4.3 weeks per month= 94.6 hours per month. Which is right @ 32 dollars per hour. You don't need to do his lawns for a week. Just go look at them and see if it will take you more or less than an hour a piece.

    The question is are they going to take an hour average to mow?
    If so is it worth 32 dollars an hour @ 1 hour per yard?
    Can you make any money mowing @ 32 per hour gross?
    Don't forget I only averaged 22 lawns per week if it more you're going to be even more in the hole. If it's less you might make some money....
    We have small lots here at 60ftx100ft lots with 2000 sqft home foot print subtract the beds, driveways, and side walks its about 3-4k in turf. Solo it takes me about 30-40 mins to complete a yard without drive time, prep time, billing, chasing money, and everything else involved.

    Now figuring your 1% that isn't 1% for every dollar spent its 1% per 1000 fliers delivered usually. If I charge $800 per year for mowing per customer it figured out to be in the OP favor to get his own clients even at that rate.
    Last edited: Jan 28, 2014
  8. jc1

    jc1 LawnSite Silver Member
    Messages: 2,061

    Really the seller can agree to whatever he wants to agree to.
    Often the price they want Is too high.
    People are not receptive to being sold in some cases and therefore cancel.
    By splitting the payments in half it helps protect you in the event he changes his mind when he misses the monthly income. I have seen guys back in business with in months soliciting your newly purchased accounts.
    When I have bought out another guy I wasn't concerned with the value he received for his business.
    I was concerned with the value I received for my purchase.
  9. CNYScapes

    CNYScapes LawnSite Senior Member
    Messages: 916

    Yes, as the buyer you want a guarantee of accounts. As a seller, he wants a guarantee of his money. Need to find that middle ground I guess.
  10. CNYScapes

    CNYScapes LawnSite Senior Member
    Messages: 916

    Ya I want that marketing secret too. New customers for $14 each? I will take 1000 !

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