Buying accounts at 30% gross profit???

Discussion in 'Business Operations' started by capnsac, Mar 18, 2009.

  1. capnsac

    capnsac LawnSite Senior Member
    Messages: 702

    Hi everyone, just thinking how this sits with you as I am seriously contemplating the current deal. Here's the short and skinny on the deal. A guy is currently trying to get out of the lawn and landscape business (duhh) and wants to sell his current account list of 41 accounts (37 mowing + 20 fert, 3 of which are fert only). The company gross's a good amount and the aquisition cost would be 30% of the gross profit this company pulls in for the year.

    Is 30% a good deal? The gentleman sounds knowledgeable, and has assured me that I should see minimal drop in clientele if I take over. Basically what it boils down to is people don't care who mows their yard as long as it gets done, and done right. Now I have figured this out, since it will be about 2.5 months till I pay this off with profit, on top of the fact that I will incur all expenses to get the accounts done with little to no profit as well makes this deal more like 40% cost on gross.

    I think the reason I am so heavily considering this would be I want the work. I don't have the work yet, and am in need and am willing to spend the money to make sure I have it, so I am not thinking clearly and would like some objective opinions on the matter to help steer me in the right path.

    Sorry for the long post, thanks for reading!
  2. capnsac

    capnsac LawnSite Senior Member
    Messages: 702

    Silence doesn't help me!
  3. capnsac

    capnsac LawnSite Senior Member
    Messages: 702

    bump bump bump
  4. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Messages: 4,891

    There are many ways to value a lawn business that I have written on here before.

    If you are just buying accounts and not buying a self standing company you will pay a percentage of gross sales usually.

    Many times 3 months gross is used. So 30 percent of gross PROFIT for accounts sounds like a good deal to me.

    You are not buying a self standing company.

    For example, when I sold my company it went for a MULTIPLE OF GROSS SALES. So I was and am still being paid my gross yearly sales times x.

    However that was a self sufficient company that I sold. The new owner takes over and thats all that changes.

    For just buying accounts, anything up to about 40% gross sales is reasonable.
  5. capnsac

    capnsac LawnSite Senior Member
    Messages: 702

    That's what I am afraid of, since it will be a new company taking over will the customers be afraid? I guess I will have to call each one and if they have cares and concerns sit down with them and do a little hand-holding to make sure all is well with this decision. Minimizing customer loss will be the biggest obstacle in this equation because the monetary aspect of it is good.
  6. capnsac

    capnsac LawnSite Senior Member
    Messages: 702

    Anyone else, any thoughts, opinions?
  7. AllHardscaping

    AllHardscaping LawnSite Member
    Messages: 77

    When I sold my accoutns it was in the same ballpark that you are talking about. I was happy with it and so was the buyer. that was about 5 years ago and they are still making money on it. If they are good, profitable accounts I would consider it. It isnt very often you run across people in your area wanting to sell. If I could redo it I wouldn't have sold...
  8. ford550

    ford550 LawnSite Member
    from PA
    Messages: 221

    I am also in the process of possibly acquiring another lawn service. I am interested to see some more responses as I have never done this either (bought out someone else). I would be buying equipment and accounts. The equipment is easy to figure out. It's what is the actual customer worth and will they even stay with you once you do pay for them.

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