Buying accounts from a company

Discussion in 'Pesticide & Herbicide Application' started by greenskeeper44, Jul 23, 2009.

  1. greenskeeper44

    greenskeeper44 LawnSite Senior Member
    Messages: 426

    Was at our local fertilzer and chemical supply store and a competitor of mine that I have become decent friends with has a full service landscape company that does everything. He has decided that he doesnt want to do the turf side anymore because it was getting in the way of installs and maintenance and wants to sell all of his accounts and his f350 with a 400 gallon tank. I might not be interested in the truck but I want the accounts. We sit down early next week to negotiate. What is the pricing structure for what the accounts are worth and whats some things I need to think about going into this since I have never purchased accounts. Thanks for everything.
  2. lilmarvin4064

    lilmarvin4064 LawnSite Senior Member
    Messages: 757

    many others could answer this better than me, but I'll try to help get you get started. What are the customers currently offered?

    How many apps were they getting? What was inluded (fert, lime/sulfur, weed control, insect/disease control? how much revenue was he receiving from each of these accounts per year?

    Those would be my first questions. Then figure out what you think they're worth.

    If your program is better than his, you could charge more, but you'd have to "sell it". Give them the option of keeping the same service or "upgrading" to yours.
  3. Hogjaw

    Hogjaw LawnSite Senior Member
    Messages: 386

    Don't know if there is anything to buy / sell here unless there are binding contracts, etc.

    In our area, clients go with who they like and provide quality service. Our new accounts are acquired by customer referrals.

    When I give up accounts, customer is notified by me and I don't do referrals.

    In my opinion, there is nothing to buy. I would see each customer on an individual basis to obtain their business and will give you the opportunity to discuss existing and additional programs, provided he has informed them of his intentions.
  4. Josh.S

    Josh.S LawnSite Bronze Member
    Messages: 1,085

    I completely disagree with the above post (no offense).

    When buying a business (I have bought 2, both of which did not have customer contracts) in my experience around 80% stay. This I'm sure varys by area.

    One thing to check though is that he is not being a sub for anybody, those "accounts" would not be worth buying because they are not his. This happened to me once.

    There is a huge list of things that you need to check, one of which being prices of course. Also how many steps are each customer on and what is the gross revenue.

    Example; I bought a fert business this spring. The guy's full plan was 4 applications per year, which about 95% of his customers were on. When I sent them the prepay letter in the spring it showed the original 4 applications and I added a winterizer application to all of the 4 step clients. I did not give them any options in the letter I just said that this is what you are scheduled for and if you would like to change your program to call. Only 2 people called (out of well over 100) to go back to the 4 step. By adding 1 round to their program I offset the cost of the lost customers. So even though he only had XX revenue per year with the current program there was potential. If the guy you are buying from has a 6 step program I don't think customers would want to have a 7th.

    Just remember to buy based on revenue + pricing versus customer count.
  5. greenskeeper44

    greenskeeper44 LawnSite Senior Member
    Messages: 426

    Thanks for the replies I think this can be a great oppurtunity to grow with a good client base (I know where his client base and there the same as mine and I know he does a 6 step program like me) and I know hes not a sub for anyone. Im just really lost on how to figure out how much they would be worth. I think we would be able to retain most of them because alot of the customers are in the same area i work and they can see my work and would be comfortable staying with us but who knows. Thanks for the help
  6. Josh.S

    Josh.S LawnSite Bronze Member
    Messages: 1,085

    Spray accounts are normally purchased based on revenue + equipment (if any). 60% of years gross would be a really good deal. 70-85% would be decent. 90% is probably the most I would pay.

    Supposedly TruGreen pays 100% of 1 year gross but they have strict contracts and you lose money for any account that quits if you sell to them. So really they probably pay more like 70-90% of what the business had before selling.
  7. Pythium

    Pythium LawnSite Member
    from OHIO
    Messages: 166

    You could hire a CPA that specializes in this sort of venture.

    OR..You could structure the contract to say..."$xxx.00 dollars now for the list (I would say 30-50% of gross) then X% of the gross revenue received from his customers for a period of X years. That way you don't pay for customers that drop, he gets some income for a period of years (no more than 3-5).
    Good accounting is needed for this as to avoid potential legal issues.

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