Buying accounts: what's a fair price?

Discussion in 'Lawn Mowing' started by greensideup, Mar 14, 2005.

  1. greensideup

    greensideup LawnSite Member
    Messages: 63

    A buddy of mine in the lawn business is interested in buying some accounts from me. What is a fair way to value my accounts? I realize this will vary greatly in different areas. Just wondering if there were some guidelines for us to follow. Looking for a fair price for the both of us. I appreciate any input you guys might have. Scott
  2. greensideup

    greensideup LawnSite Member
    Messages: 63

    TTT- anyone?
  3. fazzy815-66

    fazzy815-66 LawnSite Senior Member
    Messages: 303

    Ive always used the price of mowing x 4
  4. fazzy815-66

    fazzy815-66 LawnSite Senior Member
    Messages: 303

    I ve sold mine in the past for 4 x the mowing price
  5. greensideup

    greensideup LawnSite Member
    Messages: 63

    These are mostly full service accounts that pay monthly installments. There is much more to them than just mowing. Anyone else?
  6. lwcmattlifter

    lwcmattlifter LawnSite Senior Member
    from NC
    Messages: 859

    1 months sales for mowing. 10-15% for the fert, mulch, etc.
  7. Eho

    Eho LawnSite Member
    Messages: 205

    I d say sell them for the amount of money you charge each customer per month.
  8. MMLawn

    MMLawn LawnSite Gold Member
    Messages: 3,569

    If you do a Search on here and under Elements of Business you will find this very topic discussed many times with much information. However, if you are like most of the guys selling you will think they are worth more than they based on going rates they actually are. Also under they are under contract that is Transferable and you are going to sign a Non-Compete they are really not worth anything to a true buyer. Good luck.
  9. new2nash

    new2nash LawnSite Member
    Messages: 32

    Just food for thought:

    The 4xs amount is okay to use if you like, but there's no logic behind it whatsoever. Your sale price should really be based on True Net profit- the amount that job can produce after all costs it took to do the job- including labor, supplies, etc. Also, (the thing many forget to calaculate, thus getting a false and highly inflated price) the administration of that job- entering the job's figures into a computer, the time it takes to schedule it, deal with the customer on the phone, etc.

    A job has no value if it's done at a low-ball price. Zip. If someone can't stick that job into a turnkey operation, sit back and pocket the money left after all costs are figured in, a good business person would say it has a value of 0 dollars. Only when a job creates a turn-key profit does it begin to have value. Now that's not to say that you couldn't get some money for it from someone who is ignorant of the facts.

    Most people greatly underestimate the cost/time of acquiring new customers. It's fairly easy to obtain a new customer at a low-ball price, not quite so easy to get a truly profitable job, good paying customer, etc. The higher the profit, the harder it is to obtain a similar customer. Typically business sale prices are based on job net profits x five years plus equipment value.

    If the jobs you're selling can't generate a net profit, at the 4xs mowing price you're ripping the buyer off. If the jobs net 5% or 10% or 30% you are giving them away at the 4x price.

    A $40 job x 4 = $160. If true net profit is 5% = $2 x 30 mowings/year= $60 x 5 years = $300 (and 5% is what most LCO's scrape by on, although many will say they're making 20% and believe it).

    If net profit is 20% then that job value would be $1,200.

    The other big factor is that unless a job is contracted, the customer could die, quit, whatever and the money paid would be for nothing. So non-contracted jobs have less value. :waving:
  10. dvmcmrhp52

    dvmcmrhp52 LawnSite Platinum Member
    from Pa.
    Messages: 4,205


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