Purchasing Accounts

Discussion in 'Pesticide & Herbicide Application' started by Cooter, Feb 28, 2009.

  1. Cooter

    Cooter LawnSite Senior Member
    from NE Iowa
    Messages: 510

    A guy has approached me wanting to sell his chemical business. All the business is in a neighboring town 15 miles away. All accounts have been with this person for at least 7, years some even more. He is currently doing 2 applications on 95% of 160 customers. There would be a potential to sell more applications. The reason for only 2 rounds is the applicator had a full time job and that was all he was wanting to do. He has told me a figure for the business which includes basically the customer base. I would like to hear your opinions on what the accounts would be worth. Thank you in advance.
  2. Think Green

    Think Green LawnSite Silver Member
    Messages: 2,746

    Have you sat down and looked at his yearly figures? What is he making annually gross and net. Has he contacted these customers and inquired them of his selling this side of his business to you? If he has, have you taken the time to meet and sell yourself to his customers aside from his word? Maybe he is selling these 2 application customers because they aren't producers to his business or they are not prompt payers. Yes, there is always room for add-ons to a potential customer, but they are only getting 2 applications a year for a reason.!!!!
    I don't want you to make this decision based on my distrust, but around here there are always other LCO's are selling their customers for whatever reason. You can sell a business with its equipment, but the only thing you can't sell is trust.!! The customer has to know who you are and earn this trust.............can't put a dollar amount on it!?!
  3. Cooter

    Cooter LawnSite Senior Member
    from NE Iowa
    Messages: 510

    I have looked at his figures. If we go through with this we will meet with clients and or inform them through letters. All this person does is the application side of things due to him acquiring a full time job approx 4 years ago. Up until that point it was a full time venture. He did other surrounding towns and mowed also. His wife was after him to slow down and he got the full time job and downsized to applications only in his town. I am also worried about the retention rate.
  4. RigglePLC

    RigglePLC LawnSite Fanatic
    Messages: 13,457

    Service businesses often sell for 3 to 4 times annual earnings. Try annual sales, minus product, minus labor, multiply the result times 4. Decide whether or not the cost of the extra distance, in time and gas is worth it.

    160 customers, with two aps would make his annual sales about $16000. You might want to offer the customers an incentive to accept your new company. Some kind of freebie.
  5. Ric

    Ric LawnSite Fanatic
    Messages: 11,969


    You are not purchasing accounts so much as you are purchasing opportunity. Up sells and new neighborhoods where word of mouth can increase your bottom line is what to look for. The price to value ratio is your decision. We can not make up your mind, but I can tell you purchasing accounts has worked well for me in the past. Big Boys like TG/CL purchase accounts as SOP. They call it buying income.

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