Lawn Care Business Forum Lawn Care Business Book Lawn Care Business Blog Lawn Care Software
Home Forum Contract & Flyer Templates Blog Software Videos Podcast Calculators / Estimators Store Mower Review Design It Yourself Lawn Business School

Go Back   GopherHaul Landscaping & Lawn Care Business Marketing Forum > Lawn Care, Landscaping, and Property Management Forums > General Talk

General Talk If it doesn't fit anywhere else, post it here.

Buying an existing business


General Talk

If it doesn't fit anywhere else, post it here.
Reply
 
Thread Tools Search this Thread
  #1  
Old 08-26-2007, 11:45 PM
Clean Lawn Clean Lawn is offline
Members
 
Join Date: Jul 2007
Posts: 124
Rep Power: 8
Clean Lawn
Default

Hey Team Gopher. I know there was a post recently regarding someone wanting to buy lawn care routes/ accounts and I remember reading it and it came to mind when I was approached regarding the purchase of a lawn care business. I am due to speak with a gentleman within the next couple of days regarding the purchase of this 7+year old lawn care business that he wants to sell. Now I don't have all the ins and outs of the business yet but I can post the little I do know and see if you all can think of anything else I might want to ask regarding the business before the discussion of purchasing it comes up and thoughts on how I should offer a price to him (if he doesn't have a price in mind or if a negotiation comes up).
7 year old business, 75+ accounts, 2 new trucks, trailers, 52" toro, z-machine, etc.. yearly work, incorporated...$75K + yearly
Questions I thought of were how many accounts are residential and commercial? How many are new accounts? I was curious on the residential accounts how many were more than just weekly/bimonthly/monthly mow services? Meaning how many of them purchased additional services from them. I wanted a more detailed list of the trucks and equipment. Would the owner of the company be willing to say on for at least 30 days to make this a smooth transition for the customers and would he be willing to send a newsletter to all of his customers letting them know about the sale of his business and who the new company is that would be taking over the company, meeting with the new customers for signing of new contracts between the previous lawn care provider and myself.
Some of the questions came to mind due to the post I read regarding a similiar purchase consideration. But something like this would take a 2 1/2 month business that is only part time right now to a full time status
Is there anything that you all might think of that might be important that I am forgetting?

Thanks
Rhonda
CleanLawn
Reply With Quote

Stop guess-timating. Learn how to estimate and make money! $$$
Mow Time Estimator Lawn Care Price Estimator Mulch and Topsoil Calculator Snow Plow Estimate Calculator


  #2  
Old 08-27-2007, 10:02 AM
Steve's Avatar
Steve Steve is online now
Administrator
 
Join Date: May 2003
Posts: 36,171
Rep Power: 10
Steve has disabled reputation
Default

Lawn care business tipsLawn Care Business Book
Hi Rhonda,

Did you get a chance to see this article? Does it offer you more ideas on what to ask?

Quote:
Originally Posted by [b
Quote[/b] ]Suggestions on buying lawn care customer accounts.

When you are trying to get your lawn care business to grow, there are many ways to gain new customers. A very simple yet often over looked method is to simply buy them from another lawn care operator. These ideas came from our free e-book Be A Lawn Care Business Rebel.

Instead of trying all these different tactics to gain new customers, what if you simply bought them from another company? Eric of Lepping Lawn & Landscape asked "Is there a basic valuation when buying an existing mowing business from another company? The company is reasonably large and would like to get out of the residential lawn business."

Joel Larusic of http://www.mowboy.com and author of Start and Run A Landscaping Business said "This is a very good question . . . one that comes up a lot. It is touched on in pages 63-64 of my book but I can give you the short answer here.

As a very general rule I would say that a residential customer is worth about the value of one month's revenue. However, it may be more or less depending on a several factors:

1 ) Where you live? In my area, residential customers are not all that hard to come by so it is not likely to go much higher than 1 month's revenue. If you live in a ‘tighter' area, be prepared to spend a little more.

2 ) Is there a signed contract? How long is the contract for ( 1 year, 2 years ). This will affect the price too.

3 ) How much do the customers spend in extras each year. If they spend a lot in extra work consistently then expect to pay a little more for them.

4 ) Are the customers new? In other words, what is the existing customer loyalty like. If they are new to the seller, they are likely to drop you after you buy them. If they have been around for a while they will likely trust the decision of the seller to have you take over.

In any case do your due diligence in researching the customers. Find out the answers to the above questions and ask for job costing information on each of the customers so you can see what the actual profit of the job is. Also ask for a complete accounting record for each customer ( do they pay on time? ). Work with the seller to come up with a suitable transfer period. At the least, have them write a letter of explanation/introduction. Ideally though, they would personally introduce you and perhaps even work side-by-side with your for a few weeks to ease the transition for the customer."

Bruce from Scott Maintenance Company asked "I am currently operating a business in which I am buying from another company who is getting out of the business. The selling price is the value of 1 year on a 2 year service contract in which I perform the service and the seller gets the money for that year. In return I get the balance of his customer list. The business gross per year is approx. $50,000 CDN. I am guessing that I am paying him about $9,000 for the 1 contract which is approx 1- large and 4 small properties. This deal is verbal only. I want to write up some form of "transfer" or "non-compete" agreement. If you have any comments I would appreciate them."

Joel LaRusic responded by saying "buying customers is a great way to build your business but there are some important things to consider.

I would use caution proceeding with your deal. Currently your seller is holding all the cards. I am assuming that, for the first year, you are doing the work and he is getting the money? ( as opposed to you getting the cheques and then paying him ). So he is in control of the money. As well, he has indicated only verbally that he will hand over all of his $50,000 in contracts at the end of the year. Short answer then is that you are smart to demand both a signed agreement regarding the conditions of the sale and a non-competition agreement. Consider these other points too.

- General rule of thumb for buying customers is that they are worth about 1 month revenue. If they are commercial you'll pay a little more and if there is a signed multi-year agreement in place ( which you said there is ) then this will push the price up too. So it could be worth as much as 2 or 3 months revenue depending on the situation.

- What about the other $40,000 worth of contracts? Are they commercial or residential? Are they long term customers or brand new ( the longer that the selling company has served the customer the more likely that the customer will trust that he or she is being treated fairly ** and will accept you as the new contractor ). The $9,000 you mentioned seems a little steep but it really boils down to the value of the other customers on his list.

- Ask to see his books ** you have the right to examine them. Ask him to provide job costing information so that you can see if the customers are profitable. Ask for a complete account history of all his customers. Ask to see them now, not at the end of the year. If he does not want to produce them, be prepared to call off the deal.

- I am leery about going a full year doing the work for him. Working together for a couple of months makes good sense and helps make the transaction smooth for the customer . . . but a year? If possible offer to reduce this time even if you have to pay some cash. A year is a long time and if things get awkward half way through, you will likely end up with the short end of the stick.

- Having said that put everything in writing whatever you decide to do. Record customer names, addresses, revenue and costs. Make sure the selling company agrees to help you with a smooth transaction ( ie by writing letters explaining the situation and assuring customers that quality will not drop ) and document this in the signed agreement too. As well, as you mentioned, put that the selling company cannot compete against you ( at least for the customers on the list ) for 2 years or so.

There is a lot to consider and a lot to lose here so caution and prudence is key. If you have any doubt, talk to a lawyer and/or an accountant to help you with the deal."

Build the business of your dreams. Remember to Dream It, Build It, Gopher It.
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
  #3  
Old 08-27-2007, 04:22 PM
Clean Lawn Clean Lawn is offline
Members
 
Join Date: Jul 2007
Posts: 124
Rep Power: 8
Clean Lawn
Default

Yes, that was the article that I read regarding it and I found a lot of very helpful information in it.
Reply With Quote
  #4  
Old 08-28-2007, 09:03 AM
Steve's Avatar
Steve Steve is online now
Administrator
 
Join Date: May 2003
Posts: 36,171
Rep Power: 10
Steve has disabled reputation
Default

Keep us posted on how everything goes with this process and if you have any insight to share with others to avoid pitfalls and find success with purchasing accounts.
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
  #5  
Old 08-28-2007, 09:43 AM
Clean Lawn Clean Lawn is offline
Members
 
Join Date: Jul 2007
Posts: 124
Rep Power: 8
Clean Lawn
Default

Right now I am going to let some time go by. The man who is selling the business is looking at the sale like he was selling a restaurant or a piece of real estate and the big difference is that selling a lawn care business and selling a commercial restaurant don't value the same.
Lawn care by the post would be 2-3 months tops of the value of the contracts (and from what I have seen and read that is being generous), the equipment, trailers and trucks.
A restaurant your buying the equipment, the name, the recipes, the clients, the whole business. I'll see if I can find a better way to explain it this afternoon for those who have never owned another business other than a lawn care business.
Reply With Quote
  #6  
Old 08-29-2007, 12:07 AM
StartALawnCareBusiness's Avatar
StartALawnCareBusiness StartALawnCareBusiness is offline
Keith
 
Join Date: May 2007
Posts: 731
Rep Power: 0
StartALawnCareBusiness is on a distinguished road
Default

I agree with most of the line of thinking of the Gopher Team.

You have to calculate the net worth of each customer. Valuing an existing business is something I have written quite a bit about.

A customer is only worth the cost (in time and money) it would take you to get that customer, or a similar customer, and integrate him into your regular schedule.

Here's an example: If you place a $200, one month, advertisement in the newspaper and you expect that ad to gain you 10 new customers over the course of the month, the advertising cost is $20/new customers. There are other expenses too. You might only get 1 new customer for every 2 estimates you give which takes considerable time answering phones and driving (gas costs) to the customer's house to give estimates and explain your work and get a contract signed. You can easily spend 2 hours worth of work for every new client added to your roster. What do you value your time when giving estimates. Is $25/hour reasonable? If it is and if you spend an average of two hours getting each new client and the advertising cost is $20/client then the value of each new client to you is $70 plus a premium (finance people call it the "time value of money) for getting your clients now instead of having to wait the course of a month. So, you might find that a new client is worth double the $70 figure....$140 each, as an example.

You also have to look at the time of the year. It's almost September and, believe it or not, it's fairly easy to get new clients right now. There are many reasons for this including the fact that a lot of kids are going back to school and dropping customers. Those customers need a new LCO. Don't pay a huge premium if you can get new clients on the cheap elsewhere.

What is his fee structure? Take a careful look at what he is charging his clients. He will be reluctant to give you his client list but, make him take you to at least 10% of his clients and tell you the nature of the work and what that client pays. If he is doing work at a discount of what you normally charge, those clients are not worth as much to you. Look at his acct. payables. Ask him how many accounts are 60 days past due...90 days past due. This will give you an idea of the quality of clients he has attracted. He is perfectly within his rights to ask you to sign a confidentiality agreement before he gives you any actual data about his business.

Equipment - Though it might be packaged to the point that you have a turn key operation, the equipment is only worth it's individual value. Call dealers, check ebay, look in the classifieds for each piece of equipment. Once again, it's almost September and this is the time of year people begin selling equipment. Calculate the worth of the equipment based on an itemized list and not on a package deal. "Package Deal" often aren't a deal at all especially when dealing in used equipment. Check his maintenance records. Grill him on the operation of the equipment. Did he run the equipment or was it a haphazard employee with a tendency of running the mower low on oil?

These are only a few areas you need to look at in consideration of purchasing a business.

Hmmm...I just read over what I have written, gosh it seems negative. I certainly didn't mean to be totally negative. Buying this business might be a great idea but go into it with these questions in mind.

Oh, one more thing, do you have an accountant? It might be worth $100 to get an accountant to look at this business and give you an idea of a proper valuation.

I hope this helps.

Best Luck:

Keith
www.StartALawnCareBusiness.com
__________________
Start a profitable lawn care business.
Reply With Quote
  #7  
Old 08-29-2007, 12:22 PM
Steve's Avatar
Steve Steve is online now
Administrator
 
Join Date: May 2003
Posts: 36,171
Rep Power: 10
Steve has disabled reputation
Default

Hi Keith,

Great information. I don't think you were negative at all! I think you are able to speak to us from a position of authority on the matter.

I really do appreciate your insight.

When you reflect on your past, what % of your client base have you purchased from other lcos?

Was this an avenue you pursued frequently or was it more hassle than it was worth?
__________________
- Subscribe to my Lawn Care Marketing Blog Feed and get daily tips sent to you. Free!
Download your Free trial of Gopher Lawn Care Software.
Reply With Quote
Reply

Bookmarks

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Forum Jump

» Recent Threads
  RatingTitle, Username, & Date Last Post Replies Views
Need help determining...
Jbss861
07-20-2014 02:33 PM
Yesterday 11:18 PM
by SGL1
8 182
Got my first lawn job...
SGL1
06-11-2014 09:19 PM
Yesterday 11:15 PM
by SGL1
25 1,065
Scag new "Eliminator"......
ExtremeLawncareServices
07-20-2014 10:45 AM
Yesterday 10:11 PM
by ExtremeLawncareServices
7 160
new to me box truck
jrayb39667
03-06-2014 10:20 PM
Yesterday 08:31 PM
by jrayb39667
13 1,265
Lawn Service back in...
LawnCareMan280
07-18-2014 09:00 PM
Yesterday 07:18 PM
by LawnCareMan280
3 146
Should I ?
googus
Yesterday 04:06 PM
Yesterday 04:06 PM
by googus
0 47
Overspray?
stevef1201
07-21-2014 04:20 PM
Yesterday 03:59 PM
by stevef1201
2 64
My First Apartment...
SSLCtn
05-26-2014 10:17 PM
Yesterday 03:37 PM
by jrs.landscaping
12 771
Hello Everyone! Newbie...
SLKlawn
07-17-2014 06:22 PM
Yesterday 01:53 PM
by Steve
6 194
Proper height for lawn
rob lederhilger
05-26-2014 08:01 AM
07-21-2014 02:53 PM
by LawnDoctor
9 596
need professional advice...
Fiddlers_green
07-20-2014 07:21 PM
07-21-2014 02:29 PM
by Steve
1 100
Blade sharpener
Just for Cuts
07-04-2014 12:31 PM
07-21-2014 01:48 PM
by Steve
9 425
What's my business worth?
Chaz
07-16-2014 01:35 PM
07-21-2014 01:45 PM
by Steve
4 205
Single tree, mow customer
WesleySnips
06-27-2014 10:12 AM
07-21-2014 01:04 PM
by Steve
12 488
1.5 Acre Jungle
WesleySnips
07-15-2014 05:57 PM
07-20-2014 11:31 AM
by ExtremeLawncareServices
21 499
Selling lawns like...
eastsidelandcare
07-17-2014 03:51 PM
07-20-2014 08:03 AM
by kslawn
1 140
Crop Rotation Techniques...
eastsidelandcare
07-17-2014 03:47 PM
07-19-2014 05:40 PM
by kslawn
1 104
Gopher schedule software
Ray
07-18-2014 04:13 PM
07-18-2014 04:13 PM
by Ray
0 107
2006 Chevy fuel pump...
KevinsLawns
07-17-2014 08:39 PM
07-18-2014 11:51 AM
by Steve
1 105
Halfway point of year!
Steve
07-01-2014 12:08 PM
07-18-2014 11:38 AM
by Steve
14 643
I got told to leave and...
gwilson98
06-16-2014 02:07 PM
07-17-2014 11:43 AM
by Steve
16 955
These are the days on...
ExtremeLawncareServices
03-22-2014 09:12 AM
07-16-2014 08:38 PM
by ExtremeLawncareServices
73 4,215
Hey guys this is the...
prmenter@gmail.com
07-07-2014 08:23 PM
07-16-2014 08:10 PM
by ExtremeLawncareServices
28 686
Mowing the hills
prmenter@gmail.com
07-08-2014 12:22 PM
07-16-2014 05:00 PM
by Just for Cuts
18 620
Say Hello !!!
Steve
03-19-2007 11:18 AM
07-15-2014 05:38 PM
by icon2000
1,184 318,279
need some help geting...
dalvan0
07-13-2014 09:28 PM
07-15-2014 11:56 AM
by Steve
5 211
new trailer help
mattthelawnguy
07-11-2014 08:21 PM
07-15-2014 11:42 AM
by Steve
9 310
Classified Ad Template...
bcfb
06-05-2013 02:40 AM
07-15-2014 11:16 AM
by Steve
15 3,640
Husqvarna pz 60
CDLAWNCARE
07-06-2014 06:50 PM
07-15-2014 08:53 AM
by kslawn
10 384
Lowballers
Chaz
07-11-2014 03:55 PM
07-14-2014 12:27 PM
by Steve
5 315
My new side job
Sprinkler Buddy
05-10-2014 05:23 AM
07-14-2014 12:15 PM
by Steve
10 777
Illegal spraying
GoGreenerKS
07-04-2014 09:11 AM
07-13-2014 10:36 PM
by GoGreenerKS
10 492
New Mower and Trailer
Chaz
06-25-2014 12:04 PM
07-13-2014 06:25 PM
by SGL1
7 495
What Fertilizer to Use?
acrajchel
04-07-2014 01:56 PM
07-12-2014 07:36 PM
by SGL1
21 1,813
Fuel and fuel additives
SGL1
07-06-2014 10:23 AM
07-11-2014 07:53 PM
by SGL1
15 486
Questions for a patchy...
jumcgee
07-09-2014 08:42 AM
07-11-2014 12:34 PM
by Steve
1 168
toro proline blades wont...
boog
06-25-2014 06:26 PM
07-11-2014 05:28 AM
by kslawn
18 601
Contents of Marketing to...
prmenter@gmail.com
07-09-2014 05:25 PM
07-10-2014 03:23 PM
by Steve
3 253
Shindaiwa
CLB454
05-13-2014 09:04 PM
07-10-2014 03:04 PM
by Steve
14 733
Starting New in FL
mmcuttrim
08-06-2010 09:22 AM
07-10-2014 02:44 PM
by Steve
48 11,179
Bid help 45 on acre...
Priggan
06-26-2014 12:56 PM
07-09-2014 08:38 AM
by kslawn
7 476
need help bidding fence...
veteranslawncaresystems
07-03-2014 10:33 AM
07-08-2014 12:00 PM
by Steve
5 337
Trimmer or Knife?
gwilson98
07-04-2014 09:56 PM
07-07-2014 02:41 PM
by Steve
6 304
Started a New Solar Lawn...
Solar Lawn Care
06-08-2013 01:40 AM
07-07-2014 01:55 PM
by Steve
37 7,359
New Canadian Member
coppervalley
07-04-2014 02:15 PM
07-07-2014 01:12 PM
by Steve
1 200
Happy Independance...
stevef1201
07-04-2014 07:05 AM
07-07-2014 01:01 PM
by Steve
2 203
Echo PE 266 edger
stevef1201
07-01-2014 01:28 PM
07-07-2014 12:47 PM
by Steve
4 286
30 Inch Push Mowers Pros...
Billy Goat
06-27-2013 08:07 PM
07-06-2014 01:50 PM
by SGL1
21 5,169
Poulan Pro trimmers
SGL1
06-30-2014 11:16 PM
07-05-2014 09:32 PM
by SGL1
20 479
Timber!
Clays Landscape
11-28-2011 09:48 PM
07-05-2014 07:31 PM
by jhinton
22 5,712
» Popular Tags
4wd advertisement article marketing auger bid butterfly gardens charge christmas lighting christmas light service courtesy call customers decorating estimate exmark ferris first truck fundraiser gopherhaul grass gravely hills holiday holiday decorating holiday lighting how much to charge introduction john deere quik trac lawn lawn care lawn care business book lawn care business seo lawn care business show lawn care business website lawn care business website seo lawn care website leaf lighting marketing monthly mow mulch mulch price new buisness new mower organize outdoor environments payment podcast property management company pto reo scag schedule scripts seo snow starting a business starting a lawn care business start up lawn care business steve stihl theft toro toro grand stand trailer trimmer rack walker winter winter services zero turn
Powered by vBadvanced CMPS v3.1.0

All times are GMT -5. The time now is 12:28 AM.


(C) 2011 Riggs Publications - Terms of use & Privacy Policy

All times are GMT -5. The time now is 12:28 AM.

(C) 2011 Riggs Publications - Terms of use & Privacy Policy