Conctract Customers - Buying or Selling

[The Cleaning Doctor]

Lately I have noticed a lot of questions about purchasing customers from another lawn care business and one question keeps coming up in every thread. How many of the customers will stay with you? I have been thinking on this a lot lately and have come up with a possible solution. In most contracts you will find a clause (no not Santa) in there that gives them the right to sell your contract to another service provider. Mortgages are the biggest example of this. Car notes are another. What if you were to put a clause in your contract that gives you the right to sell that contract for service to another company? Would this give you more value if you should decide to resell? Can you knock down the value if there is no clause in there and you are the potential buyer? Without that clause the customers do not have to stick with you because the contract was between them and the former service provider not you. You might also want a clause in there that will allow you to subcontract if the need should arise. Maybe your equipment broke and the job has to get done so you call a competitor and pay them to cut? It could be any number of reasons. I would like to hear some other thoughts on this as I am curious.

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Pat

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[Simpkins]

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Originally Posted by The Cleaning Doctor Lately I have noticed a lot of questions about purchasing customers from another lawn care business and one question keeps coming up in every thread. I have been thinking on this a lot lately and have come up with a possible solution. In most contracts you will find a clause (no not Santa) in there that gives them the right to sell your contract to another service provider. Mortgages are the biggest example of this. Car notes are another. What if you were to put a clause in your contract that gives you the right to sell that contract for service to another company? Would this give you more value if you should decide to resell? Can you knock down the value if there is no clause in there and you are the potential buyer? Without that clause the customers do not have to stick with you because the contract was between them and the former service provider not you. You might also want a clause in there that will allow you to subcontract if the need should arise. Maybe your equipment broke and the job has to get done so you call a competitor and pay them to cut? It could be any number of reasons. I would like to hear some other thoughts on this as I am curious. I think this sounds like a great idea, personally! As far as knocking down the value if this clause doesn't exist, I'd say your hands are a little tied here. For example, if I were selling you customers and you beat me down to half what I was asking based on this fact, if a customer decided to go with another provider there is nothing you could do about it. I think if you are purchasing customers and this clause doesn't exist, you can either choose to beat the price down because of it or take another route like was pointed out in some other threads (ie if a customer doesn't stay for xxx then you aren't paying for that customer). It would be a gamble going with the first option as you've already agreed to pay xx for him but if you can play on this and REALLY beat the price down, it could potentially be well worth it. I would definitely start putting this clause in my contracts though. Just my two cents. I'm interested to hear what others think too!

[The Cleaning Doctor]

Originally Posted by Simpkins

I think this sounds like a great idea, personally! As far as knocking down the value if this clause doesn't exist, I'd say your hands are a little tied here. For example, if I were selling you customers and you beat me down to half what I was asking based on this fact, if a customer decided to go with another provider there is nothing you could do about it.

You take a chance either way. How are you going to get your money back on that customer if they leave? do you thing the former owner will pay it? Some might but some will not. I personally would take the risk on a smaller investment.

Originally Posted by Simpkins

I would definitely start putting this clause in my contracts though.

I currently have a subcontract clause in mine because there are times that I do not have the time to do the writing and although I dabble in design, I am not great at it so I sub that work out.

That is just an example of how I do things. You might even consider sub contracting some pressure washing if you do not have the equipment. Better to make 10-20% than 0.

[Steve]

The thing I wonder is this.

The service one lawn care business owner may provide to a customer can vary immensely compared to another.

So say if the original lawn care business owner really had a great hands on approach and the customers loved him.

He then sells to another company that is much larger and is only in it to mow, blow, and go.

To me, it seems that if the customer does not get that same level of care, they are going to look for another provider. How could a contract really help in such situations? I guess you could take customers to court that wanted to leave, but still? Would that be good for business?

What's your take on that?