expanding business

[landonkade]

I have been in the lawn care business for over 9 months now. I have accomplished to get about 30 customers. Everything is going pretty well as of right now. The advertising i do is almost everything u can think of. But i am looking to buy lawn care routes here in town to expand even more How do i go about doing that....

[Little's]

Lawn care business tips

You would have to find a company willing to sell their routes. Usually they will sell if they are quitting the business. Expect to pay a lot for a route. Usually the routes will go with the rest of the business (equipment, etc.) I have seen lots of lawn care businesses for sale on ebay.

__________________
Northern California

[Steve]

Hi Landonkade,

Here is an article we wrote a while back. Does this help?

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.

Originally Posted by [b

Quote[/b] (landonkade @ Aug. 21 2007,11:13)]I have been in the lawn care business for over 9 months now. I have accomplished to get about 30 customers. Everything is going pretty well as of right now.

The advertising i do is almost everything u can think of. But i am looking to buy lawn care routes here in town to expand even more

How do i go about doing that....

30 accounts in 9 months is great. Why do you want to jump the gun so much so fast?

[landonkade]

Originally Posted by [b

Quote[/b] (tiedeman @ Aug. 22 2007,8:20)]

30 accounts in 9 months is great. *Why do you want to jump the gun so much so fast?

i just want more accounts lol, i do good work, but the customers arent telling any one it seems like, just want more and more

[Clean Lawn]

I know what you mean landonkade. We started 3 months ago and we handed out more fliers (like 500) in different neighborhoods and used craiglist. Craigslist is awesome and we get hits all the time but they don't all work out to contracts or business. It happens. There are two business right now for sale in my area that I have been speaking with one gentleman about, the other I was just approached about and will talk to. But even getting hits from craigslist and having a few yearly contracts, you just get your hands dirty and want more. You want to see your business grow little by little and bloom into something great. Buying accounts or a business is an easy way to expand very quickly and get your name seen more in new areas. That helps a lot too.
I understand how you feel.

[Steve]

Did you happen to ask these other lco's why they were getting out of the business? If so what did they say?

What has been your experience so far when talking with lcos that want to sell their business?

[Clean Lawn]

The first guy said he is also a realtor and is getting his broker license. This basicly for anyone who does not know takes someone from just selling houses like a realtor does to enabling him to run real estate business (or possibly creating his own) and having realtors work under him or for him and he gets paid for it.
My experience for this guy is that he is that he feels he should make more than what he makes for one year of work as the selling price of the business. Having read the article posted on the forums and looking at other lawn care sites and their postings along with what others are selling their business' for. What was in that article is right on the money for what should be paid for a business.
I am going to let him sit on the business a couple more weeks and then make him an offer $25,000-$30,000 for the equipment and the contracts or $50,000-$60,000 equipment, contracts and 2 trucks, and this will depemd on who signs a new contract with CleanLawn and who decides to go elsewhere.
The second business owner I have not talked to yet and I just heard another young man that was running his own smaller lawn service is going away to college. So, I will see what he has and if its worthwhile put some jingle in his pocket for college for him.
I think that buying a business is an easy way to gain numerous contracts at one time and I have had pleasant experiences thus far but I also know that once I have them I still have to show them my business rocks. That they are in great hands and will always be treated like they are number one because without them I am nothing.

[LawncareMarketingMagic]

Buying another business is a great way to expand quickly, you just need to be careful to not overpay. A lot of times sellers over-value that their business is really worth and if you're not careful you can end up getting stuck.

As for how to find people willing to sell their business, it's really just a marketing problem. Here's what I would suggest. Get a list of other LCO's in the area you want to work and send them a letter or postcard. In the letter I'd introduce yourself, list your services, and then mention the fact you're interested in buying lawn care businesses.

If you word it correctly you should be able to build some good relationships and possibly get some new business out of it.

[LawncareMarketingMagic]

One other thing related to this post. Getting new customers can be a challenge, which means you should be as efficient as possible.

Here's my advice to people just starting out. Don't go out and order 5K flyers. Instead, get a list of 1,500-2,500 names MAX within your target area and focus on them. This smaller list is called your 'farm' and just like a real farm, it requires care and attention in order to harvest positive results.

I could go on forever about this subject, so if there's enough interest, perhaps I'll start another thread in order to elaborate more.