question about buying accounts

[precisionlawn]

I'm in the process of starting a lawn care business for next season. I have abut everything to get started, but i have one question. Someone had told me that you can buy exisisting accounts from other companies. I've looked all over the internet and have seen nothing like that at all. Im in the chicagoland area and i was wondering if anyone knew anything about it. If this is true, and you can buy accounts from other outfits, how does the pricing for each account work, and how do I find these accounts that are for sale? If anyone can help me out, any info would be appreciated.
Thank you

[Jack]

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I would like to say that I think you have picked the best forum on the internet to get advice. There are some very knowledgable people that are going to give you some good practical advice here. I am fairly new, so others can advise you better on pricing. What I did to help me get some ideas about business is the small business acceptance corporation has various offices and organizations located in their building. The Small Business development center offers a seminar on starting a small business, in our area SCORE had a office in the building, they are the organization of retired executives, and they volunteer their time helping people. I found some nice people that have followed up and have helped me.

[Phil Nilsson]

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A few thoughts ...

1. Test the accounts, take total annual sales (each customer) subtract materials billed within sales then divide the remainder to see what returns per hour are ... to test that you are buying profitable accounts. How long will (each acct) take total hours for the year? sales produced per hour? sales produced per account, by the account to weed out any low balled customers.

2. Even a small transaction needs a sales agreement drawn up by attorney unless it's all cash and sold "as is".

3. Measure and calculate each account on your own as if you were going to bid the work yourself see how these accounts compare to your cost/price profiles.

4. For grounds maint accounts you might be looking at a price to pay from a low of 15% to a high of 30% of the sales for one season. Ask him what he wants first. For chem lawn care from 70% to around 100% of one season's sales.

5. Paying - escrow 50% of pymt with (your) attorney, after being introduced and accepted by the customers during a face to face meeting with "each one" then (no drop offs paid for) release the other 50% after a month or so. See if you can cash flow the pymnts based on your actual received amounts from doing the work. Like 10% of gross receipts in month received until paid off. If you have to give a "note" secured by real estate, get lien released after fully paid. Interest (if any) should be VERY LOW because of current rates. Don't mention interest.

6. The main thing is to know you are buying profitable accounts.

7. Age the accounts ... how many on board for 1 year, 2, 3, 4, 5, and so on. An account on board only one year may not renew to either him or you. Find this out during the drive around.

8. With the escrow mentioned above and given the time of year it is, that 50% should also be tied to the renewal of work for next season, so you aren't paying for work without getting the work. Have (your) attorney release it after everybody signs up or confirms for next year when you know what the net number of customers are that you are starting with.

9. If you want to get a little "fancier" slap all those accounts one by one on a worksheet by customer name, break down the work done across top, (mowing, pruning, mulch etc) place in the labor hours needed for each part of the work and see if the hours "make sense" or if any part of the work is being billed low. In other words, within the customer lineup itself there might be low pay accounts (but) within each customer account there might be some low pay items.

You'll need a realistic assessment of the hours to plan for producing the work if you buy it.

You'll need a 5 year non-compete and a modest sales agreement should run under $500 for that simple sales agreement maybe use just one attorney, split the fee with him on that. Also take a llok at all sales invoices and customer records to make sure that the sales "exist" in the amounts claimed ... if no detailed records, look at bank statements and confirm prices with the (customers) if you have to.

<b>P.S. for buying accounts in general (finding them to buy) put together a mailing list of all landscapers within a 10 or 20 mile radius of you ... send them a short letter say every 90 days (don't stop) mailing to them ... on outside of envelope a label that says ... wanted to buy grounds maintenance accounts ... keep doing this, don't stop, eventually you'll get calls on your mailing.</b>

[Jack]

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I forgot to say in my first post, if you take the small business development centers course, it will get you to thinking about courses and programs like Phil Nilsson offers and how valuable they can be to help you
listen to Phil