buying accounts?

[michscape]

Does anyone out there have any advice on buying "accounts"?
I have the opportunity to "buy" 18 accounts. the guy wants out, and I can use some more. Long story short he wanted me to take 3 and was ready to just stop cutting the rest. they are all residential $17-20 per home. a little low on the price but not to bad. No signed contract either. anyway I told him I will take them all and Maybe "float him a couple bucks". 3 days later He came up with a figure of $1200.00. My bad for offering money but I was thinking of maybe one weeks billing on these propertys. what is the norm for buying "accounts". Oh yeah, I already have the address's.
Any input is apreciated.
Thanks, Chad G.

[tulsa lawn guy]

$17-20 per house?

I hope that's a typo!

[michscape]

not a typo

This is the close to the going rate for the homes in this area. once it stops raining (please) I will be in and out in 20 min. this guy does not do good work so i figure i can bite the bullet for a little while and up the prices once they see my work. I wish we could get more around here but someone will always come in lower. I see more and more every day, guys out in the afternoon with a trailer hooked up to there wifes minivan cutting lawns.

[backsmackwristcrack]

yesh thats a little low but then again how fast can it be done the add on potential is always a treat. down here its buy and sell central. though the local scam is to sell you the contracts then set a different company name and try to get as many of the contrats back as you can! lol seriously it happens. Id be more interested in his equipment list. take what you need sell the rest.

[michscape]

What are you guys getting?

[MortNuke]

I've never boughts accounts, but here are my thoughts.

Paying him $1200 for 18 under-priced accounts that are not under contract doesn't seem to make good business sense.

Now, I'm not saying to just cut the poor guy out of the picture...but perhaps a lower figure ($300?) to get an introduction to each homeowner with a strong recommendation - might be reasonable. They need to be priced properly right from the start ($25 - 35 each).

It takes a lot of marketing dollars to get 18 accounts...my guess is that you may net 8 - 12 good customers...so this could be a good deal if you properly service them.

Mort

[Phil Nilsson]

The $17 to $20 is thin ... how much travel time between accounts? ... if they were all in a row it would help IF at 20 mins each the hourly return while not the best ... I don't think will be a total loss.

[scooter978]

I'm close to signing a deal for 55 accounts that gross $55,000 that includes $10,000 in cash. He wants $20,000 for his account base (some contracts but not many) and $20,000 for euipment. Euipment is like new and in good shape

[Phil Nilsson]

If I were pricing that 55 accounts and they were "profitable" ... I'd price them at no more than $16,500 (30%) .... but ... test those accounts first ... question is how many total labor hours for the entire season will it take to complete that $55,000 worth of work?

Examples:
total hours 1375 = $40 return per hour
total hours 2000 = $28 return per hour

See what I'm getting at? ... the more the hours the lower the return hence the LOWER price you should pay.

Also important is ... how long has he had the accounts? ... the longer the better which is one indication they are profitable otherwise he may have dropped them long ago.

[scooter978]

I do not have the total man hours, But the business has been established for nine (9) years. It is a man and wife team and no one else. They work approx. Eight months out of the year. If the normal week cosist of 55 hours x 2 = 110/man hrs/week x 32 weeks = 3520 man hours. Does this sound like some realistic numbers?

[Phil Nilsson]

Ask them for a breakdown of hours for the year ...

Spring cleanup
Mowing
Edging
Pruning
Fall Cleanup
Flowers install
Mulch Install

Whatever they do to bill that $55,000

P.S. Just FYI ... it's very typical for (one) maint person to produce around $50,000 in billings a season ... rough but it gives you some idea. They probably are not mowing 32 cuts in PA unless irrigated or mowing when they don't need to.

[scooter978]

Not to question your expertise, but how did you arrive at the 30% number? This could help with the negotation on this business. What about pricing (blue book for autos) to see the current market value on used equipment.

[Phil Nilsson]

I use that 30% as a "high side number" ( for grounds maintenance companies) mainly because ever since I started to broker deals back in 1989 (sell green industry businesses on behalf of sellers) I could never get any buyers to pay more than 30% of gross sales for one year. Then when I do a valuation using the excess earnings method and use a mutilple factor X profit I came out to close to 30% as well ... so that's where the 30% comes from. Other green industry biz types sell for more than 30% because they happen to be more profitable than general grounds maint ... hence fetch a higher % rate based on sales. Anyway 20% to 30% seems to be a market value price but that doesn't mean you can't get more.

[MGO]

MortNuke........right on.

"$17-$20 per lawn"......that is probably why he wants out of the business

Take Mortnuke's Advice.