Small Business Startup Advice

[green2man0]

I received notice today that the franchise lawn care company I work for is selling/shutting down after this season. I was offered a chance to buy out the company. I've worked with the company for 11 years and helped open and manage this franchise for 6 years. I'm interested in purchasing the company but would like to operate it independently and drop the franchise. The company is very small and grosses a bit over 100k per year with basically myself as a full time technician and occasionally a seasonal employee for about a month. So basically my thoughts are to purchase the customer list and most of the equipment. The franchise fees were 8% annually. My customer base has an average retention rate of 87% averaged over the last 6 years. I also am the main technician and have good relationship with my customers...the company has around 350 active accounts. This is all new(received notice this Wednesday) and just starting to formulate a modified business plan. I know I'll have to setup a new LLC and get my own liability insurance. Setup a new shop/setup a home office and modify or get new account management software (currently using RealGreen which should be adaptable but expensive) and get new paper products (cards, flyers, invoice blanks, po box, ect). Also new marketing campaigns (phone book, website, ect). I'm thinking of setting up a meeting with the college business department, they do free small business consulting. The company has been growing about 15-20% annually but not fast enough to be good enough for a national franchise.

I'd appreciate your thoughts, advice, guidance of helping me get on the right track.

Thank You

[turboguy]

My first suggestion would be to ask the current owner if you can see the franchise agreement. It would be safer to make sure there is nothing in the agreement that would open you up for a lawsuit if you go that route. There is a good chance it won't be a problem but doing due diligence is always a good investment. If there are some hooks in there such as the customer list belonging to the franchise company then have a good attorney look at it and tell you what your options are.

A franchise is good starting in since they have a lot of advertising ability to help draw in new customers but I would agree with you that with the situation of the business being pretty established it probably isn't necessary. I work in your industry and although there are a number of franchises available I would say that 90 percent of the LCO's are independent.

Even with the advertising a franchise operation can bring to the table decent looking vehicles with really good signs and a decent web site will likely bring just as much business.

[ChadR]

It seems you have the right experience over the past 11 years to know what you'd be getting into. Most new businesses owners aren't able to answer the depth of questions you did giving the industry and customer overview. So that's a good start.

15-20% annual growth rate is solid. I'd take a look a potential opportunities to expand.

1) Are you limited by geographic area, or can you go into new neighborhoods without a new franchise?
2) You know the customers pretty well, are they a niche customer market or are there a lot more customers who would buy your service?
3) Are there ways you can improve your operations to take on more customers with the same infrastructure or hours?
4) Are there up-sell services you can add on to your existing services that you aren't offering now. Increase each customer value?
5) What could negatively affect your current business? Which way is the market trending and are there new companies competing?

Definitely read the franchise agreement to know exactly what you're getting into first. Even have a lawyer review it to be sure. If the legal side looks good, I would look for new opportunities to reach more customers (while still keeping your current customers happy) and increase the value of each transaction.