I’m considering buying a small window clng. business for the 2nd time and wondering how much to buy it for. The approx. cost per client the 1st time was $25 ea. = I bought 350 clients for $9000.
And when I compared the cost of a lead through my advertising efforts ( Homestars, similar to Angie’s List ) that cost also came out to about $25 lead ( I got 65 leads last year and paid $1700 for the year ). Assuming the average job size ( probably $150 - $200 ) from Homestars is the same as the jobs coming this other business is it a fair way to price out how much to pay to buy this list? He said he got an offer from another company of 20% of any retained business. There are 200 clients. If the other company retains 70% ( to be generous ) the seller would only receive $5600 if average job size is $200.
So I am considering offering $25 X 200 = $5000. If I only retain 100 of them with an average job size of $200 and 30% profit ( 100 X 200 X .3 ) that’s $6000. Then I may consider offering $6000. I’m willing to pay up front to keep these new clients out of the hands of the competition. All of his clients are in my operating area so the synergy is good. Thoughts?
This is a good question. I think it all depends what you plan to do with the customers. Business Systems and automation, and some gratitude could double that business in a year easily. But then you could do the same starting from nothing.
But will you do that?
Ask yourself "self will I knock this out of the park?"
Implementiation is key.
Business is hard and success is only sweet from outside observation.
Do the hard thing.
Forget the cost! what’s your why?
How much did his company gross last year? How does he price jobs? Does he have any really good clients? How long has he had those clients?
I would offer him 1/5-1/4th of his gross last year if it looks profitable. If jobs are low priced or if he’s only been in business for a year or two, probably don’t waste your time
Who’s to say these customers are going to stay with you after you buy them? For that price you can have a stellar website made and seo it for a year and crush it.
i had an opportunity to buy 20k worth of business for 10k and thought it was too high so i pondered. i did not think anyone would go for it but in a couple weeks he told me he met the owner of a very aggressive and successful company here who gave him the money on first meeting.
If you are offering 6k what could you do with 6K to bring in 200 new people to your business ?
I’m with @wws they might not stay with you and or you might be able to even pick some of them up if he sells.
If you are established in the area then you should be able to use the 6k to bring in 200 of your own new customers that you know are staying. I have no problem with people buying but I’m always wondering if the money spent would work spending in-house. Good luck and keep us in the loop.
Another way of looking at it is if hes still in the field then he has personal relationships with these people, when hes not there they may just hit the phone book. If only his techs were in the field then there isnt a personal bond rather one with the company and you would be most likely to keep those clients that you were buying. My opinion
Due your due diligence and get your accountant to look over his books. WC business go for any where between .8 to 2.7 x SDE. If he is a one man shop, clean books and takes home a good income, then it will be more, probably closer to 1.5 SDE.
Are you just buying a list of clients, or are you buying equipment as well? How much are his contracts worth? How much time is remaining?
Is he an LLC, s-corp, SP? Does he have tax liens or anything against the business that may affect you after purchase?
So… someone sold there business that prob made them 10 thousand plus a month
Lol that would of took me all but a minute to think about buying , But on here most will think it’s to much, Lol can’t imagine someone sold you there life’s work for so little
Here it’s yours 10 thousand. Imagine a business t hat makes 10G plus a month An you can make your investment back in one month.
Shouldn’t take much thought process to buy it.
Got a quick question. Those 350 clients for your first buy. What was the retention rate ?
I don’t understand. At that rate why sell just hire an have someone semd you the money every month whrrr ever you are
What ever happens happens. lol it’s more profitable than just selling. When it diissapears An goes under if that’s the way you decide to operate than you will more than double that 10 thousand.
If you decide to mange An make things run smothtly you multiple that 10 thousand many fold
I don’t know is it just me
I paid $5K for 32K in annual sales/approx. 155 customers. Not bad I feel. The clients are all in my stongest neighbourhood too. SDE? Googled it with no luck.
I prefer the term “Gross Revenues”, seems much simpler.
Another factor in the purchase of a contested route which is within your primary area of operations is the gain of market share. You prevented your competitors from getting more market share so that has value too, although that value is hard to quantify.
Another perspective is that you paid $32.26 for each paying customer. This seems reasonable, as long as they are regular customers vs. the “one and done” type or the ones that will move away/go out of business and as long as they are amenable to your price structure. If we assume that 80% of them remain customers (124) then the average cost per customer/lead = $40.33. Since the average revenue from the original 155 customers = $207, then 124 ($207) = $25,668 and you paid 19.48% of SDE/Gross Revenue.
I don’t know anything about your market but if I was operating there I would probably make the same decision you did. Another source of value is that the labor costs of performing and submitting bids and finalizing negotiations has already been done for you.
Edit: I forgot to mention upsells. If you offer additional services that were not available from the previous business you have additional opportunity to increase the value of the acquisition.
So true. I love the fact that I am keeping them out of the hands of my competitors. I want to dominate this area. Plus the fact that more of them will want fall eaves clng. ( a service he didn’t perform as he was a summer business ). And there is value in that he did the legwork/estimates/selling, etc. Know I feel even better. Thank you.
