I appreciate the insight. Also I understand what you’re saying as far as comparing customer acquisition cost. I don’t have those calculated in front of me . I guess my broader question was do you place any more value on accounts or a business for that matter based on the time they have been operating for the length of time the customers have been with them.?
No
the longevity of the customer (ten plus years) is based on the personal relationship with THAT guy.
when you have a brand like coke or Pepsi or Panasonic, no one is dealing with the “owner”.
So the brand has value
A company or investor can buy a brand and there’s value in acquiring it.
a good example of something local to you might be the garbage company, a taxi service or the bus company that picks of the kids for school,
You could buy one of those companies and the repeat customers would continue to repeat, because unless you do something wildly different , no one is likely to ever know the company changed hands.
the local lawn guy had built his rep on HIM not the brand .
how ever in our case, very few people know who the owner of the company is, lots of people think it’s me, because I’m the one they see or talk to,
The owner had focused on building his brand.
If someone bought the brand and didn’t change anything , just let it run, no one would really know anything changed.
the company could be sold, lock stock barrel... turnkey.
if you find something like that, odds are it’s probably out of your price range anyway.
truth is, if bob went out of business tomorrow , you stand a decent chance of getting at least some of those customers anyway.
what you’re looking to do is incentivize bob to prevent his current customers from letting their fingers do the walking and go to you.
that’s far more involved than simply buying a list of bobs former customers.
if bob wants to get paid, then bob needs to sell for you.
Since bob already knows these people and had already sold them in the past, this should be easy for bob.
so what you do is give bob a sign on bonus (let’s say $5000) and a commission sales position with your company
Bob gets his sign on bonus based on 100 percent of his client list.
33.3% up front
33.3% mid season
33.3% end season
Any customers not with you any longer are subtracted from the sign on bonus
so for example if $5000 is the bonus and you pay $1667 up front and by mid season only 75% of his customers are still with you the bonus is only worth $3750 of which you’ve already paid Almost half, so his next payment is 1,250
Now by years end his customers base has dwindled to 60%
Then $83 is all he is owed at the end of the year.
now he can also make money through new and existing sales via profit sharing
Every sale attributed to him, he gets 33% of net profit for his returning sales and 25% of any new or up sold work.
so let’s say he had 400 customers they all got fertilizer at $50.00 and the net profit was 20%
that’s $4000 net profit
His profit sharing would be $1,320 on round one.
he doesn’t have to do a lot other than make sure those customers keep returning to you
He can make money year after year, round after round.
Now.. if he wants he can work on selling new things for you and make even more money.
this way it also protects you
If the customer doesn’t make money, you don’t owe any sales commission because it’s profit based and if for example his customers lose he could end up with no money from the transfer of clients at all.
a guy who’s just looking for “blue sky” (meaning you give me money and I walk away) is pretty much dreaming
That situation really isn’t worth the crayon and the paper napkin used to write the deal in the first place.
