buying new existing customer base

Discussion in 'Growing and Managing a Business' started by neilthewolf, Aug 26, 2012.

  1. neilthewolf

    neilthewolf
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    Hi,
    I've worked for a small business for 10 years, its been built from scratch to about 700 customers(lawn treatments). My current boss and owner of the business is retiring and wants to sell it in 2 parts... 350 customers and half of equipment.
    I'm the only full time employee in the company and have been since it started so i have built up a relationship with the customers, 95% of the customer base have only ever dealt with myself and trust me to look after there lawns.

    It all seems a bit of a no-brainer that as long as i can raise the capital i should buy half of the business and start on my own. I suppose I'm just nervous because I've never run a company and just wanted to put it out on here to see what advice i can get.

    I've had tentative discussions about price and even if i didn't increase the customer base and stood still i could easily pay all overheads(including loan to buy the business) double my salary and still make a small profit annually.

    The lawn treatment business in the U.k is flourishing and the profit margins are good....although i wouldn't like to be starting out from scratch with no customers as there are now a few companies providing this service.

    Thanks for listening and any advice or comments would be very welcome.


    Thanks

    Neil
     
  2. ArcSine

    ArcSine
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    • 10 years of experience
    • Been with the company since it started; helped build it from scratch
    • Nearly all of the customers see you as "the business"
    • Only full-timer with the company, so you've been an instrumental part of the "from scratch" build-up and development
    • You've already evaluated the margins, the competition, and the post-buyout cash flow expectations

    Taken together, those factors all bode very favorably indeed. There are no guarantees in business ownership, of course, and stuff can go ugly on factors that come out of the blue like stealth bombers, but your case is like the poster-child for "The Factors Which Ideally Are In Place Before Buying A Business".

    You say you're nervous over not having run a company before, but it sounds like you've been integral in running at least a big portion of it for a decade. Specify in your mind those particular aspects for which you feel you don't have the chops (keeping the books, e.g., or dealing with personnel?), and then you'll be in a better position to get comfortable on how best to fill those gaps.

    One question: Who gets the other half of the business (the 350 customers you don't acquire), and how do you know they won't be trying to poach your customer base?
     
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  3. Fergal

    Fergal
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    Welcome to Business Advice Forum Neil, thanks for joining and posting your business questions. ArcSine has already given you some excellent advice.

    A question I would add is why do you need to buy the business? Could you just set up from scratch on your own and be better than anyone else in your area? You already have the contacts and the know how to run the business. Obviously if the selling price of the business is reasonable it could be a great opportunity for you. However, if the selling price is high, I'm not sure that you really need to buy the existing business. You may well be able to purchase the equipment and start a new business, providing the same service.

    Similar to ArcSine I would have concerns regarding the other 50% of the business and wonder why the current owner is not selling the business as a whole.
     
  4. neilthewolf

    neilthewolf
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    Thanks Fergal and ArcSine for your replies.
    In answer to your questions...I'm pretty sure that if and when i buy the 350 customers there will be some sort of contract/agreement to sign that will state that whoever buys the customers they wont be able to 'poach' them for a certain length of time and that will work both ways.
    As for selling it in 2 parts....at the moment i wouldn't be interested in taking any staff on because as i stated the relationship that I've built with the customers is very important and at certain times of the year when a lot of remedial work is carried out i would only have time to look after that amount of amount of customers on my own and still offer a good service.
    My employer does take on casual staff at these times to cope with 700 customers, I'm sure in the future as i hopefully grow the business i may look to employ some help but certainly in the short term I'd be looking to play it safe and keep my existing customer base happy by being the face they recognize.

    Thanks

    Neil
     

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