What's a Client List Worth?

B W E · Apr 1, 2012

hypothetically......

You are closing down your contracting business, and would like to sell off your client list.

In 2011, you had $80,000 in gross sales. What would you expect to get for your client list only, or, what would you realistically be willing to pay for it, in cash, up front?

katoman · Apr 1, 2012

This is an interesting question. As I'm looking to retire soon and also have a client list. My problem is I don't know anyone qualified to take over my clients.

If I did refer them, there's no guarantee the clients would hire that person. That makes the list worthless.

I myself, would not buy a client list. But I'm interested in others' responses. Maybe I could sell mine.

B W E · Apr 1, 2012

katoman said:
This is an interesting question. As I'm looking to retire soon and also have a client list. My problem is I don't know anyone qualified to take over my clients.

If I did refer them, there's no guarantee the clients would hire that person. That makes the list worthless.

I myself, would not buy a client list. But I'm interested in others' responses. Maybe I could sell mine.

If you were to ask for a cash amount for the list, based on your yearly earnings, what do you think you'd ask for?

B W E · Apr 1, 2012

katoman said:
This is an interesting question. As I'm looking to retire soon and also have a client list. My problem is I don't know anyone qualified to take over my clients.

If I did refer them, there's no guarantee the clients would hire that person. That makes the list worthless.

I myself, would not buy a client list. But I'm interested in others' responses. Maybe I could sell mine.

And here's a part two:
Let's say you find a guy who you feel is qualified. He does the exact same the of work, in the same area. If he was to offer you 20% of all gross income resulting from your list, for 2-3 years, no cash up front, would you take it?

katoman · Apr 1, 2012

B W E said:
And here's a part two:
Let's say you find a guy who you feel is qualified. He does the exact same the of work, in the same area. If he was to offer you 20% of all gross income resulting from your list, for 2-3 years, no cash up front, would you take it?

No. I don't like that deal. I would take say 10% of last years gross. Cash, up front.

That way there's no chasing the guy for money. How are you going to know how much work he did for your past clients?

B W E · Apr 1, 2012

katoman said:
No. I don't like that deal. I would take say 10% of last years gross. Cash, up front.

That way there's no chasing the guy for money. How are you going to know how much work he did for your past clients?

So you would expect a guarantee, but allow him no guarantee? How is he to know your list is of viable clients, or that his investment will pay off?

katoman · Apr 1, 2012

The proof is that these clients already spent x dollars with me. No one else. They will only hire me. They are MY clients.

So, if he doesn't F it up, they will then spend their money with him. My referral would be good enough for my clients.

I've mentioned this to my clients and they all say that I'm not allowed to retire. :laughing:

There are no solid guarantees with anything. He pays for the list and takes it from there.

Or don't buy it then, I don't care. That would be my attitude. You're the one with the list. You're in the drivers seat.

B W E · Apr 1, 2012

katoman said:
The proof is that these clients already spent x dollars with me. No one else. They will only hire me. They are MY clients.

So, if he doesn't F it up, they will then spend their money with him. My referral would be good enough for my clients.

I've mentioned this to my clients and they all say that I'm not allowed to retire. :laughing:

There are no solid guarantees with anything. He pays for the list and takes it from there.

Or don't buy it then, I don't care. That would be my attitude. You're the one with the list. You're in the drivers seat.

So if the payout at the end of the 2-3 years was to greatly exceed the lump sum you asked for, you'd still turn it down?

mbobbish734 · Apr 1, 2012

B W E said:
So you would expect a guarantee, but allow him no guarantee? How is he to know your list is of viable clients, or that his investment will pay off?

Just like any business decision there is no guarantee. It's up to you to decide if selling it or buying it is a good business decision for you.

katoman · Apr 1, 2012

B W E said:
So if the payout at the end of the 2-3 years was to greatly exceed the lump sum you asked for, you'd still turn it down?

Too much risk that way. A bird in the hand is worth 2 in the bush.

Don't let someone talk you into that deal.

B W E · Apr 1, 2012

katoman said:
Too much risk that way. A bird in the hand is worth 2 in the bush.

Don't let someone talk you into that deal.

But isn't the guy paying out several thousand dollars for what could be a made up list also assuming a ton of risk? why should he? I am the one going out of business and up against a wall.... moving out of the state in two months. Im looking at getting zero, or taking his deal.

katoman · Apr 1, 2012

If it's a choice between zero and that deal, then of course make the deal. But have a lawyer write up the deal.

Just curious, what percent of gross sales will you get?

BamBamm5144 · Apr 1, 2012

I don't think a client list that only generated 80k in gross sales over a year period would be worth very much...

B W E · Apr 1, 2012

katoman said:
If it's a choice between zero and that deal, then of course make the deal. But have a lawyer write up the deal.

Just curious, what percent of gross sales will you get?

20% of direct sales, 10% of indirect referrals, 5% of direct referrals

for example:

Joe Blow is on my list, and he does a job for Joe Blow, I get 20%.

Jane Doe is on my list, he does not do a job for her, but she gives his name to Mike Jones. I would get 10% of what he does for Mike Jones.

He does a job for Jane Doe, and she gives his name to Billy Bob. I get 5% of what he does for Billy Bob.

B W E · Apr 1, 2012

BamBamm5144 said:
I don't think a client list that only generated 80k in gross sales over a year period would be worth very much...

I'd like to get $15,000 for it. $5000 up front, then a required $833 / month for 12 months, regardless of whether or not he gets any work from it.

He wants to give me 20% of gross, with a $1200 cap each month, for 30 months, or $22,500.00, whichever occurs first, but no cash up front. He says I am the brand, and I have the relationships, which all disappears when I move.

katoman · Apr 1, 2012

So you had $80,000 in sales. Let's say he sells half that amount to existing customers, or through them. (which I doubt, because they've already had their work done).

That's $40,000. Now, taking the average of 10% that means you'll get $4,000 over two years. Less your legal costs.

Not worth it. I'd tell the guy give me $4,000 and the list is yours.

BamBamm5144 · Apr 1, 2012

Isn't the value of a company determined by their average gross sales over the previous three years multiplied by 3?

Tscarborough · Apr 1, 2012

It is worth what any idiot willing to pay you for it agrees to. Here is a phone book, I will let you have it cheap.....

B W E · Apr 1, 2012

katoman said:
So you had $80,000 in sales. Let's say he sells half that amount to existing customers, or through them. (which I doubt, because they've already had their work done).

That's $40,000. Now, taking the average of 10% that means you'll get $4,000 over two years. Less your legal costs.

Not worth it. I'd tell the guy give me $4,000 and the list is yours.

what legal costs? i make a spread sheet of all the clients, email it to him, and wish him luck.

B W E · Apr 1, 2012

BamBamm5144 said:
Isn't the value of a company determined by their average gross sales over the previous three years multiplied by 3?

i would say not even close. Considering I would end up with $240,000 by that math, who is going to give me $240,000? Are you offering?

What's a Client List Worth?

B W E

katoman

B W E

B W E

katoman

B W E

katoman

B W E

mbobbish734

katoman

B W E

katoman

BamBamm5144

B W E

B W E

katoman

BamBamm5144

Tscarborough

B W E

B W E

Top Contributors this Month

Recommended Communities