Paying for an account

E

ezragipson

New member
I'd like to ask a question about paying someone for an account. We have been approached by another detailer who has an account to clean vehicles for a medical equipment company eveyr other week. He can no longer clean the vehicles but he is offering us the account but for a price. Any thoughts on paying for this account?
 
ezragipson said:
I'd like to ask a question about paying someone for an account. We have been approached by another detailer who has an account to clean vehicles for a medical equipment company eveyr other week. He can no longer clean the vehicles but he is offering us the account but for a price. Any thoughts on paying for this account?
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What guarantee do you have that the medical company will use you over them?...Even if they are no longer able to service their vehicles....doesn't mean that they will put this out for a competitive bid.

Next if they will use you I would look at the books to verify the income. Its the only way of understanding the potential of the account....I would be meeting with the decision makers from the medical company and the old detail service to make sure that you are insured the work, before I would even entertain buying the business
 
THanks for the response Beemerboy! We definitely plan to meet with the decision makers at the company. We have seen his books and what we can make on the account. There will be no payment until we have all of our questions answer and are guaranteed the work. My only concern is simplying paying for the account itself. Is that something that businesses do often? It seems to me that if he can't physically handle the account anymore, it is weird to charge someone for it. But I don't know, which is why I am asking.
 
ezragipson said:
THanks for the response Beemerboy! We definitely plan to meet with the decision makers at the company. We have seen his books and what we can make on the account. There will be no payment until we have all of our questions answer and are guaranteed the work. My only concern is simplying paying for the account itself. Is that something that businesses do often? It seems to me that if he can't physically handle the account anymore, it is weird to charge someone for it. But I don't know, which is why I am asking.
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He is trying to make some income from his years of effort and having established a good account...I can't blame him for that but on the flip side a good business person would have the accounts best interest in mind, since he will be unable to accommodate their needs...that means finding a good replacement for them with no financial gain from it. However its like buying any business fixed or mobile you buy the customer list as well, and hopefully do well with it, no guarantee. This is a common practice in business but only ones that are selling to get out and can still service there accounts, not ones that can no longer service the account...So if you refuse to buy in the medical company will be forced to look for a new provider...you any idea who they are???..I'm not suggesting that you circumvent him, but if you can't come to an agreement with the seller...there is a medical company that is looking for your services..that's called free enterprise
 
If you know the company just go talk to them, you may be able to get it for free, especially after the other guy tells the company he can't do it anymore.
 
MrRogue said:
If you know the company just go talk to them, you may be able to get it for free, especially after the other guy tells the company he can't do it anymore.
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As competitive as I am in sales that's a bit cut-throat...that's like standing in front of your local detail shop handing out your cards....I think the way to approach this is work with the seller and if you can't reach a common ground then its up for garbs, as a business person you did the right thing...also who knows he might be talking to more than one shop about this...if he circumvents the seller in the end runs the risk of loosing the business by making himself look bad...Once the seller who has the medical companies trust tells them about his current situation...
 
I'm not sure how common it is in the detailing world, but selling your "book" is quite common in other businesses. Typically, it happens when a business is closing. As I've never been a part of one of these transactions I can't say how they work, but I've always been rather curious how it is guaranteed that the client will actually work with you.
 
Mikeyc said:
I'm not sure how common it is in the detailing world, but selling your "book" is quite common in other businesses. Typically, it happens when a business is closing. As I've never been a part of one of these transactions I can't say how they work, but I've always been rather curious how it is guaranteed that the client will actually work with you.
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The ones that I have been involved in is 3 X that of the monthly income for that account...the guarantee is nil there inst any, its up the the buyer to develop the account and gain the trust....its either a money maker or a lose
 
Thanks Beemerboy! Your wisdom and insight is right in line with what I was thinking and what I have been told by other business people. We plan to sit down with both the seller and the business owner to make sure that the account is guaranteed to us. My concerns are that they business owner may want to go with someone else or put it out for bidding once they find out the current detailer can't do it anymore. In any case we will definitely get all details ironed out before any money is exchanged.
 
ezragipson said:
Thanks Beemerboy! Your wisdom and insight is right in line with what I was thinking and what I have been told by other business people. We plan to sit down with both the seller and the business owner to make sure that the account is guaranteed to us. My concerns are that they business owner may want to go with someone else or put it out for bidding once they find out the current detailer can't do it anymore. In any case we will definitely get all details ironed out before any money is exchanged.
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Your welcome I've been involved in sales and marketing most of my life....The one thing that I would do up front is make sure that what is currently being charged fits your business model....in other words are they making enough profit for your business model...the last thing that you want to do is raise the prices of this guy because the over head of the seller is lower than yours...That will determine if this is a good risk or not...

In talking to the medical company I would look at a performance contract stating that you have X amount of days to preform for them, something like 90 days....this dose two things gives you a comfort level to gain there trust and for them if they don't care for your service they won't feel locked down....it also will tell you if they are thinking about putting this out for competitive bid before you buy in.
 
First thing you will need to see is the accounting records of the account. Next thing is to figure a worth, street value is typucally 5% of annual net.
You will have to meet with the account and see if you meet eye-to-eye. What if you hate the client and the net is lower than what you are used to.
You will also need to get a non-compete drawn up to prevent the company that sold the account to you from going in and doing the work while you are there.

I'd say for the average detailing business, all of this work is out the ball park. The legal work is in the $15,000 range to properly orchestrate an account sale. And who is to say the compnay you are buying will keep you?

Buying an account is way too risky for a "skilled labor" type business. If the guy is looking for $500 or something that won't matter to you if you lose, then roll the dice. If this is a big volume account, you will need to do it properly.

Maybe approach the guy selling the account with a latent finders fee. Meaning, meet with the account as a referral of him and actually do a certain volume of work for a specified period of time, the seller is entitled to some payment if the relationship works out. (10 cars over 30 days nets the seller $1000.00. 20 cars of 60 days nets the seller $2500 and the contract is complete)

I sub contract through many different companies, I always start off with a non-compete.
 
jdoria said:
First thing you will need to see is the accounting records of the account. Next thing is to figure a worth, street value is typucally 5% of annual net.
You will have to meet with the account and see if you meet eye-to-eye. What if you hate the client and the net is lower than what you are used to.
You will also need to get a non-compete drawn up to prevent the company that sold the account to you from going in and doing the work while you are there.

I'd say for the average detailing business, all of this work is out the ball park. The legal work is in the $15,000 range to properly orchestrate an account sale. And who is to say the compnay you are buying will keep you?

Buying an account is way too risky for a "skilled labor" type business. If the guy is looking for $500 or something that won't matter to you if you lose, then roll the dice. If this is a big volume account, you will need to do it properly.

Maybe approach the guy selling the account with a latent finders fee. Meaning, meet with the account as a referral of him and actually do a certain volume of work for a specified period of time, the seller is entitled to some payment if the relationship works out. (10 cars over 30 days nets the seller $1000.00. 20 cars of 60 days nets the seller $2500 and the contract is complete)

I sub contract through many different companies, I always start off with a non-compete.
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According to what was stated in the start of the thread...the seller can no longer perform the service that's the reason for selling the account...a non-compete is not necessary IMO

The rest the you have stated makes good business sense
 
Beemerboy said:
According to what was stated in the start of the thread...the seller can no longer perform the service that's the reason for selling the account...a non-compete is not necessary IMO

The rest the you have stated makes good business sense
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I'd personally still be worried. Not everyone has good intentions. A non-compete for something like that could cost from $1500-$3500. Bail for busting the guy in the teeth for going to the account after you buy it runs about the same.
 
jdoria said:
I'd personally still be worried. Not everyone has good intentions. A non-compete for something like that could cost from $1500-$3500. Bail for busting the guy in the teeth for going to the account after you buy it runs about the same.
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It certainly couldn't hurt to have something in place, just keeps everyone honest
 
Beemerboy said:
As competitive as I am in sales that's a bit cut-throat...that's like standing in front of your local detail shop handing out your cards....I think the way to approach this is work with the seller and if you can't reach a common ground then its up for garbs, as a business person you did the right thing...also who knows he might be talking to more than one shop about this...if he circumvents the seller in the end runs the risk of loosing the business by making himself look bad...Once the seller who has the medical companies trust tells them about his current situation...
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I AGREE! Business has rules just like war. Don't do business buy stealing and under cutting. It is possible that the people have ALREADY asked him to find a replacement and will not go with anyone he has not approved. Then my friend you will have damaged your own reputation. Word of mouth gets things done both positive and negative and the last thing you want is a repetable individual bad mouthing your business practices.
 
Thanks everyone.. This has been Ezra's wife talking to you all. He and I own the business together and I just wanted to make sure we did some additional research on this thing before I agreed to it. I will be on from time to time picking your brains trying to learn as much as I can. We want our business to be excellent and honest and to make good business decisions. I am firm believer that we don't know everything so we should definitely use the wisdom and experience of others when we need to.
 
Is the person selling you an account or a contract?

If it's an "account" then he has nothing to sell, nothing will bind that person or company to continue to due business with you.

If it's a contract find out how long its for and what is expected of you (there are reasons people want to get out of contracts). Also by altering the contract (having you take over), does that make it null and void?

JMHO:
To me it seems odd that someone would "sell" an account because they are too busy, because you never know when business will change, and who will be the next big account. I would sub out my work with a non-compete as jdoria mentioned, but I wouldn't sell it.

I were staying in business, and had to sell an account... it would be one that brings in a low profit margin or proved to be troublesome or both.

My $.02
"J"
 
To my knowledge they are selling an account. I think there is only a verbal contract with the medical company. But I will find out for sure. That has been my concern all along is that I didn't want us paying for something that he couldn't do it anymore anyway. But it seems that this is a business practice that I didn't know about. He can't guarantee the business to us and we don't plan to pay anything unless we have a WRITTEN contract from the medical company to at least recoup his fee and make some money of our own. We also don't plan to pay asking price. I definitely think we need to negotiate something that works for both of us, not just the price we are given.
 
as someone may have mentioned, find out what his packages/services are and how much he is charging and see if the price(s) is in your range. Also see with the medical company if you can get a contract. Do a contract that is the first so many days (ex:90day) to see if both sides are on the same level and if so then have another contract for a year or longer. As you mentioned they are cleaning the vehicle(s) every other week so they should not have a problem with signing a contract if they are pleased with your work.

As for paying for it I would not pay much. For an example if you get 5 vehicles everyother week and you charge $30 for in/out you would make $3900 per year. Minus supplies($3.5 per car each time), overhead($1.50 per car) and taxes you have to give to the gov that you collected and for the taxes you pay on your profit/income(if applicable).(approx. $1000 on the $3900). So you would be around $2250. Using a forumla like that could also help you find out if it is worth to buy it and for how much. If you pay alot for it you may consider going out to local companies and sell them you business instead of paying to get businees. example - local realstate companies or othe fleet vehicle companies

Cheers
Chris
 
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