Buying a Client List and Rights to Company Name

[samsig03]

Long time member of the forum and I have a question that I know only this forum can help me answer or at least reach a decision.

I have an acquaintance/ semi business partner that I would like to use his company's name and likeness and use his contact list to start a business. He has a 4 year old company that is well known in our area that specializes in a residential service. He has over 1,700 clients and I would like to tap into that list and start branching the company off into other residential service sectors. Without going into a lot of detail, he personally does not want to expand residentially, but commercially. So he is not looking to expand his service offerings. I want to pitch him the idea that I would use the brand name, likeness and client list and uphold the same level of service for exchange for...... fill in the blank. What should I offer? What is standard? A percentage of the business revenue? If so how much if he is literally doing none of the work, it is almost like a licensing deal, so 3 -5% or more like 10%? Is it more like a monthly or quarterly fee or a one time upfront payment? Or could it be any of the choosing above?

I really appreciate the feedback. The reason I am going this whole route of business growth is because I think it really breaks a lot of the barrier to entry with a residential startup company. He has a rock solid 1,700 happy clients in mostly upper middle class in a densely populated area. He brand name is getting stronger and the company has a stellar reputation.

Thanks

 

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[Johnny boy]

What's the service and what are the revenue/profit numbers, and how many crews and the cost of equipment?

 

[Guest-5ty5s4]

He is likely to be reluctant to give you the brand name rights because if anything goes wrong it will make him look bad.

Why don’t you just offer to buy the customer list? You can use any name.

 

[samsig03]

What's the service and what are the revenue/profit numbers, and how many crews and the cost of equipment?

My acquaintance with the business? I am not looking to buy him out. I want to utilize his client list to start it and offer compensation for doing so. I am not sure why his numbers are relevant. Not as a smug reply, I am really trying to see your angle.

He residential service business is not pest control, window cleaning, maid service or pool service. All of which I want to eventually branch out to.

 

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[samsig03]

He is likely to be reluctant to give you the brand name rights because if anything goes wrong it will make him look bad.

Why don’t you just offer to buy the customer list? You can use any name.

Great question. I could do this but I am a marketing major and know how strong it is when there is already positive brand recognition in place. Cold calling is so much more difficult then warm calling. Clients know that his work is top notch and has been for years. They would be a much easier sell to add on service or switch.

 

[samsig03]

He is likely to be reluctant to give you the brand name rights because if anything goes wrong it will make him look bad.

Why don’t you just offer to buy the customer list? You can use any name.

Yes his reluctancy is what I am trying to combat by making it worth his wild but leave enough revenue for growth for my business.

 

[Johnny boy]

My acquaintance with the business? I am not looking to buy him out. I want to utilize his client list to start it and offer compensation for doing so. I am not sure why his numbers are relevant. Not as a smug reply, I am really trying to see your angle.

He residential service business is not pest control, window cleaning, maid service or pool service. All of which I want to eventually branch out to.

Because won't you be doing the exact same thing as him?

But it matters because these things are variables that affect what's a fair price for a customer list.

You'd be buying him out but without the equipment, what do you think "buying out" a service company means? It's equipment and a customer list. If they offer "employees" that's not actually worth anything. You'd even be using his brand. You're "de-facto" buying him out.

If the business makes a grand of recurring revenue per customer, those customers are worth a lot. If the margins are really tight, it's risky and the customer value is lower. I have bought customers for my home services industry so I know what many people argue is fair for customer value for my set of variables, but unless you give some details it's a super wide range.

 

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[samsig03]

Yes his reluctancy is what I am trying to combat by making it worth his wild but leave enough revenue for growth for my business.

Also, not sure if it matters but I want to use his logo scheme, theme and use a variation of his company name. For example instead of “AWESOME LAWN SERVICES” it would be “AWESOME MAID SERVICE”, “AWESOME POOL SERVICE” and so on. Changed the actually name but you get the drift. Same font, theme, color and scheme.

 

[Johnny boy]

Here's what he can do. He can agree with you on a price. He can send out a mass email that says "we are rebranding" and change the name. This is only for the customers he is selling to you. Then that's your new company name. It's got the same brand equity as before, but he can continue his brand name without risk as he does different services. The customers you get could still theoretically tell their neighbors about what happened, but I think you'll be fine.

example:

current company: ricky bobbys lawn mowing

"we rebranded! we are now "elvis'lawn mowing"

Then you, "Elvis' lawn mowing", have your own company, tax id number, etc. but since they swapped the customers over to you with a "rebrand" email, they won't think you're any different.

As for buying the customers, take how much money that list of customers make him in a year in profit. Like if he has 1700 customers and makes 100k in profit per year from them and 400k in revenue, you could offer him like 50-60k for it, and set up a payment plan so you pay it over a year or two. You'll have cash flow and he makes some money.

But, like I said, there's a lot of variables, so it's better to know some rough numbers to give a fair estimate. And as always, it's only worth what someone's willing to pay for it, and what he'll agree to sell it for. He could want to give it away, or he could be stingy as hell.

edit: also, it pays to compare the deal to how you could get the 1700 customers another way. If you can just run ads and get a customer for $30, then paying a lot of money may not be worth it if you can just run some ads and get the customers yourself. It all matters.

 

[samsig03]

Because won't you be doing the exact same thing as him?

But it matters because these things are variables that affect what's a fair price for a customer list.

You'd be buying him out but without the equipment, what do you think "buying out" a service company means? It's equipment and a customer list. If they offer "employees" that's not actually worth anything. You'd even be using his brand. You're "de-facto" buying him out.

If the business makes a grand of recurring revenue per customer, those customers are worth a lot. If the margins are really tight, it's risky and the customer value is lower. I have bought customers for my home services industry so I know what many people argue is fair for customer value for my set of variables, but unless you give some details it's a super wide range.

So I see your point if that was the case, but I am pursuing a portion of the business that he does not want to pursue. He wants to stay in one lane and just do residential pressure washing and grow residential pressure washing as the company knows as "AWESOME PRESSURE WASHING". his 1,700 clients are recurring clients and I want to expand the services offered as "AWESOME PEST CONTROL", "AWESOME POOL SERVICES" ETC. So I am never stepping into his pressure washing business, just want the client list and right to expand using his brand name and likeness.

Does anyone have experience with starting a business by just buying a client list and cold calling as a completely new company? I have build client lists, cold called and it is a slow grind and I think this way could have much better result. Look around your community, I know several HVAC companies that were just that for year then expanded to ABC Pest Services, ABC Pool Services, ABC Plumbing etc. I want that, he wants to pressure wash residentially and commercially that is all. 1,700 recurring clients for 4 years is a gold mine to me.

 

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[samsig03]

Here's what he can do. He can agree with you on a price. He can send out a mass email that says "we are rebranding" and change the name. This is only for the customers he is selling to you. Then that's your new company name. It's got the same brand equity as before, but he can continue his brand name without risk as he does different services. The customers you get could still theoretically tell their neighbors about what happened, but I think you'll be fine.

example:

current company: ricky bobbys lawn mowing

"we rebranded! we are now "elvis'lawn mowing"

Then you, "Elvis' lawn mowing", have your own company, tax id number, etc. but since they swapped the customers over to you with a "rebrand" email, they won't think you're any different.

As for buying the customers, take how much money that list of customers make him in a year in profit. Like if he has 1700 customers and makes 100k in profit per year from them and 400k in revenue, you could offer him like 50-60k for it, and set up a payment plan so you pay it over a year or two. You'll have cash flow and he makes some money.

But, like I said, there's a lot of variables, so it's better to know some rough numbers to give a fair estimate. And as always, it's only worth what someone's willing to pay for it, and what he'll agree to sell it for. He could want to give it away, or he could be stingy as hell.

edit: also, it pays to compare the deal to how you could get the 1700 customers another way. If you can just run ads and get a customer for $30, then paying a lot of money may not be worth it if you can just run some ads and get the customers yourself. It all matters.

Good stuff here. I do have a pretty solid # of his per customer per year. $150/ customer. $120,000 profit.

 

[Johnny boy]

Sit down over a couple beers and talk to him about this.

If he wants to do it, talk numbers while the iron is hot. But know your shit going into it. You want to do things smoothly. There's a thing called momentum. You gotta keep the energy high and be ready to shake a hand or else you run the risk of "deal fatigue". If you go in and say "wanna sell me your list?" and he says "what's the offer?" and you have to go home and think about it, your odds drop. If you instead say "X for the list, give me 7 days after signing to confirm I'm getting what you're saying, and we'll put it in payment terms over the next 24 months, how's that sound?" you will likely get a handshake and you can send a contract over that night.

You can make your terms in whatever works. People like a solid cash figure upfront. You'll take a risk that way. The best option for you is a percentage of yearly profit if you want to avoid risk. Don't make a ton? It's less money. But you'll have to pay more if you do well.

When doing deals like this, I recommend lowering your risk, because it doesn't hurt you that bad to do so, but if you end up with a horror story, like he screws you over or something happens, there's huge downfalls. Properly analyze your risk and remember that partners and deals and stuff like this goes south often, so be smart.

Personally, I would try this "I'll give you 1/3 of the revenue of these customers for a single year, but only these customers, and not upfront, but paid over time so we have cash flow".

Run the numbers and make sure they don't choke you out, and that both parties are getting what they want, and you're not opening yourself up to the nightmare scenario where you go "here's 100k" and you get an email list of people and half the people don't even respond and you're sitting there with your thumb up your a$$ thinking "damn".

Be ready for a range, and then approach him and say "Would you be open to the idea of selling me your customer list?" "maybe, how much?" "1/3 of a year's revenue, should we talk more about it?" "wow, sounds good yeah" "okay let's grab a beer" and you talk terms, expectations, ect. And then you finalize things the next day.

 

[MitchC]

Also, not sure if it matters but I want to use his logo scheme, theme and use a variation of his company name. For example instead of “AWESOME LAWN SERVICES” it would be “AWESOME MAID SERVICE”, “AWESOME POOL SERVICE” and so on. Changed the actually name but you get the drift. Same font, theme, color and scheme.

I think you should just start your own brand and have him refer you customers for a few dollars where he can. That way it’s your brand and your reputation and you can do whatever you want with it. For example sell it, move into other services or franchise it out yourself.

I also don’t see how there could be all that much overlap between people requiring different services that those customers would be worth more than cold customers that are actually interested in your new service.

Idk man, it makes sense short term to try and piggyback off his brands reputation I get that but I think you need to build your own, it won’t take as long as you think if you’re good.

Full disclaimer I’m not in the services business and @Johnny boy is killing it with one

 

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[CareCPA]

I have to agree with @MitchC - I would start a separate company with a distinct name, but have him do an "intro" of you to the clients. I would personally structure this as an affiliate/referral deal to reduce my risk.

So essentially: "hey friend, I want to provide these services which do not compete with yours. I'll give you $XXX for any client you refer my way that signs on."
He can blast his clients for relatively low effort with potentially large upside to him. Depending on how the business is run, you can give him physical flyers that he can hand to clients after the work is done, and he can mass email them (or use the voicemail dropping service @Johnny boy is always talking about if it follows privacy/spam rules in your area). Give him the email wording and/or script for the voicemail. Make it as easy as possible for him to say yes.

The price to him for each signup has to be enough to make it worth his time, but not so much that it bankrupts you. This is why you need to know your margins like @Johnny boy mentioned.

 

[samsig03]

All around good advice and responses. Really got me thinking of tweaking my approach. I am leaning towards offering to buy his clients list plus offer a referral bonus. I will create a solid first introduction/sign up email for him to send out to his clients with my unique company logo, name and website. Offering a special code for his clients for a discount.

I like this approach because or reasons y'all have stated. My own company, brand and I do not see any major drawbacks. If he is referring his customers to me then that should be a strong intro and potential conversion.

Really appreciate it. I am in the whiteboard phase as you can tell, but I will follow up with some updates along the way.

 

[BizyDad]

@thechosen1 had a great point, but I don't think buying the list solves the issue.

Why should he even sell you his client list? That is still a risk to his brand. He's got a great reputation.

When you buy this list, for it to feel like a "warm list" you'll have to disclose your relationship with his company. Or, if he sends out an email then it's obviously a direct recommendation of your company.

What have you done to earn his recommendation?

And what happens when you piggyback on his reputation, someone signs up with you, and next thing you know, you screw up. His reputation goes down.

You're looking for a shortcut to earn a reputation.

And all you're talking about is money. You see money everywhere. You see the money he's leaving on the table.

Hence you're not really sounding like the type who's going to nurture a relationship.

You're not talking about service. Not really. Sure you mentioned four different lines of business. But have you convinced your friend that you're actually able to provide a top-notch maid service? A top-notch pest control service?

Or are you going to buy his list, and make a bunch of mistakes along the way while you learn each of these businesses?

And if you're actually able to provide a top-notch maid service or pest control service or whatever service, then what do you need his list for? Start your own business the same way everybody starts a business. By finding a client, kicking a$$ for that client, and having that client refer you three people once they're happy.

But if you're really really dead set on making this happen, then clean your buddies house for free for a month. And then start your maid service with him as your first client. Then he will probably be happy to refer you, cuz he knows you did an awesome job. Maybe offer one weekly free standard cleaning service (as opposed to a deep cleaning service which takes longer) for every client he sends you.

Lastly, a problem with you writing the email is you don't know how he talks to his customers. I've seen this kind of thing go sideways before.

You're going to put all this copywriting effort into it, but it's not going to sound like it's coming from him. It's going to sound like it's been written by the guy paid money for the email to get sent. And that also is a reputation risk for him. Keep that in mind as you're crafting that email...

 

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[samsig03]

@thechosen1 had a great point, but I don't think buying the list solves the issue.

Why should he even sell you his client list? That is still a risk to his brand. He's got a great reputation.

When you buy this list, for it to feel like a "warm list" you'll have to disclose your relationship with his company. Or, if he sends out an email then it's obviously a direct recommendation of your company.

What have you done to earn his recommendation?

And what happens when you piggyback on his reputation, someone signs up with you, and next thing you know, you screw up. His reputation goes down.

You're looking for a shortcut to earn a reputation.

And all you're talking about is money. You see money everywhere. You see the money he's leaving on the table.

Hence you're not really sounding like the type who's going to nurture a relationship.

You're not talking about service. Not really. Sure you mentioned four different lines of business. But have you convinced your friend that you're actually able to provide a top-notch maid service? A top-notch pest control service?

Or are you going to buy his list, and make a bunch of mistakes along the way while you learn each of these businesses?

And if you're actually able to provide a top-notch maid service or pest control service or whatever service, then what do you need his list for? Start your own business the same way everybody starts a business. By finding a client, kicking a$$ for that client, and having that client refer you three people once they're happy.

But if you're really really dead set on making this happen, then clean your buddies house for free for a month. And then start your maid service with him as your first client. Then he will probably be happy to refer you, cuz he knows you did an awesome job. Maybe offer one weekly free standard cleaning service (as opposed to a deep cleaning service which takes longer) for every client he sends you.

Lastly, a problem with you writing the email is you don't know how he talks to his customers. I've seen this kind of thing go sideways before.

You're going to put all this copywriting effort into it, but it's not going to sound like it's coming from him. It's going to sound like it's been written by the guy paid money for the email to get sent. And that also is a reputation risk for him. Keep that in mind as you're crafting that email...

100% on all of these areas you have pointed out. To earn his respect and confidence that I won't screw up his reputation, I was going to clean his house a few time, my friends, neighbors and then in ~6 months roll out to his client list. I wanted to take the first step with him and get him to agree to terms. I do not want to go this direction without his consideration of selling or some sort of kick back for his client list. I do not know what type of business you are others are in, but in residential to gain 1,700 clients in 3-4 years is huge and to tap into that is amazing. These are warm to hot leads that could really make my company profitable from the first few months and allow me to start hiring right way with the work load. My friend has been semi "stuck" with really scaling the business. He is working 60 hours a week doing the day to day and trying to remove himself from the day to day. It is the standard story and part in his company's growth that is one of the hardest. I am learning from that and trying to start scaling as soon as possible and I think my plan of having a warm to hot client list of 1,700 will really help with scaling quickly. It will increase cash flow, keep the job schedule full and make the decision to hire easier. Not a full proof plan, but that is why I am writing it out and letting you guys chime in. It really helps. If he disagrees, then I can pivot and will have to go the route of slow growth, but still want to execute. Maybe down the road then him and I can work something out.

As far as copy write of email: I will have the email setup for easy signup to my services and scheduling. I will give him direction on what to say, but he will write in his words. I agree if I write it, it will not sound genuine or like him.

 

[BizyDad]

to gain 1,700 clients in 3-4 years is huge

True.

tap into that is amazing

Possibly true.

having a warm to hot client list of 1,700 will really help with scaling quickly

Is this true?

I mean, do you really have 1700 people that are warm to hot leads? Are you sure these 1700 people even need your service?

If they need your service, don't they have their own provider for whatever it is that you're starting?

You sound like you're pinning your hopes on this one list.

A table with one leg cannot stand, unless it's a big sturdy center leg. And I'm not sure this qualifies.

You need to start planning for what happens if this 1700 list is nowhere near as good as what you think it is.

Get out there and start selling your service. Building that skill is way more important than marketing to a warm list.

 

[fridge]

So I'm a bit confused on this - you're wanting to pitch 4 services to these 1700 clients or one service? Have you done these services or have work experience in them before? Or running a service based business at all? If not, then you likely don't see why this guy is trying to stick to one service. Offering multiple services is a massive headache and is not scalable at all until you master one service, can refine systems for it, and hire on employees for it. Not only that but you'd need insurance for all 4, need to come up with marketing material for all 4, need sales pitches/processes for all 4, do you see where I'm going with this? As someone who tried to offer 5 different services for my part time service business, it didn't work out so hot. Even in pest control you can have enough work to keep you and many crews busy. Why don't you niche down in one area, excel at it, hire on employees, and then grow from there? Or is there something I'm missing? I don't say this to be discouraging, just curious why you're so pressed to offer many services.

 

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