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Selling Your Business: Are Your Customers Worth Squat?

Posted On - 14/10/2016 12:24:22

Join us in this series on building business value and learn how to make your customer base worth having

No business is automatically worth anything. Having one doesn't mean anyone will pay you for it. And unless you've worked to make your business worth a premium it won't sell for anything like what you hope.

For many small businesses their worth lies in their customer base. But just having one isn't enough: it has to be worth buying.

Don't sit back believing everything will be alright. Building value takes time. By the time you want to sell it'll be too late to start. The good news is the moment you do you've a better, more profitable, business. So you'll not just reap benefits way in the future you'll start getting them now.

Join us for the first in a series on building business value: learn how to make your customer base one that's really worth having.

What are your customers worth?

Daft question? Well no. Just because your customers are worth what they pay you in sales that's doesn't mean a buyer will see things the same. This isn't about price negotiation – that's different – this is about the value of your customer base. The things that will urge a buyer to pay more, concern them to pay less, or scare them to pay nothing at all.

So this blog won't discuss how to determine price, though we'll touch on that in "The Best Way to Sell-Up: Don't Use an Accountant". This blog is about the things that drive prices up or down. It's about the things that make a business worth something or nothing at all.

Attractive customers

Not all customers are the same. You know this, buyers know this too. But what they don't know is anything about your customers. And they hate risk. So you must prove who they are and whether they're worth buying. And while your P&L may show a nice turnover that's all it says. Plus it doesn't tell buyers what they really need to know. 

Customer sales and profitability matter – there's no doubt. And while bigger numbers are more valuable it's all history. The buyer isn't buying that they're buying what you were going to do in the coming years. We're not talking forecasts here – that's dealt with in "Looking to Sell Your Business? Then Don't Obsess About its Turnover" – we're talking about trading and making money. We're talking about the means to drum up business. We're talking about marketing and customer communications. We're talking about a customer database.

Your customers aren't worth paying for

Nobody pays for anything they can get free. You wouldn't would you? Now, did you pay for all those word-of-mouth customers you've got? You didn't did you? But someone else had them before you. You took those customers off them. So why would anyone pay for yours when they could pick them up the moment you close? They won't.

This is the harsh reality. It's not your customers aren't worth anything to anyone else - it's there's no reason to pay you for them.

The biggest risk a buyer faces is buying thin air - buying the hope your customers will carry on returning. What they want is the certainty they will. Sure, part of that is all your past sales. But what buyers crave is the knowledge they can make it happen in the future. The start-point is a database of names, addresses, phone numbers and emails. A clear, well-kept list is a must. That's something worth paying for.

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