Selling Your Business For The Best Possible Price

When it comes time to finally sell your business, you’ve worked hard for it, you’ve worked hard in it and you would like to see the best possible price for it.

However, most business owners don’t do the work necessary in order to get the maximum possible sale price for their business.

The real value of a business is almost entirely in its list. I mean if you want to sell your business for more than the sum of its parts.

I have a very close friend who built up and sold a business that delivers meals designed to help you lose weight to your door for the week. He sold that up a few years ago and was paid out handsomely. He told me recently that it wasn’t until he delivered his customer data on a USB to the buyer and saw how excited they looked that he realised just how valuable customer data is.

They didn’t care about his ordering software… his high tech delivery routing program… anything to do with his location or how it was fitted out. All they wanted was the customer list.

This isn’t isolated. There was a magazine that was targeted to farmers, but they didn’t allow advertising. It was very popular and a lot of companies wanting to sell to farmers wanted to be advertising in that magazine. The song and dance went on until the one of the companies cracked and bought the magazine out for seven times its earnings.

There is nothing more valuable in your business than your customer database and your relationship with it –  well actually it is the results of that relationship that is so valuable, the customer loyalty and the referrals. To create a relationship with your customers requires investment and a system.

The system is the key part. Systems are what are valuable in business. It means that whoever buys your business will be able to use the same system and get the same results.

“Creativity is over-rated. Most business success comes from doing boring, diligent work. From developing a system that produces consistent results and sticking to it”

Ray Kroc. (The man who built McDonalds into the most successful fast food operation in the world.)

It is this boring work that is the key to business success. Developing and continuing to implement systems to achieve the outcomes you want. In this case building and maintaining a strong relationship with your customer list so that they will continue to buy from you and refer new customers to you.

The systems you create mean that you can sell a future revenue stream. That means you are in effect selling money at a discount. You buy my business for X and you’ll be almost guaranteed to get your money back in 5 years – less if you do the work to grow it… Or something like that.

That is the power of creating systems to maintain and grow the value of your most important asset in  business.

A Customer retained is a Customer Gained

Customer retention is taken a little too nonchalantly by many businesses these days.

Ben Franklin’s saying “a penny saved is a penny earned” applies in this case.

Every customer you retain is a customer you don’t need to replace. It may sound trivial but the rate that you lose customers controls the rate that you are growing.

For the sake of making the maths easy, say you lose 100 customers a year in your business. That means you need to go and find 100 customers to replace your lost customers with.

Painful eh? Now if you want to grow at all, that means you need to get customers in excess of your 100 if you want to grow. Say you want to grow by 100 customers this year that means you actually need to find 200 customers in order to reach your growth goals.

That is twice as much work as you thought.

Obviously, in light of that, it makes sense to prevent as many of your customers from leaving as you possibly can.

I can’t do the math for you but I can encourage you to look at your own business’s customer defection rates and calculate what an increase in your retention rates is worth to your business in hard dollar terms.

Often times the amount will surprise you.

One client we worked with figured out that increasing their retention rate by 1% of their customer base was worth about $15,000 over the next 12 months. That spurred them into action to make sure that they made an effort to keep their existing customers happy.

I know from a friend in the insurance industry that 1% increase in your retention rate could be worth as much as $100,000 in revenue.

Customer retention is as valuable as customer acquisition. After all, every customer you keep is one you don’t need to go out and get again.

You can go further and say retention is more valuable than acquisition because the longer you can keep a customer, the more they are worth to you, the more they are worth to you the more you can spend in order to get them in the first place.

Ben Franklin’s advice on thrift should be applied to customers. Make sure that you “Get greedy and make sure you don’t part with them cheaply.”


Business Ignorance Exposed: Questions about Customer Retention.

Look, I get asked things like “why would I bother with my existing customers. I can just go out and get new ones?” New customers are vital for a business and if you can’t get them then you will starve. Beyond that, customer retention becomes far more important than customer acquisition for three reasons.

Reason 1: Existing customers are more responsive than new customers. Existing customers can be up to ten times as responsive as new customers. So retaining them means you can sell more to them in higher volumes.

Making retention a priority means that you have an opportunity to do this for longer. This has got to be an ongoing focus if you want to create real wealth in your business.

After all, selling more to highly responsive customers is going to be more profitable than selling small quantities to less responsive customers like you do when you first acquire a customer.

Reason 2: The sale price of your business is driven by the ongoing value of your customers. It is called goodwill. Think about this, a real estate agency is valued entirely off of its rent roll. The commonest valuation is three times the rent roll. Sales volume counts for zero because it is an event – there is no equity in selling a house. It doesn’t create any future income.

Having customer retention strategies in place demonstrates that you are building ongoing value from your customers and that there is real value in buying that business from you.

Reason 3: Your existing customers will buy other products from you as well. Regardless of what you do, there are downstream opportunities to resell to your existing customers. Most of the time this is opportunity is neglected or prevented by the limiting beliefs of the business owner.

The one opportunity that every business will have access to is referrals. It is very likely that a good customer can refer other good customers to you.

Say you can get your customers to refer at a rate of one referral per customer per year. You’ll never have to find another new client another way. You’ll get all of your business by referral and that is the best way to get new customers. Don’t just take my word for it. Any seasoned business owner dreams of it but most don’t do the work in order to get the referrals.

Understanding the maths and reasons behind customer retention can mean massive changes and advantages for you and your business.

I bet you can find any number of related products to offer your customers aside from getting them to refer. To find out more about what other opportunities your existing customers represent go to and download the “The Business Owner’s Guide to Getting More Repeat Business and Referrals.”

Customer Retention: Is it a Prevention Or Cure? (5 critical questions you need to be able to answer)

I often get asked about the importance of customer retention. “Is customer retention important?” I don’t need to worry about it there are plenty of new customers out there or some variation of the theme.

Its importance varies by the business you are in. Although that said, retaining and building a base of loyal customers can be one of the most lucrative activities you can undertake in business if you know what to do with them.

For many businesses, retaining customers is a bit like a dog chasing a car. Damned if they know what they are going to do if they ever catch a car.

Any single statistic can be over emphasised. For a business which is driven by renewals or subscriptions the need for good customer retention is far more obvious than business where they sell a more ‘one-and-done’ type products.

Most Business miss the link between new customer acquisition and customer retention

Basically, the more customers you lose the more customers you need to replace with new ones each year. Sounds simple enough but many times what is practiced seems to ignore this rather obvious principle. The more you keep the less new ones you need to find to replace the ones you lose, the more growth you are going to experience for adding so many customers.

  • If two competing businesses are both adding 200 customers a year, one is losing 150 customers a year and the other is losing 75 which one is going to grow faster? The one that is only losing 75. Which one will be able to extract more value out of their customers? All things being equal, the one only losing 75.
  • Which business is going to have a larger army of satisfied customers who will refer new business to them? The company that is only losing 75 customers. Because over time it will build up a larger customer base sooner.
  • Which business is going to be more attractive to other business owners to promote to? The one only losing 75 customers. Because it has a larger list.
  • Which business is going to get a better return when they introduce new products? The one only losing 75 customers. Because it has a larger list so it has more opportunities to succeed.
  • Which business is going to sell for more? The one only losing 75 customers because it has a larger more loyal customer base which means it represents greater future earnings to the buyer.

Customer retention is not the be all and end all but it dramatically alters the long term sustainability and profitability of your business.

You can read an in-depth report about customer retention called ‘The New Model of Doing Business. Revealed: The new hidden currency, how it became the most valuable commodity in the world’ by going to it is a bonus when you download The Business Owner’s Guide to Getting More Repeat Business and Referrals

Hope is Not a Customer Retention Strategy

Customer retention is the new acquisition. More and more these days customers are willing to shop around and find a better deal or not buy at all. Many business owners know that customer loyalty is dwindling but have not put together a customer retention strategy to compensate.

The smart business owner who is willing to focus on keeping what they already have will be at an advantage over their competitors who ‘hope’ that their customers come back.

McDonalds has systems for everything. A system to open the restaurant, a system to close the restaurant and systems to everything in between – that is why there is Hamburger U. So that you can learn The McDonalds way. What you don’t realise is McDonalds also has a marketing system a way to get new customers in and to get existing customers to come back – they have a complex and very sophisticated customer retention strategy.

You don’t need anything as complex as what McDonalds uses. But considering the economic climate you do need a customer retention strategy. It will be far cheaper to spend 50 or 60 dollars a year to keep an existing customer rather than spend hundreds of dollars or possibly more getting the phone to ring with a new customer.

Think about it for a minute. If you are unwilling to spend a pittance keeping the customer then why would you bother to go out and get them in the first place?

In the report “Getting More Repeat Business and Referrals Simply and Easily in the Next 12 Months,” you can read about a simple customer retention strategy that almost any business can implement. Yet most seldom do.