NEVER buy a business without having a list of clients; customer names, addresses, telephone and fax numbers and email addresses, or the ABILITY to get them!
Sadly, most business owners and their advisors (accountant, lawyers etc) mistakenly place a high value on the physical aspects of a business, such as the shop front, the locations, equipment, inventory and whether it’s a shop or a factory, when all of these things are either easily replaced or duplicated.
The smartest and richest entrepreneurs I know, always ensure they have direct access to and a relationship with the end user! To have it any other way will always ensure that the experience is basically a painful one.
Last year, I enjoyed a dinner in Phoenix with Jeff Paul, of ‘How to Make $4,000 per day in Your Underwear from Your Kitchen Table’ fame. Jeff relayed a story to me, about a new product he had developed; a Financial Organiser Kit which he sells through infomercials on a Home Shopping Television channel.
Jeff sold 165,000 units, but because of his contractual agreement with QVC, he wound up without any access to the client. Not only that, he was not allowed to put his contact details on the product, so even if the purchaser tried, they would be unable to contact him. While he did very well out of the deal – he did well ONCE! Given that Jeff knows how to maximise the ‘back-end’ (sales after the first sale) he estimates that conservatively, the money he won’t make without access to these buying customers, will exceed the money he did make by 500%! Now that’s painful!
Worse than this scenario, is the one where the business owner does have a list and does NOTHING or little with it! I believe that less than 5% of restaurant owners have a list, which they use! Yet I know for a fact that there is a restaurant owner in the U.S. who attributes a whopping $400,000 annually to his “Birthday” promotion emails! Ok, so he gives them incentive to come in, maybe a free meal or a Birthday cake … but think about it; do you know anyone who celebrates their birthday alone in a restaurant? Of course not. People come in pairs and groups, which introduces new clients to the restaurant and their names are added to the list by the crafty restaurateur. Then of course, all of these people get their own individual birthday offers and they too bring along first time customers who also get added to the list.
I don’t know of a better model than that!