You're brought an opportunity: Residential HVAC company $1.1m revenue 2 employees $400k SDE $800k purchase price (2x!) No. The trucks are old. The employees are the seller's wife and a 65 yr old installer. Don't buy this. Let's talk about customer list acquisitions. First - if you're not already in the game, you just have to walk away from these opportunities. These are a trap for new buyers. If you're in the game, you may be willing to pay, say, $100 to acquire a customer. This company has contact info for 2,500 customers in its quickbooks account. So $250,000 seems fair, right? No. We've found that you can only expect about 20% of a legacy company's list to be "active." "Active" meaning: hasn't moved, isn't dead, even recalls doing business with this company before. So we pay $20 per customer for a customer list acquisition, assuming a $100 acceptable CAC and 20% retention. $50,000 in this scenario. You may be willing to pay $200, $300 CAC. No sweat - adjust your per customer price to $40 or $60. The trick to activating these lists and making them worthwhile is outbound calling and sales. We have people dedicated to this effort. For another post. You'd be shocked at sellers' willingness to do this. We've done two of these deals this year and in talks with two more.
@StrongpointRich spend 50k on ads, you will be overloaded with realistic new customers. All this obsession with buying. Google ads
@StrongpointRich What if 3 installers and does 2 mil worth anything then..asking for a friend
@StrongpointRich Is $1.1M with 2 employees even realistic?
@StrongpointRich I told a broker something similar a few days ago. He’s trying to sell a 2 man shop doing 800K in sales for 3.5x SDE. They’ll be better off selling to a competitor for a more realistic price rather than advertising “great opportunity”…