What is the real value of purchasing a competitor's book of business?20777
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west360digital private msg quote post Address this user | |
| Hello, I have a decent size Matterport and Google Virtual Tour business. I have a friend/competitor who wants to retire and sell me his top account. His top account has averaged $150,000 a year in revenue on average for the last 5 years. He wants $75,000 for it, but how can someone truly value a photography business? The account consists of franchise owners that have the option to order through the current company I would be taking over. Any thoughts on how to structure this deal? I personally do not have that sort of upfront capital to just shell out and I think that would be incredibly risky. Wouldn't the best idea be to structure a long term deal where I pay out a percentage of each project booked until we reach the $75,000. There is absolutely no certainty that any of the business will successfully end up going to me. Thoughts? Thanks! |
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 WGANPremium Member Lahaina, Hawaii |
Skeeter private msg quote post Address this user | |
| As an owner of many businesses, when I sell it I don't want to have anything to do with it and want cash. Most business sell for 2 times the yearly revenue. That said there are some many people doing Matterport now I wonted buy it. That's my thoughts. |
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west360digital private msg quote post Address this user | |
| Appreciate the advice. Probably doesn't make sense. Too much risk for one person to take on and I can continue to grow my business organically and not have to pay someone out. | ||
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vrephoto private msg quote post Address this user | |
| I agree with the percentage agreement. This is not a brick and mortar business with any significant build out or start up costs and there are a lot of providers offering the same thing. I'd offer 75% of the revenue with him involved in the bookings for transparency up to $75,000 or 12 months, whichever comes first. It should hit 75k in 8 or 9 months. | ||
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 WGAN FanClub Member Suisun City, California |
ScanYourSpace private msg quote post Address this user | |
| There's multiple ways to handle this. This is a great opportunity, but you're absolutely right to be cautious about the risks. Here are some key considerations and possible ways to structure the deal: Valuation Considerations Client Retention Risk – The biggest risk here is that the franchise owners may not continue working with you. There’s no guarantee they will stay just because you acquire the business. Historical Revenue vs. Future Revenue – The account has averaged $150,000 per year, but you need to assess if this trend will continue. Are there any contracts in place, or is it all based on relationships? Profitability – What are the costs associated with servicing this account? Do you have the capacity to take it on without additional expenses? Deal Structuring Options Since paying $75,000 upfront is too risky, consider these alternatives: Revenue-Based Earnout Pay a percentage of revenue from this account (e.g., 20-30%) until you reach $75,000. If the account doesn’t generate the expected revenue, you don’t overpay. If it performs well, the seller gets their asking price. Tiered Payments with Performance Milestones Example: $10,000 upfront, then additional payments every 6-12 months based on revenue benchmarks. This way, you don’t overcommit without seeing actual results. Seller Financing The seller finances the deal, and you pay in installments. This aligns their interests with you, as they want to see you succeed to get their full payout. Trial Period or Partial Ownership Transfer Run the account for 6 months with a revenue-sharing model before committing to a full buyout. If revenue stays strong, proceed with an acquisition. Due Diligence Before Committing Talk to the clients – Gauge their interest in continuing with you. Get access to financials – Ensure the revenue numbers are legitimate. Assess the seller’s involvement – Will they help transition the account, or are they leaving immediately? Final Thoughts You’re thinking in the right direction. An earnout or revenue-sharing deal minimizes your risk while ensuring the seller gets paid if the business continues performing. Would you be able to get some of the clients to commit in writing before finalizing the deal? That could give you more leverage in structuring a favorable agreement. |
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west360digital private msg quote post Address this user | |
| Great insight! I think something like this would be great. FYI- the account does around 100-125 locations a year at $1400 a location. Deal Structure- $10,000 upfront. 25% payout of all tour revenue that come in. $350ish per tour. Payout monthly to the seller. $5000 payment for each 25 locations booked/completed. So if they end up doing a 100 tours under my name, we would be at $30,000 in direct payments and around $35,000 in the % of tour sales. So around 125 tours, the entire $75,000 would be paid out within 1-1.25 years. The seller would also be a part of the transition. Getting a commitment from a few of the existing franchise owners would be reassuring. |
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