Operations

How Much Are Customers Worth In A Limousine Business Sale?

Charles Tenney
Posted on October 3, 2011

Limousine business owners often ask The Tenney Group how much customers are worth in a business sale. Limousine business buyers ask us the same question.

The short answer is that the customers are worth what a buyer is willing to pay for them. Below are four of many variables that influence how a buyer valuates your customers.

1. What is your customer base doing for you?

How often are your customers using your service? How many people are your customers referring to your business each year? How many of these referrals actually end up doing business with you? How long have your customers been doing business with you? Understanding the answers to these questions and others allows a buyer to understand what the customers could potentially offer them in a purchase.

2. Where are your customers originating from?

Whether the buyer is an existing limousine business owner or someone looking to start a career in the industry, buyers want to know where your customers are originating. Your customers’ trip originations greatly influence fleet usage, which in turn influences an owner’s ability to be profitable. If the origins of your customers and your market footprint complement or enhance a buyer’s ability to operate a profitable business in this industry, your customers will be worth more to that buyer.

3. How does the cost of acquiring your customers compare to the cost of creating new customers from scratch?

Depending on the industry, studies demonstrate that the cost of creating a new customer is four to 10 times more expensive than retaining an existing customer. Although retaining a customer is not the same thing as buying a customer, educated buyers understand that creating a “loyal” customer from scratch is very expensive. If acquiring your customers allows a buyer a clear cost-effective alternative to attempting to reproduce the same loyal customer base through organic means, it will influence how a buyer values your customers.

4. Can your customers offer buyers gateways to new, untapped opportunities?

In some cases, a buyer will acquire a customer base because certain customers offer a gateway to bigger opportunities that the existing owner is not capitalizing. A good example of this would be a seller who has an account that has travel needs worldwide. The seller only provides service in his direct market. The buyer, a larger company, has the infrastructure and technology to serve the customer’s international travel needs and will be able to greatly expand the revenue from the account following the transaction. If your customers offer buyers a gateway to bigger opportunities, they will be more valuable to a buyer.

 

Related Topics: business deals, Charles Tenney, mergers & acquisitions, selling your business

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