this negotiation trick will let you BUY OUT your competition

Hey, everyone, My name is Mike Andes, and today I'm going to be sharing how you can buy a business and acquire another company, potentially even one of your competitors, for pennies on the dollar. So today I'm going to be using lawn care and landscaping example. But this works for really any business if you're trying to buy somebody out and purchase a business. I've used this for buying multiple businesses, both in landscaping and lawn care, as well as a gym and other businesses that I've been involved in. So. So this is a really simple way to break down what you're willing to pay for a potential acquisition. Now, for the lawn care landscaping industry, this time of year, as we head into the spring rush, as we are about to head into the busiest time of year, is a really good time to be buying businesses. Because first and foremost, if someone doesn't want to get started and ramp up their business and have to take on all the mowing customers and all the landscaping jobs that are gonna come in the spring rush, they wanna sell now. And there's a small window they have until they're going to be able to actually get out of the business or they're going to have to actually fulfill the work. So there's a really small window of opportunity to make an acquisition because there is a sense of scarcity of time and a sense of like, hey, this has to get done or else they're going to have to actually continue the rest of this year. So a great time to buy any business is right before it's about to eclipse or really crescendo in the amount of work and leads, because it takes more commitment, more involvement from the owner. And if they have already one foot out the door, they don't want to ramp up, they don't want to go get more employees, they want to be able to just hand the business off and not worry about it. So keep in mind, if you're going into the spring rush, this is a great time to be buying a business. But the question always is like, well, how much should I be spending and what is fair? How much should I be willing to pay for new customers? So this is kind of what I would put together. And that is typically the best type of acquisitions when it comes to getting a steal of a deal, is going to be smaller deals, typically, because these type of deals are going to a lot of times where the owner is actually still involved in the daily operations. And the reason that these are the best deals is because not only are they have a sense of scarcity, of time. They've got like, there's a sense of urgency. They've got to sell the business. But it's also the fact that no one wants to buy the business because all they're buying is a job. So for example, lawn care and landscaping, this might be someone with 50, 60 mowing customers and it was them. And maybe a helper. They do not have a business. There's nothing to really sell. There's no IP. They're not going to sell this for $500,000 because what you're simply doing is trying to sell a job. And the only way that they're going to get a higher price for this deal is going to be someone that is bought into this idea of becoming self employed and sees this as a quick way to do that. So a lot of times these type of small businesses you can buy and ask them say, hey, look, I don't want to buy your equipment, your trucks, I don't want to buy your business name, your website, your phone number. I just want to buy your contracts and your contacts. I want to buy your customer base and then everyone you've ever had service with for done an estimate for have a lead, you have their contacts at all. That's the value of the business. And you're just gonna take those and plug them right into your existing business. And you probably won't even need to go get more trucks and equipment and get all the other stuff that they have. And so if they want to go sell that elsewhere, fine. And for most really small businesses, the bulk of the value of the business is actually wrapped up in their assets, their trucks, their equipment and all the rest of it. So what you're buying isn't that stuff. So you shouldn't be getting a really good deal. So let's break down how you should determine what that price should be. Let's say, for example.

This guy's trying to his business, maybe he's retiring, wants to get out of the industry, trying to sell this thing in the next four to six weeks before the spring rush. And you say, okay, well how many customers do you have? I don't want your equipment, I don't want your trucks. Go sell those on Craigslist, go sell those on Facebook Marketplace. I just want to buy your contracts. And your contacts say, well, how many customers do you have? How many weekly mowing customers do you have? He says, well actually I have 50 recurring mowing customers. Okay, that's great. Now let's just say he doesn't really have a whole lot of Context, his CRM isn't that great. He hasn't been keeping track of emails. He's like, really? Honestly, I only have the contacts from the people that actually mow their lawn. I don't really have any contacts whatsoever. So in addition to these 50 customers who he has their email address, phone number, he doesn't really have any contacts to sell me. He really just has his existing customer base. Well, this makes it actually pretty easy because then all I'm going to do is I'm going to take $30,000, I'm going to divide it by the 50 customers that he currently has, and I'm going to come out with, what's the customer acquisition cost? Now, typically, we use customer acquisition cost as the number required that we need to spend in advertising in order to get one new customer. So really, when you're buying just the customers, you can really just compare this against what would I otherwise be spending if I went and spent that money on advertising. So in this case, if I do the math here, my customer acquisition cost or the cost that I'm paying in this acquisition per customer is $600. So really, what you could ask yourself is, well, could I spend less than $600 per customer and go get a customer right now? If the answer to that is yes, then you might not want to get this acquisition. This might not be a great deal, because if I only have to spend $100 per customer in order to get 50 customers, I only need to spend $5,000. So why would I spend 30,000 if I know that my customer acquisition cost is 100? And if I need 50 more customers, I simply need to spend $5,000 in marketing. So this might not be a good deal. But then this is why I'm making this video. This is what you use to negotiate on this deal. Because the bottom line is I'm not willing to spend only $100 to per customer. I'm willing to spend more than that because I'm gonna get the customers right away. I don't have to do any estimates. I don't have to put together any marketing campaigns or manage those campaigns. And I don't have to go do estimates for people that don't accept, like the customer acquisition cost. I'm willing to pay a premium on top of that in order to get the jobs, get the customers, all in one fail swoop. So then you gotta ask yourself, well, what premium am I willing to pay? Because if I'm willing to pay twice as much as what I usually would spend for marketing, usually I spend $100 on my marketing to get one customer. Well, if I'm willing to pay a premium of $100, in other words, I'm willing to spend $200 per customer. Well, now I can simply take the number of customers, multiply by what I'm willing to pay per customer, which is $200 in this case. And now it means that I'm going to offer $10,000 to buy this business. So they want $30,000. They're not gonna get it because they're gonna. Look, I could literally go spend $100 and get a customer. Why would I spend $600 in order to get 50 of your customers? Which, by the way, I don't even know if they're all gonna stay with me once I come in and I have to raise prices. And maybe they don't like the way I do things. They don't like the way I do billing. So I might actually lose some of these customers. And my customer acquisition cost, we actually go even higher. So this is how you negotiate. You say, look, I can spend $100 and go get a customer. I am willing to pay a premium because I want the customers. Now, your customers are in my demographic. They are in my neighborhood. They're really just what I want. And I'm willing to pay a premium on top of what I would usually have to spend in marketing to get that same customer. So I'm willing to spend $200 instead of 100 or 300 or whatever number you're comfortable with, and then use that as the way to come up with your offer price. This is a way to negotiate because you're not buying anything else. You're not buying their phone number, their email. You're not buying their uniforms or their logo or their website or their trucks or equipment or their employees. That all has other intangible value. But when you strip it down to simply the customers, this is the only thing to be determined. Now, let's step back, though, and assume that maybe there is a bunch of contacts. Maybe this person has like 400 contacts in their database. Well, that does have some value. That has some value. Because now I can go email, I can go contact, call all these 400 people that in the past have raised their hand and said, I need service from this provider. And that potentially might lead. You gotta ask yourself, well, how many of these 400 customers will actually become customers? Potentially, maybe I get another, let's say 20 customers. Out of those 400 contacts, I get 20 more customers. Well, now all of a Sudden that's going to impact my purchase price or the offer price I'm willing to pay. Because if I'm paying $200 for my customer acquisition cost under this guise of paying a premium, well then I'm going to end up spending another $4,000 or be willing to spend another $4,000. Because I'm assuming that out of these 4, 400 contacts I get 20 more customers. 20 times the premium of $200 that I'm willing to pay equals $4,000 on top of my old offer price. So this is how you can get a steal of a deal. I've purchased really, really small lawn care companies for like $2,000 and they have like 30 customers. I've also paid. The one was $18,000 and I was able to get 90 recurring customers and like 800 or 900 contacts. Then I also got this other one that had about 170 customers, but they had like six, almost 5,000 contacts. And I got for $75,000. Now, that business, when they had trucks and equipment and employees and all the rest of it, they did over a million dollars in revenue with those same contacts and contracts. And I take all of those and maybe it only led to 4 or 500,000 in revenue to me because a lot of them, I had to raise their prices and I lost them here. But when you do the math, it was a really, really good acquisition simply because I was able to use these numbers. What would I otherwise be spending in advertising to get a customer? What are you with your acquisition price or your asking price, insinuating that I'm going to spend per customer, and then I use that number as a way to negotiate with them and say, hey, look, I'm willing to pay a premium on top of what I usually pay for customer acquisition, I'm willing to spend 2, 3, 4, whatever you're willing to pay, it's fine, but it's usually going to be less than what they've outlined and given to you in terms of an asking price. And then that is how you're going to come up with an offer price. And that is just one way to determine the valuation of a potential acquisition target and offer someone potentially a lot less than they were asking for. But you get a lot of value because you actually know what you're spending and you don't overpay because you're gonna actually compare it to what you would otherwise spend if you just went out and spent that money on marketing and advertising. I hope that was helpful. And in the video at the end of this video, I'm gonna share another video. It's an hour and a half long. It's a webinar. And there's nothing I'm trying to sell in this video, by the way. It just shows you other ways to do valuations in terms of when there are trucks involved and equipment and a website and all these. These other ways to potentially acquire another company and value them based on what they are trying to sell you. So check that one out. And if you have any more questions, go to mikeandys.com for more information. We'll see you tomorrow.