7 things a business buyer will pay a premium for #5 – Clients

July 27, 2011Post by Laura Humphreys

In the business world, clients mean money.  Have no doubt, a buyer will pay a premium for what they perceive is more money.  A buyer will look at your clients and ascertain the value of your business to them on the basis of the average spend and longevity of your clients.  They will look to find a way to measure the loyalty of those clients.  For many small businesses the true quality of their clients is questionable for a potential buyer.  Many of us spend too much time on getting clients and not enough time on ensuring their long time longevity and spend with us.

The 5 signs of a quality client

  1. Clients must not have their primary relationship with you.  A client who relies on your personal input to keep them happy is of no value to a buyer.  When you are gone, so is the client.  So whilst in the early days it is normal and expected that your clients have their primary relationship with you, your exit strategy needs to include your plan for weaning your clients off of you and onto your systems and people (see next points).  At liber8yourbusiness we put a lot of emphasis on teaching you how to plan an exit strategy that removes client reliance on the business owner.
  2. Clients should be committed to contracted spend with your business for a measurable time into the future.  A potential buyer is moderately interested in your track record, they want to see the history of the business and how it has grown.  But they are far more interested in the future earnings of the business.  Clients who are locked in to a defined future income give real tangible value to your business.
  3. Clients will be on a ‘repeat business’ basis rather than one off.  Businesses which have clients on a regular payment scheme fulfil the same need for recognised future income.  In a similar way, clients who are members/subscribers offer a potential buyer a tangible future asset.  A buyer can see at a glance what they are buying and as long as they feel confident in the product and the systems, they will buy those clients off you at a real value.
  4. In a traditional retail model, your store/s will have a balanced profile/location ratio (this means that your store/s are located in areas with high concentrations of your target audience profile).
  5. A client who LOVES your business and is happy to give you both testimonials and referrals are worth their weight in gold.  A potential buyer wants to know they are buying happy clients, it would be a disaster for them to buy your business only to find the clients were on the verge of a revolt.  It’s not uncommon for a potential buyer to want to talk to your key clients, so they better be happy!