How to value a competitor acquisition or client list deal
Making sense of the numbers is difficult when the target firm has very low net income. Buyers often structure offers based on a multiple of gross revenue paid out over several years, making the deal contingent on client retention and letting go of existing staff. Many pursue these complicated buyouts because starting a new firm from scratch feels too difficult.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
Found another way around this?
Share your steps and trade-offs so fellow engineers don't have to reinvent the wheel. No account required.
- 1Letting the competing business close down naturally and picking up a percentage of their drifting customers.Did this help you?
- 2Starting a new firm from scratch instead of buyingDid this help you?
- 3Structuring the buyout with a retention guaranteeDid this help you?
- 4Requiring non-compete clauses from the sellersDid this help you?
In their words
Unedited, grouped by where they were said, most upvoted first within each place, each linked to the thread it came from.
“Since net income is very low, would it be worth purchasing the firm if I offered the following: .8x of gross totaling $380,960 while putting 20% down totaling $76,190. The remainder to be paid off over 5 years with 2 years of client retention, and I don't keep any of the staff.”source ↗
“In a perfect world I'd prefer to start my own firm from scratch but I feel like it's quite difficult to do”source ↗
“Looking for advice on a competitor acquisition / client list deal, trying to make sense of the numbers”source ↗
“That's where I have a problem.”source ↗
“What would you do in this situation?”source ↗
“I'm particularly interested in how people would value/structure the deal.”source ↗
Where this came up
People with this problem also raised
- 2How to extract knowledge from a retiring business owner with no records
- 2How do you figure out what a business is actually worth?
- 3How to value a small retail business with declining profits and rent hikes
- 7How to buy a small e-commerce business for under 20k
- 13How do I know if I should sell my business?
- 17Should I keep going with my stagnating business or quit?