Buying UK web agency client base... need advice?

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cloudy

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Hi,

I currently have an opportunity to buy a UK web agency client base.
The numbers seem ok but i don't really know how to structure it...

buying for £7.5K

35 clients
£1300 monthly income (hosting)
£1100 net profit a month (£200 server cost)

All clients will need on going development and marketing what is not contributed into these monthly figures.

Im interested to know how you would buy this???

I'm think of the following
- spreading the cost over monthly repayments ( 4 months £1750PM)
- contingency plan in regards to the previous owners not working with the existing client base. Something along the lines they cannot work with them for a 2 year period.

Have i missed anything?
I would love to know how you would structure it?

Cheers
Cloudy
 
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This is why we need a location on member on their profile!

Are you UK based?

If you are moving their data overseas you may run into issues with gdpr.

A non-compete clause would be a the minmum needed.

is your plan to take over the marketing contracts aswell?

Honestly this sounds incredibly cheap for what he it is.
 
In addition to @social engineer points raised, you need to find out what the contract terms are of the existing clients.
The last thing you want is they leave the month after you take the reigns and all go to the seller who has a new business.

Ensure you're buying everything, brand name, database, social media accounts, branding etc.
Spend the money and become a Ltd Co too, if you don't have ,much financial backing.

Check the T&Cs of the contract from the server people, ensure prices are fixed for you. You don't suddenly want to find they are claiming new owner means they renegotiate their fees and suddenly increase your price by 50%.
 
Other than provide a server, what other activites do you have to do for the clients. On average they are paying about £37 each per month. Seems a lot just for hosting.
I pay about £20 a month, at one point had about 20 CMSs runnning and didnt reach anywhere near my storage limit. I also have 24 hour support if I need it, usually I contact support about twice a month.
 
For this you really need a lawyer to look over everything about this.
Loads of points that need an answer.
You really need to sit down with the person and thrash out all the points face to face.
 
Why is he selling?
Who is selling to you and who came up with that price?

Are you just buying a resellers hosting account? That is not a web agency.
If it is just a hosting account then I would tread carefully.
If it is a web agency then why isn't he selling it as an agency and why is he just selling you the clients?

Looks to me that somebody has signed people up for some cheap hosting and there is no guarantee that they will require any other service.
What is specified in the contract with the seller?

Looks fishy to me. Use an escrow service for payments.
@meathead1234 might be the best person to ask

SamLewis said:
Other than provide a server, what other activites do you have to do for the clients. On average they are paying about £37 each per month. Seems a lot just for hosting.
I pay about £20 a month, at one point had about 20 CMSs runnning and didnt reach anywhere near my storage limit. I also have 24 hour support if I need it, usually I contact support about twice a month.
Click to expand...

Just out of interest, who is your host?
 
social engineer said:
This is why we need a location on member on their profile!

Are you UK based?

If you are moving their data overseas you may run into issues with gdpr.

A non-compete clause would be a the minmum needed.

is your plan to take over the marketing contracts aswell?

Honestly this sounds incredibly cheap for what he it is.
Click to expand...

I am based in the UK!
Based in Manchester!

Yes, to take over all marketing, dev & hosting!
The directors needs to exit quickly due to personal reasons... we have been working together for the past 5 years so i know them incredibility well.

I have no idea what valuation to put on that tho... how have you worked out that it is cheap? (i do think its a good deal tho)
 
MisterF said:
In addition to @social engineer points raised, you need to find out what the contract terms are of the existing clients.
The last thing you want is they leave the month after you take the reigns and all go to the seller who has a new business.

Ensure you're buying everything, brand name, database, social media accounts, branding etc.
Spend the money and become a Ltd Co too, if you don't have ,much financial backing.

Check the T&Cs of the contract from the server people, ensure prices are fixed for you. You don't suddenly want to find they are claiming new owner means they renegotiate their fees and suddenly increase your price by 50%.
Click to expand...
Absolutely agree!

Thanks for replying... they currently are not within any contract with the current provider... they are just paying monthly and all have been since 2015.
Thats my exact worry that they may leave due to not being in contract.

I am just buying the client base with monthly revenue.
They are not selling the business as such, i dont receive any brand name, social meida accounts, branding etc etc.

The idea is that these clients are just absorbed into my LTD company.
 
SamLewis said:
Other than provide a server, what other activites do you have to do for the clients. On average they are paying about £37 each per month. Seems a lot just for hosting.
I pay about £20 a month, at one point had about 20 CMSs runnning and didnt reach anywhere near my storage limit. I also have 24 hour support if I need it, usually I contact support about twice a month.
Click to expand...

Thank you for replying!
We just need to make sure that the sites dont go down... all other actives are billed at a hourly rate of £75 per hour.
In all honesty we charge our existing clients around £50 - £250PM for hosting, backups and 1 hour worth of maintenance per month.
We believe that some of them will be needing new sites between £3K - £5K.

I currently run a small agency. Its a team of 4 including myself.
One of our guys is constantly working on the servers so we do have support from team members and also hosting providers if required.
 
cloudy said:
Absolutely agree!

Thanks for replying... they currently are not within any contract with the current provider... they are just paying monthly and all have been since 2015.
Thats my exact worry that they may leave due to not being in contract.

I am just buying the client base with monthly revenue.
They are not selling the business as such, i dont receive any brand name, social meida accounts, branding etc etc.

The idea is that these clients are just absorbed into my LTD company.
Click to expand...


Plus it might be worth getting legal advice and a contract drawn up.

Worse case;

You pick up from Billy after paying him for his business
35 clients not on any contract.
Potentially £1300 monthly income (hosting)
Potentially £1100 net profit a month (£200 server cost)

Billy then rings his mate who has a similar service and says;

I have 35 leads for you if you can go in at £ xxx a month, they'll save 20%, you pick up a few good clients and slip me a Monkey in cash as a finders fee.
 
Asif WILSON Khan said:
Why is he selling?
Who is selling to you and who came up with that price?

Are you just buying a resellers hosting account? That is not a web agency.
If it is just a hosting account then I would tread carefully.
If it is a web agency then why isn't he selling it as an agency and why is he just selling you the clients?

Looks to me that somebody has signed people up for some cheap hosting and there is no guarantee that they will require any other service.
What is specified in the contract with the seller?

Looks fishy to me. Use an escrow service for payments.
@meathead1234 might be the best person to ask



Just out of interest, who is your host?
Click to expand...

Selling due to personal reasons, i know the guy super well... he has been my friend for 5+ years.
He has alot on his plate currently and finding running the business extremely stressful.

buying dedicated server & client relationships.
Not buying the whole agency due to his business partner focusing on the design side of the business.
He is selling the clients to me because he know we will look after them correctly and give them excellent service.

currently dont have a contract... even them clients dont have any contracts LOL!
 
MisterF said:
Plus it might be worth getting legal advice and a contract drawn up.

Worse case;

You pick up from Billy after paying him for his business
35 clients not on any contract.
Potentially £1300 monthly income (hosting)
Potentially £1100 net profit a month (£200 server cost)

Billy then rings his mate who has a similar service and says;

I have 35 leads for you if you can go in at £ xxx a month, they'll save 20%, you pick up a few good clients and slip me a Monkey in cash as a finders fee.
Click to expand...

Very very true!
I didnt think of that!

Anyway of preventing such a thing?

I do trust this guy in all honesty... i cant imagine him bending me over in all honesty... but i obviously want to mitigate my risk.
 
cloudy said:
Very very true!
I didnt think of that!

Anyway of preventing such a thing?

I do trust this guy in all honesty... i cant imagine him bending me over in all honesty... but i obviously want to mitigate my risk.
Click to expand...


Why is he wanting to sell ?
 
cloudy said:
Selling due to personal reasons, i know the guy super well... he has been my friend for 5+ years.
He has alot on his plate currently and finding running the business extremely stressful.

buying dedicated server & client relationships.
Not buying the whole agency due to his business partner focusing on the design side of the business.
He is selling the clients to me because he know we will look after them correctly and give them excellent service.

currently dont have a contract... even them clients dont have any contracts LOL!
Click to expand...

So potentially they can quit the service at any time.
Also something doesn't sound right, personal reasons isn't a good excuse when he already has an agency and doesn't actually have to do much for the £1000 a month.
It doesn't matter if the guy is your friend, or how long you have known him, you still have to treat it as any other deal and carry out full due diligence

How long have these 35 clients been customers?
If they have been signed up for less than 12 months then that is way overpriced.
If they have been signed up for a number of years then it might possibly be OK.

Bottom line is how much does it cost you to sign up 35 new clients? That is what they are worth to you, that is what you should pay.
 
Asif WILSON Khan said:
So potentially they can quit the service at any time.
Also something doesn't sound right, personal reasons isn't a good excuse when he already has an agency and doesn't actually have to do much for the £1000 a month.
It doesn't matter if the guy is your friend, or how long you have known him, you still have to treat it as any other deal and carry out full due diligence

How long have these 35 clients been customers?
If they have been signed up for less than 12 months then that is way overpriced.
If they have been signed up for a number of years then it might possibly be OK.

Bottom line is how much does it cost you to sign up 35 new clients? That is what they are worth to you, that is what you should pay.
Click to expand...

Yeah i understand mate.
I need to do more due dill... what things would you be asking in this situation?

These have been clients since 2015... so obviously have a long lasting relationship with current supplier.

I didn't think of it like that... it would take me along time to sign up 35 clients... way over 12 months.
in all honesty they are not the ideal clients... they seem to be paying much cheaper than what our current clients pay.
the idea is to "cut the fat" and build relationships with existing ones and put them on current tariffs what current clients are paying.
 
cloudy said:
Yeah i understand mate.
I need to do more due dill... what things would you be asking in this situation?

These have been clients since 2015... so obviously have a long lasting relationship with current supplier.

I didn't think of it like that... it would take me along time to sign up 35 clients... way over 12 months.
in all honesty they are not the ideal clients... they seem to be paying much cheaper than what our current clients pay.
the idea is to "cut the fat" and build relationships with existing ones and put them on current tariffs what current clients are paying.
Click to expand...

Have you spoken to the guys business partner?
You will need him to agree to the transfer.
If the guy is stressed/mental health, he might be looking to bail and looking to pocket some cash on the side.

You need to work out your Customer Acquisition Cost (CAC) and calculate the Lifetime value (LTV)
https://www.google.com/search?q=cost+of+acquiring+a+new+customer
https://www.google.com/search?q=lifetime+value+calculation
 
Asif WILSON Khan said:
Have you spoken to the guys business partner?
You will need him to agree to the transfer.
If the guy is stressed/mental health, he might be looking to bail and looking to pocket some cash on the side.

You need to work out your Customer Acquisition Cost (CAC) and calculate the Lifetime value (LTV)
https://www.google.com/search?q=cost+of+acquiring+a+new+customer
https://www.google.com/search?q=lifetime+value+calculation
Click to expand...

Yes, the business partner is cool with it as he doesn't have the skills to manage them.
Yeah for sure i have definitely thought about that!

ill check the links thank you! :)
 
cloudy said:
Yes, the business partner is cool with it as he doesn't have the skills to manage them.
Yeah for sure i have definitely thought about that!

ill check the links thank you! :)
Click to expand...


Whatever you decide, I would use an escrow service, consult a lawyer/solicitor, and stagger the payments, pay half monthly (£625 p/m x 6) with the final payment (£3750) at the end of 6 months and have it drawn into the contract that if x no of clients leave/are lost then that is a % off the final payment. (Or something along those lines)
 
I buy a lot of agency/freelancer portfolios and clientele.

One of the key metrics that you need to understand is intimacy.

To give you an example, if I were approached by ABC Ltd. for a sale with 200 hosting clients who only ever open a support ticket once in a while. I'd lap it up in the first instance, if the price were right.

However, if it were a smaller agency XYZ where the owners were intimate with the client - talking to them on phone frequently, doing smaller fixes for free, not just hosting them but also managing their domain and having designed their website etc. (where the client is clueless and is just trusting XYZ with everything), then the factors change completely.

You have to exercise a certain level of caution if the agency you're getting is like XYZ above. Since a change in the friendly face who speaks to them daily without their knowledge will alarm most of them and they may be in the market looking for a new developer the very next day.
 
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