Money Matters

How to Sell Your Client List

You can’t put a price on friendship, but you can put a price on your clients. Here’s how to come up with a fair price for your client list if the time ever comes for you to sell it.

At some point, all of us will have to think about retiring from the nail industry. Who will you find that will service your clients with the same quality and professionalism as you. Your client list is one of your most valuable assets. Building a good solid client base can be hard to accomplish, and often takes years of hard work. What will become of it when you retire?

Before you can sell a client list, you have to make sure it’s been well-maintained so it has a value to someone else. It’s important to always keep track of new last names, address changes, and phone numbers. This information may be kept on paper as a client card that is updated at each visit, as an address book, or on a computer database. How do you place a value on the list of names you’ve cultivated so painstakingly? How can you ensure that your clients are cared for as well as they were by you? How do you go about finding a buyer for you client list? Candy Farrell from Huntsville, Ala., was faced with this situation. Farrell had been in business for five years and decided to move out of state. When she decided to move she started looking for nail technicians who shared her commitment to quality services.

Farrell made appointments with several different nail technicians in different areas and went in as a client. She carefully watched every step the technician made. Farrell was looking for someone who offered services in the same price range, who used quality products, hand filed, and completed the service efficiently. IT also was important to her to find someone who was conscientious about disinfecting and sanitation procedures, and on top of it all, had a friendly personality. After her research, she narrowed it down to one nail technician in each area as her choice to buy her client list.

Farrell divided her clients geographically into lists, each containing about 20 names. She decided to sell the lists for $5 per name. Although there was no guarantee a client would go to he nail technician who bought the list, Farrell knew that enough would go that her $5 per name investment would quickly be recouped. Ready to present her offer, Farrell said, “I called and made appointments with each nail technician to talk about m situation. They were all happy and flattered that I felt this comfortable with them. It all went very well, and I wasn’t turned down by a single tech. I keep in contact with my clients, and of course they all say they would rather I continued to do their nails, but they seem to be staying with the nail technician.”

Finding the Right Price

Determining the value of a client list is similar to putting a price on a business; in fact, it is your business, says Ken Cassidy, owner of Kassidy’s Salon Management in Long Beach, Calif. “An independent contractor’s client list is everything she has to show for her work,” he says. Salons may be sold for as much as four times their yearly revenues. So, if a nail technician’s business makes $50,000, would a client list be worth $200,000? No, says Cassidy, that’s not a realistic value, especially since you’re not including any tangible assets such as a lease fixtures, inventory, or furniture. Instead, you should come up with a percentage of your gross earnings. So, for example, if you decide to charge 40% of your yearly revenues of $50,000, you would sell your client list for $20,000.

When Audra Sigman for Brunswick, Maine, left the industry, she decided to charge 30% of her gross income for the last 24 months for her client list. “For example, if your last two years’ gross income for the last 24 months is $60,000 (100% of client tickets), then your client list has a value of $18,000,” Sigman explains. Depending on the market in your area, the percentage factor in this formula can be changed.

Sigman was an independent contractor and received approval from the salon owner and kept each client informed of the details of the sale. Part of the agreement was that Sigman would be on-site to greet and introduce each client to the new technician. Since you can’t give any guarantees that clients will go to a new technician when selling your client list, Cassidy recommends getting at least 50% of the sale price up front, and basing the remainder on how many clients are still doming after a three-month period. The buyer must show you her profit and loss statements and appointment book to prove what she has earned from your former clients. A word of warning, however; books are easy to “doctor,” so stipulate a minimum amount that you should receive regardless o what kind of business is done with your original list.

Value can also be calculated for each client based on how long she has been a client, how often she has appointments, and how much she spent on services in the last year. For example, Client A has been coming in every three weeks like clockwork for 10 years for a $25 fill. In one year, she spends about $425. You might charge 50% of that total ($212.50) for her name. Client B spends the same amount of money, but she does not make standing appointments and she’s only been coming to you for one year. She might have a 30% valuation.

Bring in the Pros

It may be extremely difficult to put a price on the business you’ve put your heart and soul into building. For help determining its worth, consult with experts. Contact a business appraiser o an accountant to help you evaluate your client list. A business broker is someone who can help find a buyer for you business and who earns a commission based on the sale price paid by the seller. In some states business brokers must maintain a real estate license, making them a good contact for information to help you market your list.

Tom West from Business Brokerage Press in Concord, Mass., suggests a couple of ways to market your list. Run an ad in a local paper. Network with fellow technicians at tradeshows, on the Internet, or with your competitors if you respect their work. A competitor might even be an ideal buyer since she is probably located in your area, making it convenient for clients. However, you may want to give the owner of the salon where you currently work the first chance to buy your client list because she has an interest in keeping the clients in the salon. If you have built a good relationship with a supplier, she too may be able to assist you with finding potential buyers. Some beauty industry associations, such as the NIA, publish a newsletter that includes a classified section where you can advertise lists for sale.

It’s Nothing Personal

An invisible but very close bond is created between a nail technician and her client. After years of service they often become close friends. This is why some nail technicians would no more consider selling their client list than sell a family member. Vonda Keon from Flamingo ArtFX Nails in Bruce, Miss., explains, “I couldn’t sell my list because so many of my clients had been with me since the first day I opened the doors. The relation ship that I had with my clients was sort of a ‘Steel Magnolias’ type.”

Clients may also voice an opinion. Marty Cooke from Sandy, Utah, was approached by a client of a technician whose list was for sale. The client said, “Don’t you think it’s rude for her to sell us like hot dogs from a hot dog stand?” Well, in a matter of speaking they are our “hot dogs.” The client is a tangible asset of our business. With a well-thought-out plan and a smooth and carefully orchestrated transition, the sale of a list can ensure that your clients’ needs are still being met long after your retirement.

[Sidebar]

Are the Names Yours to Sell?

When you sell a business list that includes personal information there are some legal concerns. Attorney Jill Sisti in Crystal Lake, Ill., explains, “The rules regarding the selling of a client’s personal information vary in different jurisdictions. It would be wise to investigate this matter in your particular area.

Ken Cassidy states that as long as the names are being sold as part of a business, then it’s perfectly legal. “Clients don’t have anything to say about the matter, because it’s a business transaction.” he says. “In fact they should feel complimented that you care enough to place them in the hands of a competent technician.”

However, it is good business practice to notify present clients of your impending retirement and of your intent to provide that client’s personal information to another qualified nail technician. That way the client would have an opportunity to decide whether to allow her personal information to be transferred.

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