The most critical component in purchasing a company is to get what you pay for. Essentially, vehicles have titles, property has deeds and leases, trademarks and corporations have ownership certifications, phone numbers and domains have verifiable ownership credentials. Nobody owns a customer. The most important asset in a sale is the one item that you can’t be guaranteed to keep.
Now don’t get me wrong, not all sales are made for the same reason. A limousine service may purchase a sedan service to expand their corporate footprint. Same thing with a bus operator buying a limousine service or visa versa. Sometimes sales are made simply to eliminate the competitor. The seller may gain clients by default or by thinning the herd. I understand there was once a West coast group of operators who pitched in to buy someone out of business because of under cutting, driver stealing, basic bad behavior and it was in their best interest to remove him and contractually make him go away.
Buying a business in theory is easy: choose your target, do your due diligence, negotiate a price. Close on the purchase. What I just described in reality, is first base.
The implementation, leadership structure, branding, cobranding or sub branding must be considered and naturally, liquidation if required for overlapping assets and labor. Always strive to do more with less. First and foremost, lock in the clients and keep them.
This is what I refer to as spillage. Whenever a sale or merger occurs you will lose a percentage of revenue. In some ways, limousine services are like divorce mills waiting to happen. You never know the inner workings or relationships of clients and drivers and a sale can signal time to make their pitch or move. It could be that one driver with entrepreneurial aspirations has been taking notes and polishing his business plan. It could be that one fortune 500 client who always thought that particular chauffeur would do better at his office, 60% corporate chauffeur and 40% mail room.
Another common cause of spillage is you can be inheriting a client you lost in the past. This scenario has many challenges based on the reason for the initial breakup.
The first step is to understand and implement the Pareto Principal. It is the law of 80/20. Basically 20% of your client base equals 80% of revenue. My suggestion is one I discovered years ago watching Pulp Fiction. Harvey Keitel played a character called “the cleaner”. He would be called in to clean up a problem, a mess, a killing.
Every acquisition minded company should have a small team of “Harveys” whose job is to introduce, drive, explain, and most importantly convert. Once you have the 80% locked up working the 20% is next.
The 20% can also have unique challenges. Remember the sum of the parts is greater than the whole. We may be talking large numbers. You have your annual Andy’s who only go to Vegas once a year. Or weather Willie’s, they only use the service when the weather is bad, otherwise have no use for you. Customers are funny people. I have spoken to some who are tiny blips on a service provider’s radar and when they discover an ownership changes, they act with surprising and unexplainable anger, almost like they were insulted, after all they met the boss, they knew him by name.
I have learned that one program that works with the 20% is the 2C’s, cuddling and a coupon. Reach out to them, en masse, phone calls, social media, have drivers handing out letters, newsletters.
One of the easier ways to acquire and minimize spillage is cobranding or sub branding. In effect, let the purchased entity operate in it’s own autonomy while you get to know it, you can slowly pick it apart and blend everything into your primary brand. There are also reasons to keep the brand alive which we will touch on later. Remember, acquisition or disposition is not a one size fits all process.