Cost and Options for Taking Over a Client List

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ALMT
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Location: Frederick, MD and West Virginia's Eastern Panhandle

Cost and Options for Taking Over a Client List

Post by ALMT » Thu Nov 07, 2013 9:02 am

Hi folks,

I'm moving into a new massage office space in December. The town is a new practice area for me, I will (potentially) be building my client load from scratch. As it happens, there was a therapist in the same office space for the last 8 years, but in February she moved to an adjacent state because of her husband's job (about a 2-hour drive each way). However, she still has family and clients in the area and has been coming down on the weekends to see as many of her active regulars as possible. She has finally decided to give up her office and now plans to see clients on an outcall basis ... unless I take them over. (She also has an MT job in her new home town, as well as teaches at the local massage school, and her husband and she reportedly have another unrelated venture they're pursuing. They also have a toddler.)

We've had some great conversations over the phone and she's been very open and supportive with the information she's shared with me about her practice. The area of my new practice is affluent and apparently she had 20 regulars that saw her weekly or bi-weekly, many of them walking over from their houses, plus another 13 who came in now and again this year. She said the economic downturn of 2008 didn't impact her business at all. She has had over 400 clients that came in over the 8 year span.

So we've been talking about me taking over her client list. She's just emailed me her proposal, which would include (in addition to the entire 400+ client contact list):
• Legal Non-Compete active through January 2016 [i.e., she'll stop seeing all of her clients for 2 years]
• Summarized notes on each client (more detailed for active clients)
• Personally referred and potentially scheduled active clients for December.
• Personal introductions to professional referral network through January 1 [i.e., local networking contacts]
• Hosting a Holiday Open House to greet new clients
It seems like a really sweet deal, if I decide I can afford it. But here's the rub; she wants a total of $9000 for everything, or $7500 for just the client list. This is "per industry standards, value is determined as 25% of the 30K annual average gross income as a result of the active client list." She's offered to allow me to make payments in monthly installments over 2 years. The 30K quoted works out to about 7.5 - 8 hours of clients a week at the going hourly rate, assuming that's the yield of this particular effort.

My reaction is holy cow, that's a LOT of money. Especially since I have no guarantee of successfully taking over her clients and making them my own. I've had my own practice before in another state, so I'm experienced and expect I'd do a better job of it this time around. My old practice was in a town of 15,000, (the new location's population is 65,000, with more competition too) and after 1.5 years I was up to seeing 6-8 clients a week with a moderate amount of marketing/networking effort, meaning I could have done better with more/wiser effort. I'd like to be doing 15-20 hours of massage a week.

One downside: She's not been able to completely keep up with her core client load since she moved in February (cutting back from 4 days to 2 days a week), so some of them have undoubtedly found other MTs in the area to see. This devalues the list somewhat in my view.

If I decline her offer, I'm left with the traditional methods of building my business. It took her 18 months to start paying herself a salary, so earnings before that went into supporting her start-up. She said it was 3 clients who served as her "tipping point."

More about my situation: I have some savings and can afford to pay my rent and supplies for a couple of years if need be, 'til I'm established; I'm also considering eventually getting another MT or two to use the space when I'm unavailable, probably as W2 employees rather than simply doing a sublet (more income in my pocket, more effort for me too). This will be down the road, of course. As it happens, the general location of my new office is heavily laden with massage therapists and businesses; 12 come up within a mile of my office, my old location had about 6 competitors. My new office doesn't have a storefront, it's within a building of professionals of various ilk (most not health related). An upside: because I was a web and graphic designer before I became an MT, I know a bit about marketing and can develop my own marketing materials and online presence. I can write, speak and hold my own as a professional, and while I'm not very connected in the new town (I live 45 minutes away in a rural area; the new town location was my best bet), one of my best girlfriends is a psychologist there and will definitely refer to me, as may others in her group practice. The road she has her practice on is completely lined with medical practices of various ilk and goes on for 1.6 miles, so there's a lot of networking opportunity there. I will be stressing the therapeutic/medical side of my massage practice in all marketing/networking efforts, to differentiate myself.

So, a few questions:

* I'm wondering if anyone else here has worked though a similar situation (buying a client list) and what your experience was.

* Does anyone have experience with purchasing a "leads" list through any other means ... like a contact list of local homeowners whose home value is above $X amount (or something else)? I'm probably not really serious about finding and purchasing a blind list, but I'm curious about costs for comparisons.

* Does $9000 sound like too much to you? The upside of this option is that I would have a better chance of hitting the ground running. I just don't know how much better.

* What other thoughts do you have?

The therapist is willing to discuss and negotiate her offer, but I'm really hesitant to think spending this much, or nearly this much, will have the desired early growth impact vs. other avenues of building a clientele. Honestly, I also have the money in the bank to cover this offer, but it's part of my final remaining buffer and I want to feel more certain spending the money this way would be a good investment. I am going to meet the MT in person for the first time tomorrow morning, but I don't have to have my mind made up by then.

Thanks for your time and feedback!
Marlene (say "Mar-lay-nuh")
Frederick Massage Therapy in Maryland
Web: http://FrederickMassageTherapy.com/
FB: http://www.facebook.com/frederickmassage

pueppi
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Re: Cost and Options for Taking Over a Client List

Post by pueppi » Thu Nov 07, 2013 12:11 pm

Some cross-threads in the meantime:
May your trails be crooked, winding, lonesome, leading to the most amazing view. May your rivers flow without end, meandering through valleys tinkling with bells...
Houston Massage Therapy - Advanced Massage Therapy - Lucas & Lucas, LLC

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ALMT
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Location: Frederick, MD and West Virginia's Eastern Panhandle

Re: Cost and Options for Taking Over a Client List

Post by ALMT » Thu Nov 07, 2013 12:14 pm

Thanks Pueppi!
Marlene (say "Mar-lay-nuh")
Frederick Massage Therapy in Maryland
Web: http://FrederickMassageTherapy.com/
FB: http://www.facebook.com/frederickmassage

moose_goose
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Re: Cost and Options for Taking Over a Client List

Post by moose_goose » Thu Nov 07, 2013 7:55 pm

I haven't clicked on those other threads, so what I say might be a repeat...

I think something you need to think about is what is the likelihood of these clients becoming your regulars... Where I'm at, I sent out a survey to my clients to see if they would be open to seeing another therapist in our business and most said "no" because the reason they came was to see me specifically (if that makes sense)

Whatever you decide- good luck to you, and keep us posted :)

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ALMT
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Re: Cost and Options for Taking Over a Client List

Post by ALMT » Fri Nov 08, 2013 4:57 am

I'm not going to do it. At most, her help and client list would be worth $1500 to me ($1000 for her time and $500 for the list) ... MAYBE $2000. Saying her figures are based on the "industry standard" makes me wonder what industry she's talking about. If it's a general method for all industries (she talked to her lawyer about how to price the list), then I can't imagine it applies to massage. We're not selling carpet or repairing cars here, we're providing very individualized service that requires the right rapport (in touch, personality, etc.) to gain and maintain a client relationship. I did read through all of the links you posted (thanks!) and it's become clear to me that my gut instinct response is the way to go.

I meet the therapist this morning to give her a massage. I figure I will at least do that and who knows, maybe something down the road will change for her (like she no longer does massages down here) and she still might find an occasion to refer an old client to me. I will discuss her proposal after the massage and unless something changes dramatically, I'll decline her offer.
Marlene (say "Mar-lay-nuh")
Frederick Massage Therapy in Maryland
Web: http://FrederickMassageTherapy.com/
FB: http://www.facebook.com/frederickmassage

moose_goose
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Re: Cost and Options for Taking Over a Client List

Post by moose_goose » Fri Nov 08, 2013 6:09 am

ALMT wrote:I'm not going to do it. At most, her help and client list would be worth $1500 to me ($1000 for her time and $500 for the list) ... MAYBE $2000. Saying her figures are based on the "industry standard" makes me wonder what industry she's talking about. If it's a general method for all industries (she talked to her lawyer about how to price the list), then I can't imagine it applies to massage. We're not selling carpet or repairing cars here, we're providing very individualized service that requires the right rapport (in touch, personality, etc.) to gain and maintain a client relationship. I did read through all of the links you posted (thanks!) and it's become clear to me that my gut instinct response is the way to go.

I meet the therapist this morning to give her a massage. I figure I will at least do that and who knows, maybe something down the road will change for her (like she no longer does massages down here) and she still might find an occasion to refer an old client to me. I will discuss her proposal after the massage and unless something changes dramatically, I'll decline her offer.
Sounds like a good plan. You'll be attracting your "perfect client" and I'm sure in no time your schedule will be full :)
Good luck to you!

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RelaxandRejuvenate
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Re: Cost and Options for Taking Over a Client List

Post by RelaxandRejuvenate » Fri Nov 08, 2013 8:05 am

ALMT wrote:
* I'm wondering if anyone else here has worked though a similar situation (buying a client list) and what your experience was.
Have not done it, but clients have value. Is 25% of one year too high, not necessarily.
ALMT wrote:* Does anyone have experience with purchasing a "leads" list through any other means ... like a contact list of local homeowners whose home value is above $X amount (or something else)? I'm probably not really serious about finding and purchasing a blind list, but I'm curious about costs for comparisons.
Yes, from InfoUSA. You can cut it down by zip code, gender, income, home value, distance from your location...all kinds of things. But Direct Mail is successful if it has a 2% return and each piece costs about $1 a create and mail (Vistaprint generic designs tend to get ignored, you need something to stand out - 5x7 custom design)
The difference is you have no idea if this audience wants a massage or not. 400 recent customers is worth many, many times more than a mailing list based on demographics. And you can do the math in reverse -- to get just 100 clients from data mining/direct mail you would need to have 5,000 qualified leads to start with. 5,000 leads = $5,000. But, 2% return is a successful campaign -- that does not mean any campaign will get you the 2% return. 1% return and you have doubled your cost
ALMT wrote:* Does $9000 sound like too much to you? The upside of this option is that I would have a better chance of hitting the ground running. I just don't know how much better.
Not necessarily. 25% sounds reasonable, but $9000 only sounds reasonable if the client base is retained at the current level of usage. Offer her 25% of revenue off of Year One for the existing client base -- she can audit your records however she wishes.

Client acquisition is EXPENSIVE, no matter the channel used to acquire them. They are worth 25% of one year revenue if they come back. If not, they are worth nothing.
Smithers: "Sir, I'm afraid we have a bad image, people see you as a bit of an ogre." Mr.Burns: "I ought to club them and eat their bones!"

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