search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!
ColumnsGuest Editorial

Acquisitions made easy

By Jim Hamilton
April 1, 2012
Buying a company’s name and phone numbers will give you repeat customers.



Acquiring a company is nothing more then marketing for customers. When you dole out your money for a Yellow Pages ad, a direct marketing piece or any other conventional marketing tactic, what are you expecting in return? A customer, right? Well, I think conventional marketing can be a risky business, especially if you don’t have a savvy and seasoned professional guiding you along the way.

A contractor has no guarantee that a marketing investment will pay off. Some swear by Yellow Pages ads and have had great success, while many others are trading in the ink in a book for a click on the computer so they’re not left in the dust of changing times and technology. Trends are like tides; they come in and they go out. You have to pay attention when charting your course.

If you believe marketing is a risky business, give acquisitions a try. Acquisitions are the safest marketing tactic you can use for your company. Why? You’re buying “repeat” customers - they close better than first-time customers and they are better customers. Repeat customers are the lifeblood of the service business. Also, you’re getting hundreds, even thousands, of customers at a time. I don’t know about you, but I love repeat business.

You may be surprised at how simple acquiring a business can be.

Market for a prospect

Stop sending direct mail to your conventional customers. Instead, send direct-mail letters to all the contractors in your market area. The object of this letter is to put them on notice that you are expanding into their territory and looking for companies to join you. A sample letter could be as simple as this:

“Hello Mr. Contractor,

“As you probably know, our company has had fabulous growth in the past few years. The growth is part of our plan to become the largest service provider in the area. One of our strategies will be to acquire a company in this service area. I’ve heard you may be looking to get out of the industry or just looking to sell. I would be interested in presenting you an offer for your business. I look forward to speaking with you in the near future, or even today. You can reach me at xxx-xxxx.

“Sincerely,

“Your name”

This letter is intended to start a buzz with contractors in your area.

Send these letters out when your business slows down. Everyone has slow times during the year, including your competitors. You want to catch them when they may be thinking, “My business sucks,” or “There’s got to be a better way to make a living.” Being the capitalist that you are, you want to be there for them.

The first meeting

When the phone rings with a contractor interested in selling, schedule a meeting with the owner. At your first meeting, get your prospect to do all the talking. Your job is to ask questions:
  • Why are you looking to sell?
  • What is your time frame?
  • What are you asking for the business?
  • How many customers do you service in a year?
  • How many technicians do you run?
  • How much of your business is resi-dential service?
  • What are your plans after you sell?
  • Are you asking for a lump sum or would payments work?
End your conversation with, “My offer for all cash will definitely be less than if you were willing to carry all or part of the selling price.”

At this point you have set the stage for the offer.

Review service invoices

Set up a second meeting. The purpose of this meeting is to count the past 12 months of invoices. I repeat: You need to physically count and review all the company’s invoices for the last year. Do not shortcut this step.

Break your count down by service department: plumbing service and HVAC  service. If you run across any commercial, installation or remodeling invoices, do not include these in your total count. Keep your eye on the prize. You want service invoices only. Commercial is not part of this game, and installation and remodeling invoices … well, the money’s already gone.

Now you have a count of all the residential service invoices. Here’s where math assumptions come into play. You can use these assumptions:

  • Every 625 plumbing invoices are equal to one service technician. One plumbing tech = $300,000 in service revenue, at minimum.

  • Every 1,000 HVAC invoices are equal to one service technician. One HVAC tech = $475,000 in service revenue, at minimum.

    Let’s say you counted 625 plumbing service invoices and 1,000 HVAC service invoices. You could assume the business will generate $775,000.

    So, what do you offer?


  • Determine your offer

    Based on $775,000 in potential revenue, you use the following thought process when considering your offer:

  • You would spend upwards of 10% of those sales using conventional marketing tactics.

  • Your maximum offer would be $77,500. Said differently, $77,500 is 10% of $775,000.

    It’s important to know what your maximum will be, but you don’t start there.


  • Presenting the offer

    You will now meet and present your offer. You know from your first meeting that the owner wants all cash, but the stage was set to disappoint. Always lead with your offer to make payments. The questions you asked in the initial meeting can help you in negotiations now.

    Give your payment offer first. “I am willing to purchase the company name and phone numbers for $60,000.” Don’t say another word!

    The owner will come back and say, “My inventory is worth $30,000.” You agree with him and say, “I agree with you, you should keep that.”

    “My accounts receivables are worth $80,000.” he says.  “I agree, you should keep that, too,” you respond.

    He will continue this line of thinking by saying, “My trucks are worth $20,000.” Again, agree with him: “I agree, you should get that much for those vehicles.”

    Do you see what’s happened here? The offer was $60,000. The owner is expecting $190,000 for lock, stock and barrel.

    Don’t argue with the man about the value of his assets. That’s not the first order of business. Your priority is to buy the company name and phone numbers.

    After he’s done spitting out the net value of all his assets and he realizes you aren’t interested in them, he may ask you: “What are you buying?”

    You respond, “I just want the company name and phone numbers. I will pay you $1,000 per month for the next 60 months, starting the day you transfer the phone line into my name.” If he balks at the price, you know how high you are willing to go.

    An owner once told me he wouldn’t take less then $1 million for his business. I said, “OK, I will pay you $1 per day for the next million days.” He looked at me and said, “Are you nuts?” I said, “I would be if I had to pay it all up front.”

    We chuckled and made a deal - I gave him about $75,000 over five years. He kept all his other assets and sold them off.

    The conclusion here is to buy only what will generate service phone calls. The phone number is the only thing that is unique about any business. Every company has 10 unique numbers that customers call.

    If done right, the draw on your financial resources will be small and the payoff will be big!

    Links

    • Contact Plumbing & Mechanical
    • Follow PM on Twitter!

    Share This Story

    Looking for a reprint of this article?
    From high-res PDFs to custom plaques, order your copy today!

    Hamilton   copy

    Jim (Bone) Hamilton is a business coach with Nexstar. He has spent 36 years in the plumbing/heating/cooling/electrical service industry, and has purchased and transformed 28 underperforming companies into profitable businesses, each in less than a year. For more information on how you can get rapid results, go to www.nexstarnetwork.com or call 888/240-STAR.

    Recommended Content

    JOIN TODAY
    to unlock your recommendations.

    Already have an account? Sign In

    • Worker using the Milwaukee Tool SWITCH PACK drain cleaner

      Pipeline profits: Drain cleaning, pipe inspection create opportunities

      Drain cleaning and inspection services offer lucrative...
      Green Plumbing and Mechanical
      By: Nicole Krawcke
    • Uponor employee, Arturo Moreno

      The reinvestment in American manufacturing and training

      Plumbing & Mechanical Chief Editor Nicole Krawcke and...
      Plumbing News
      By: Nicole Krawcke and Natalie Forster
    • March 2024 Women in Plumbing hero image of woman engineer overlayed by circle of hexagon shapes with numbers from 1 to 10

      Celebrating 10 Influential Women in the Plumbing Industry

      Celebrating Women's History Month and Women in...
      Plumbing News
      By: Nicole Krawcke
    Subscribe For Free!
    • eNewsletters
    • Online Registration
    • Subscription Customer Service
    • eMagazine
    • Manage My Preferences

    More Videos

    Sponsored Content

    Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Plumbing & Mechanical audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Plumbing & Mechanical or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

    close
    • J.J. Keller CMV vehicles on road
      Sponsored byJ. J. Keller & Associates, Inc.

      The dash cam game-changer for small business safety

    Popular Stories

    The interior of a government building.

    President Trump signs executive order promoting skilled trades and apprenticeships

    Figure 1 is a sketch of the flow problems of the current plumbing system.

    Hydronic heating glitch solved: Why adding a circulator won't fix primary loop flow issue

    Underfloor heating installation with drain sewer hole in bathroom close up on water floor heating.

    Using hydronics to leverage time-of-use electrical rates

    PM BEMIS June 25 Free Webinar: Optimizing Plumbing Solutions for Single-Family, Multi-Family & Public Spaces

    Events

    November 13, 2024

    Future Proofing MEP: Navigating the 2026 High Efficiency Water Heating Standards

    Join our deep dive into DOE’s new standards so you can future-proof your MEP practice.

    EARN: 0.1 ASPE CEU; 1 AIA LU/HSW; 0.1 IACET CEU*; 1 PDH

    View All Submit An Event

    Poll

    Will business be up or down in 2025?

    Do you anticipate business in 2025 to be up or down in comparison to 2024?
    View Results Poll Archive

    Products

    The Water Came To A Stop

    The Water Came To A Stop

    See More Products

    Download the FREE Water Conservation, Quality & Safety eBook: Plumbing Trends Increasing Safe Water Availability

    Related Articles

    • Jim Hamilton

      The success of your business is in your control

      See More
    • Jim Hamilton

      Play to win

      See More
    • Jim Hamilton

      The words you say can ruin your business

      See More

    Related Products

    See More Products
    • 418GcA6aLWL__SL210_.jpg

      Primary-Secondary Pumping Made Easy!

    • building-code.gif

      Significant Changes to the International Building Code 2015 Edition

    • M:\General Shared\__AEC Store Katie Z\AEC Store\Images\Plumbing\new sites\edr.gif

      E.D.R. - Ratings for Every Darn Radiator (and convector) you'll probably ever see

    See More Products
    ×

    Keep your content unclogged with our newsletters!

    Stay in the know on the latest plumbing & piping industry trends.

    JOIN TODAY!
    • RESOURCES
      • Advertise
      • Contact Us
      • Directories
      • Store
      • Want More
      • Supply House Times
    • SIGN UP TODAY
      • Create Account
      • eMagazine
      • eNewsletter
      • Customer Service
      • Manage Preferences
    • SERVICES
      • Marketing Services
      • Reprints
      • Market Research
      • List Rental
      • Survey/Respondent Access
    • STAY CONNECTED
      • LinkedIn
      • Facebook
      • Instagram
      • YouTube
      • X (Twitter)
    • PRIVACY
      • PRIVACY POLICY
      • TERMS & CONDITIONS
      • DO NOT SELL MY PERSONAL INFORMATION
      • PRIVACY REQUEST
      • ACCESSIBILITY

    Copyright ©2025. All Rights Reserved BNP Media.

    Design, CMS, Hosting & Web Development :: ePublishing