Reader closing print shop and Tom suggests he still could raise cash by selling accounts and details typical transaction. Not the preferred way to do it, but better than nothing.
Reader writes: Tom, reading your post on when to quit hits exactly where I am. Due to many factors I have pared down to being the only employee for the last three years. I have attempted to sell the business, and have had three “almost” sales. At this time due to two bad knees, a wife that can no longer drive, and the “I’ve had enough” attitude, I have decided to close.
A few years ago I accumulated debt in trying to continue to operate. After releasing a pressman and customer service/graphic artist, I began to work my debt down with income from the business, and additional contributions from me.
I plan on working through November, and use December to sell the equipment the best I can. I do not plan to accept new jobs after Dec 1st. I’m organized as a Subchapter C and am the only stockholder.
Since the company owes me quite a sum of money, I plan on transferring all company assets to me personally, not renewing my corporate license or business license. I have appreciated your advice and wisdom over the years. Any comments would be appreciated.
Thanks, John
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Tom responds:
Hey John, it’s hard not to be nostalgic hearing that you are closing. It’s been a long ride since we first met at the trade show those many years ago, eh?
Okay, you’re winding it down after having almost sold it three times. What can you do to maximize what you are going to walk away with?
Off the top of my head, I’d first send a letter to any obvious buyer in the area, such as another printer, who may be interested in buying your customer accounts.
What can you get? Here’s what I see:
1) You will probably be offered something like 10% of significant accounts for future purchases for as two years and I’ve seen it go up to three in some cases depending on quality. I recommend to someone buying the significant accounts (depends on the buyer’s size but say $12,000 per year or more) and let the trinket business slide BUT I do see printer’s paying a percentage on all accounts, including the small ones especially if they themselves are smaller shops.
2) Franchised Printers are typically more likely to purchase accounts than independents because most franchisors have been promoting this for some time. Doesn’t mean ignore independents, it just means you sure don’t want to ignore the franchise printers.
3) You will probably NOT receive cash up front. In fact, you will probably be paid on a monthly basis similar to a sales commission. It is normally expected that you would be paid on ALL sales to the specific account, not just exact repeats of jobs you have printed. For this reason, you would place a higher value on a buyer who is more likely to be in business for the long run even though they may not be offering you as much percentage or as long of a time.
4) You would deliver to the buyer all the customer files and anything else that will help the buyer do business with your customers.
5) At a minimum, you would be expected to write a letter to your accounts introducing the new printer and quite commonly, for significant accounts, be expected to spend time visiting the customers with the buyer. However you do it, this is a very important step in the sale process that a lot of shy printers don’t like to do … which maybe the reason they are selling their accounts in the first place.
Specifically, the actions in steps 4 and 5 work to YOUR benefit because you are typically being paid on the basis of what the other guy sells. So, you want the transition to be as seamless as possible and for your customers to buy lots of printing from the new guy, at least during the payout period.
DANGER: Sell Accounts Before You Close
Selling customer accounts is similar to selling fish. Turn the refrigeration off on fish and you won’t have anything to sell after a day. Stop providing the printing customer with printing, wait even a few days and try to sell the accounts and you will be selling rotten fish. Printing customers need printing frequently enough that, if you close or even if they think you are going to close, they’ll get another printer immediately and your buyer will have no advantage and no reason to buy your customer list, because they aren’t your customers once you stop selling to them.
BETTER THAN NOTHING
Okay, selling your customer accounts is not preferable. What is preferable is selling the business as a going concern. But, if you can’t, then selling customer accounts is better than nothing. Then you’ll still have the opportunity to sell the equipment and any other assets separately.
So, those are the thoughts off the top of my head. Lemme know how it goes and if there are any questions as you wind down. And keep in touch in your afterlife.
Tom Crouser
