You can make great money with service businesses – but it can take a lot of work. At least that’s what most people think. And I was one of them. Until I discovered a money-making secret almost by accident.
I was in college at the time, and, with a partner, had built a modest swimming pool cleaning business. We were making a reasonable profit, and then some.
The only problem: We were full-time students. And the pressure of running a business and keeping up our grades was starting to become overwhelming. Finally, the demands on our time got to be too much. So we decided to investigate selling the business.
Back then – in the 1980s – the going rate for a pool service account was about six times what the customer was paying per month for the service. In our case, that was an average of $42.50. Multiplying $42.50 by six meant that each of our accounts had a market value of about $250.
Our company handled about 100 pools. My heart began to race when I realized that the business was worth about $25,000. If we could sell it for that, I’d have more than enough money to finish college. And since I didn’t have many other expenses (I was living at home with my mother), I’d also be able to put aside a nice little nest egg to help me start a career.
We put an ad in the local classified section of the newspaper. It wasn’t long before we found a buyer with enough cash to buy us out. And then something interesting happened…
This buyer wanted twice as many accounts as we had. So he offered to purchase 100 more accounts from us if we could procure them.
From our experience in the business, we knew it would cost about $50 in marketing expenses to acquire a new account. Then we could turn around and sell the account to this buyer for $250. That meant an automatic $200 profit. A deal too good to refuse.
In less than 30 days, we’d filled the buyer’s "order" for 100 new accounts – and made a tidy profit of $20,000. (That was on top of the $25,000 he had already paid for the business.)
It didn’t take long for us to realize that if we could find more people in the pool service business who were interested in buying new accounts, we could make a lot of money quickly. And we could do it without servicing a single customer, without paying any employees, without dealing with overhead, and without all the other time-consuming details of running a business.
Over the next couple of years, my partner and I made several hundred thousand dollars in profits by building pool service routes. And we didn’t have to service a single pool.
This money-making opportunity is easy to replicate. You can build and sell all sorts of service businesses – so long as the business has a standard formula for placing a dollar value on each account. That includes lawn care, exterminating, aquarium maintenance, and house cleaning.
And it doesn’t require a lot of time. You don’t need any employees, or even an office. All you need is a little marketing know-how.
Not only that, it doesn’t take much money to start. It’s customary for a buyer to make a deposit of, maybe, one-thirdprice when doing a deal like this. That gives you the capital to do the marketing.
Here are the basic steps to get started:
1. Identify a service business that has a standard value for an ongoing account. In the case of our pool service, it was $250.
2. Develop a marketing plan to bring in new customers. For the pool service business, we had a mailer that that brought in a consistent response. But other forms of advertising could work too – such as door-to-door flyers, newspaper advertising, Internet marketing, etc.
3. Get your business started. Your goal here is not only to build a service business that you’ll be able to sell, but also to test and perfect your marketing approach.
4. Find a buyer for your business. You can use classified ads in newspapers, network through local business groups, and, of course, search for potential buyers via the Internet.
5. Offer to help the buyer build his business by bringing in new customers. This is where having a proven marketing system is essential. By knowing how much an account is worth to a buyer ($250 in our case), and exactly how much it costs to bring in a new one ($50 in our case), you’ll be able to structure a deal that works for both sides.
6. Once you’ve successfully helped your buyer expand your former business, you’re ready to approach similar service businesses and make them the same offer. Helping other entrepreneurs build their businesses gives you a way to extract considerable profits from a service business without needing to operate one on a day-to-day basis.
One final important note: Most states have laws that regulate the sale of business opportunities – and you must comply with the laws of your state. So make sure you get professional legal advice before you get started in this business.
[Ed. Note: You can make a fortune in the service business with Paul's recommendations - and you can do so faster by becoming a master marketer. Get proven advice about how to develop this money-making skill right here.
Putting a twist on the service business industry isn't the only unusual way to make a living. Entreprenuer Paul Lawrence reveals dozens of unique ways a small businessperson can make money with his Street Smart Business Program. Get the details here.]
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