Re: Account worth

[tourman <robercampbell@xxxxxxxxx>]

On May 12, 7:20 pm, Nomen Nescio <nob...@xxxxxxxxx> wrote:
> >technically, without a contract...you have nothing to sell.
>
> Not necessarily.  If the seller has his customers signed up to
> month-to-month contracts, the accounts may still have value, though
> probably less than a longer-term contract would be worth.
>
> If the seller has no contracts at all, or contracts that don't contain the
> proper language to limit liability, the buyer may require the seller to
> sign his accounts up on the buyer's contract form as a condition of sale.
> Not the best arrangement for the seller, obviously.
>
> Finally, nobody has mentioned the guarantee period.  The seller will be
> expected to guarantee that the accounts he sells will continue making
> payments to the buyer for some period of time after the sale.  Part of this
> is to keep sellers from getting paid for deadbeat , cancelled, or
> nonexistent accounts, part of it is to protect the buyer from paying for
> accounts that cancel or go out of business a short time after the sale.
> The buyer holds back a percentage of the purchase price until the end of
> the guarantee period.  Even on month-to-month contracts, this amount gives
> the buyer some protection.

RHC: Very good point !! Most deals involving purchase of alarm
accounts (regardless of length of contractual agreement) usually
involve some kind of staggered payment plan with a clawback clause for
just this reason. Bad clients can bail out regardless of contract
length, and there is no reason why the buyer should end up financing
this "higher than normal attrition rate" loss. The shorter the
contractual period, obviously the more important it is.

One other risk to both buyer and seller is the tendency for the buyer
to want to raise prices up to his levels from the levels that the
sellers accounts are at. This is a recipe for disaster.The buyer paid
a price based on the original monthly rate and should honour this rate
at least for the first while. One large buyer bumped the rates and
lost 80% of the accounts he bought (and these accounts were under long
term contract). So the seller has to find out in advance how the buyer
is going to handle this transition period of a year or two since this
will affect what he ends up getting paid. From the sellers
perspective, he should know exactly what the buyer plans to do and
what his old clients can expect at least for the next couple of years
afterward.