Prepare Your Answering Service for Sale

By Paula Ford

Every telephone answering service should always be prepared to sell.  This is a strategy that puts you in control, allows you to say “no” or hold out for a better offer, and increases profitability.  This strategy improves your TAS every day, whether you want to sell or not.  Having your service ready to sell means having it running at its maximum potential.

Keep Good Books: Don’t do anything under the table; it can come back to haunt you.  No buyer will pay for income you can’t prove.  Also, if your labor cost is low because you are paying someone under the table, it makes everything else about the deal look fishy.

Match Billing with Clients Serviced: Compare your services to what you are billing.  I once knew a service that claimed to have 150 clients but billed less than 100.  Were they doing work and not being paid, or did they just keep poor records?  Either one is bad news.

Do You Have a Business or a Hobby?  Conduct an honest appraisal of whether you are running a business or a full-time hobby that “sort of” pays for itself. 

Charge Appropriately: Do you give excellent service but charge “competitive” prices?  This is just another variety of undercharging.  Whoever buys your service will do one of two things:

• Provide lower quality service than you do, making your clients unhappy

• Give world-class service at world-class prices, making your clients unhappy

Raise Rates:  Failure to do routine price reevaluations is the biggest reason why your answering service might be not as profitable as it should be.  One TAS I know hasn’t raised its rates in four years.  Each year its cost of doing business has risen, so it cuts profits every year.  The quickest way to increase the value of your business is to raise your rates.

Adjust Your Thinking:  Almost every answering service has a few big accounts – ones that pay $1,000 or more per month.  The trouble is that these accounts often cost more to service than the income they generate.  Here are some solutions to the problem of serving big accounts:

• Figure out what the account should be paying to be profitable.

• Find five to ten new customers who will make money.

• Adjust the rates on the big account.

• If the big account cancels, you have the replacement income in place; if they stay, you will have more profits.

Pursue Quality Clients: A buyer will look at the quality of your client list as well as your income.  Short-term clients and poorly paying customers don’t inspire high offers.

What if you don’t sell your business after taking these steps?  Your business will be more profitable and be more enjoyable to run.  Either way, it’s worth the effort!

Factors Affecting the Sales Price:

• Likely 10 to 15 percent of your clients will immediately quit, regardless of how smoothly the sale of your TAS goes. 

• A few clients only use your service because they are friends or you are also their customer. 

• Every answering service has a few customers who have stopped using the service months or even years ago, but the billing department has not made the adjustment.  Something as simple as changing the billing address causes an alert, generating a letter stating, “We have no further need for your services.”

• If customers are considering cancelling, the sale of your business might make the decision for them.

You Might Have a Hobby if You:

• Give preferential rates to friends

• Keep accounts on service even when they can’t pay for it

• Don’t know which clients are current and which are past due

• Don’t evaluate rate increases

• Aren’t making a living income

• Never figured out what your income is

• Work as a full-time agent in addition to managing your business

• Don’t routinely evaluate an account’s status when a change of work is requested

• Have no way to know whether a client is profitable

• Don’t charge for all the work you do for a client

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