Purchasing Clients from an existing business... How much?

I am a technical consultant. I have recently been given the opportunity to take over all client's of an existing business. I own my own business, so the clients will just be migrating over to my side of the business. I don't have the money to buy the clients straight out, so I will be paying the original business owner a percentage of what his clients bring me.

Let's assume the clients passed on to me will bring in roughly $100,000 /yr in additional income.

Q. What's a fair percentage to pay the original consultant for the lifetime of his clients with me?

I really need to get some input on this, as I have never been in this type of situation nor am I aware of "how it usually works" - so I appreciate everyone's advice and suggestions.

Best,

sp00nix

hi , well how you are sure that clients are with you for lifetime ...?
also if you are sure about it, then a good percentage should be given to your original consultant (40 or 45 %) as major business is with your clients ...

Well, I have slowly begin taking on his clients and they are warming to me - it looks like we work really well together. When I say lifetime, I am referring to the total time his clients remain my clients.

Thanks for you input! I would appreciate input from anyone else!

Don't dig yourself in too deep with this. You should not continue paying this other company for the business your clients give you in the future. Will the other company continue doing any work after this deal? If so, they should receive a percentage based on the percentage of work they will continue performing.

The best thing you can do is pay up front an agreed upon amount based on what the other company feels their clients would be worth. If you can't afford to buy them straight out, then you might not be able to afford this venture.

If you feel the clients will remain clients for a few years, it may be best to take a small business loan to pay this other company and then pay back the loan over time as your clients continue to do business with you.

If you must pay this other company over the lifetime of the clients' business, then you should probably have the other company prove that they would have remained clients of theirs. For example, if the client has a 5-year contract with this other company, and it's only the 3rd year, that client would have continued providing income to the other company for two more years, hence they should be entitled to some compensation over those two years.

However, if the client can willfully go to any company they want and are not under any type of agreement, then that original company should not be provided future compensation.