Greatest Sales movie of all time…Tommy Boy. It’s so good in fact I have a painting of it on my office wall. It elicits a lot of smiles.
Recently I had a pretty large and frankly awesome company experience two…count em two deal deaths. The issue….lack of stickiness of the customer. In almost every business buyers and financing partners ask about a contract with a customer or suppliers. Now at the main street level I have to chuckle a bit ….no one is signing a contract for their lawn guy or pool guy..but the question is asked anyway. At the middle market / M&A level…it certainly is asked for and scrutinized heavily.
Now to the owner / seller they are always take the position that contracts are not “industry standard” or common and they are largely right for stating such but…and its a big but….you should get em anyway. What business sellers often forget is that they are in the market and the buyers decide what is important. Just like good books and records and the ability of a business to be financed with lenders; the contract or customer agreement gives a feeling of stickiness to the buyer and assurance.
There is a scene in the movie where Tommy is selling in some brake pads and the Distribution Managers’ objection to the lack of a ‘guarantee’ on the box is singularly accurate to portraying the importance of contracts and service agreements in large and small businesses.
Forget the legal ability to enforce such agreements but the existence of some type of document stating the scope of work and duties of provider and customer is largely effective in moving a buyer closer to a closing.
For more on buying and selling a business contact Tampa Business Broker Michael Shea at 321-287-0349 or email him at mike@tworld.com .