Buying an existing business: Ready-made customers

One major advantage to buying an existing business is the immediate stream of cash from customers. Customers can be considered among the assets of a business for sale, especially if there are contracts that can be transferred.

Will clients stay with you? In the case of a service-oriented business like a beauty salon or a financial planning office, maybe not. They may decide to follow the former owner or his employees. Under these circumstances, negotiate a non-compete clause with the owner and employees that covers a specified period.

But just who are these customers? For certain businesses, a brief description of the "typical" customer is a "no-brainer." For example, if you were going to buy a beauty salon in an economically upscale neighborhood, the typical customer would be a female from a higher-income household.

On the other hand, many different kinds of people walk into a hardware store. It doesn't matter how rich or poor a customer may be, the light bulbs do have to be replaced once in awhile.

In the product-related business, consider disguising yourself as a customer to browse the seller's store, and then peruse the nearby competitors. Compare products and prices. Casually observe the other customers. Make note of gender, age, what they buy and why. Is the purchase for work or home? Did the customer come alone or with friends, family or co-workers? (They do influence purchases).

In the service business environment casual observation is difficult, so you will have to rely on the seller to give you a detailed description of the typical customer: gender, age, profession, habits and any other details that appear to be relevant. Industry and trade organizations provide the most logical alternative for gathering demographic data about the typical customer.

If the business proves to be profitable, you will want to keep the present customer base. The strategy you implement will be determined by the seller's historic relationship with his customers, how well the seller knows them, the seller's willingness to participate in the transition of ownership and the point in time when the employees are made aware of that transition.

Good customer service is the hallmark to repeat business and loyal customers. If the seller has maintained good relations with the customers, you want him to participate in informing them of the new ownership. Create the opportunity to meet the customers in the presence of the seller, assuring them of your determination to maintain the same level of service. This also provides the opportunity to learn even more details about these people, and why they buy at that business.

Employees are the "front line" in customer service. You are only as good as your employees. Timing is critical in successfully recruiting employee support. Employees are fearful of a change in ownership until they have the opportunity to meet you and assess whether they will have a future with the business. Once the terms of sale have been reached, immediately plan to meet with the employees in a group setting and then individually. Let them know who you are and give them the opportunity to learn more about what is to come.