A common question I receive from business buyers is whether there are any customer contracts in place. I always think it is a bit of a funny question. With most businesses that have customer contracts there are so many “outs” in the contracts for both parties that they provide very little guarantee of future business. Yet, even when buyers agree that this may be the case, they still often feel better about the business’ future prospects knowing that customers have signed such agreements. I believe it is because the contract is a demonstration that the customers anticipate doing business with the company being acquired into the future.
If you own a business that you are considering selling and you don’t use customer contracts you may want to consider doing so, since this may help make your business more marketable and potentially more valuable. However, you will need to be cautious about how you do so. For example, there should probably be enough outs in the agreement that you can get out of it without significant penalties, and you should make sure that the agreement is transferrable to an acquirer. A good attorney who has business sale transaction experience should be employed to help you draft an agreement that won’t cause problems. A good way to approach customers who you have been doing business with about a new contract is that you want to formalize the relationship and ensure that both parties expectations and responsibilities are documented.
Codiligent Business Brokers - Portland, Oregon based business brokers representing sellers of businesses with $500k – $20 million in annual revenue. To schedule a free consultation to discuss the possible sale of your business you may contact Eric Williams at 503-535-8817 or E@codiligent.com
