Scenario: The Plight of "Person A"

Hello all.

Looking for an opinion on this scenario:

Person A, out of emotional distress and desparation due to an extreme personal problem, sells a profitable business, including the client list to Person B.

Months later, Person A finds that Person B did not provide adequate service to the businesses clients.

Person A's previous clients start phoning and asking Person A for refunds, *Or Else*... even though Person B clearly stated that they were a wizard at such conflict resolution, and for a reduction in the selling price of the business, would *Take Care* of the clients.

The reduction in price of said business was granted, and that's all Person A thought of it, until recently.

Here's what Person A wants to do now:

Person A is prepared to SATISFY the needs of these former clients, in an effort to *Do the Right Thing* and try and keep everyone happy.

Question????

Is Person A off his virtual rocker for not wanting to throw Person B to the wolves???

Just wondering what you guys and gals would do if you were in Person A's shoes ;-)

Paul


The EbizHerald

Paul ~

If they were my clients originally and they came to me seeking assistance... I would have a tough time turning them away.

This same scenario played out two years ago, with me, when I moved to another Independent Agency. My previous clientele were not being taken care of, in the way they were used to, with me being there for them.

So eventually I was called upon by a small number of my best clients. Even though I was under a Non-Compete Clause for a year at the time... I chose to take care of their needs.

I then received a letter of intent to file suit for $175,000 in damages from my previous company. It was eventually dropped because I hadn't solicited the business... The business had chosen to leave them. And the other company didn't want, or need, to have a bad PR bout in the local press.

If Person 'A' isn't violating certain agreements with Person 'B'... I would feel somewhat obligated to assist them any way I could.

Hope that helps you somehow... The end-result is the customer or client should always be taken care of in the manner, you yourself, would like to be taken care of. Sometimes, I know, it doesn't turn out that way. But that is also what happens in the Business World too.

Not everything is always fair, or equitable, all of the time.

A sad commentary in itself...

~ Mike

what your Jimminy Cricket tells you,
and give a little whistle.

Gordon

PS. YOU'll never go wrong doing the right thing.

Hi Paul,

I think that Person A and B have shown in the past that they are both customer orientated. But Person B, just being trained, is not likely to be as effective as Person A who already knows the "ropes" to the business. But there is something else that is NOT being considered that works AGAINST person B. That is... these were Person A's customers.

Part of what we base our decision on when we choose to hire someone's service, is the individual behind the business that is providing the service. These are customers who choose to hire you based on YOUR knowledge, your affability and all the other idiosyncrasies that combine to deliver a USP that you don't even realize you have. It is what makes the relationship between you and the customer "special."

This cannot be bought, sold or transferred.

Section 4 item .01 of Revenue Ruling 59-60 states: It is advisable to emphasize that in the valuation of the stock of closely held corporations or the stock of corporations where market quotations are either lacking or too scarce to be recognized, all available financial data, as well as all relevant factors affecting the fair market value, should be considered. The following factors, although not all-inclusive are fundamental and require careful analysis in each case:

Then as item (f) in this list it says: Whether or not the enterprise has goodwill or other intangible value.

This is often the reason why you will see acquisition agreements which keeps the seller actually working for the business for a defined period of time -- to help in the transition and application of the "goodwill" that did have a monetary value placed on it.

IMHO careful analysis of the transferrable goodwill was not given enough attention -- perhaps not even recognized or considered. Although fundamental to any enterprise, perhaps even more so when we are talking about "web based" businesses. My thought on this matter would indicate that as long as too many bridges have not been burned by Gentleman A and Gentleman B, that there might yet be time to give this some consideration.

I'm sure numerous strategies exist that could still be employed....

Best Regards, Steve MacLellan




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