Scenario: The Plight of "Person A"

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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