Meet Customers and Suppliers Before Buying a Business

The success of a business depends not only on a business owner’s efforts but also on reliable suppliers/vendors and satisfied customers. It is prudent therefore for you, the buyer, to talk to the seller’s key customers and suppliers before committing to buy a business. It is usually when the purchase of the business is about to be completed that the seller allows you to contact the vendors or customers. The purchase agreement that is crafted by your lawyer should provide you a way out if you want to back out after getting very negative reviews or feedback from the suppliers or customers.

Below are some pointers to keep in mind during this stage of buying a business.

  • All businesses have vendors or suppliers. These could be suppliers of raw materials, machinery and equipment, spare parts, repairs or maintenance, products, etc. Ask the seller as much information about the vendors or suppliers. Find out if he or she has special arrangements with them – contracts, deals or discounts, credit line, etc. Will the vendors be willing to carry on with you as the new owner? Will they be extending the same amenities to you?
  • Check the payment history and discuss any problems the vendors may have with the seller. You will usually find satisfied suppliers when buying a profitable business. A failing business may mean the business is in debt, and there may be payment problems with suppliers. If this is the case, there is a strong chance that suppliers may not want to do business with you should the deal go through.
  • Mention your plans for the business, especially with regards to growth or expansion of the business. Can the vendors cope with your increased demands? You would want assurances from suppliers that they will continue the existing supplier relationships.
  • You should also check if there are back-up plans in place. What would happen if the current suppliers cannot deliver? Are there other suppliers that can meet your specific needs?
  • Customers, too, may be wary of any change in the business they patronize. Some customers may be familiar with the seller. How many customers does the business have? How long have they been with the company? Which months result in the most sales? What are the popular products or merchandise?
  • Do some customers account for a large percentage of the sales? What happens if these major customers go elsewhere or go bankrupt? It is worrisome to replace large customers should you lose them. Try to convince these large customers to continue their relationship with the business. Clearly, a business with many customers is less risky.
  • You can gather lots of information by talking to current clients or customers. They can tell you who among the employees are particularly efficient, and who addresses their needs promptly. You would want these employees to continue working in your team. The customers may even offer suggestions on how to improve on the company’s products and services.

Meeting suppliers and customers will be the start of a working and productive relationship once you take over the business. Win their trust and confidence with your warmth, honesty and caring attitude. Provide at least the same level of service, product and support as the previous owner, and the customers and suppliers will stay on with the business.

After meeting with the suppliers and customers, what information have you gathered to help you in deciding whether to buy the business?

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