Buying a Business? Don’t Get Taken to the Cleaners!

By February 6, 2018 No Comments

My firm represents clients involved in the purchase and sale of small businesses. I find that both the buyers and the sellers in these transactions tend to underestimate the work involved, both on the legal side and the non-legal side. To illustrate, let me tell you a true story of my recent dry cleaning travails.

Like many busy professionals, I have dry cleaning home pickup and delivery service. I’ve worked with the same dry cleaner for several years. I’ll call it “Acquired Dry Cleaner.” Recently, my dry cleaning was delivered to my home in completely different packaging than I was used to, and with a credit card receipt bearing a different dry cleaner’s name. I received no communication from the company as to what had occurred. When I needed to schedule my next dry cleaning pickup, I called Acquired Dry Cleaner. The person answering the telephone explained that the owner sold the business and suggested I call the new dry cleaners that had purchased it. So I did. When I called the new dry cleaner, which I’ll refer to as “Purchaser Dry Cleaner,” the assistant gathered my information, looked up my account, and promised to call back to inform me of my new pickup schedule. I never received a call back.

After several days had gone by with no return call, I began researching new dry cleaners online. I found a dry cleaner that allowed me to request pickup and delivery services via either the cleaner’s website or a mobile app. I happily signed up and quickly scheduled my first pickup. A week later, Purchaser Dry Cleaner mailed me a confusing document labeled an “Invoice Manifest.” A manifest is normally used for commercial shipping transactions, not for dry cleaning. The manifest seemed like it was a bill for the previous dry cleaning order, even though I had already paid it by credit card. I looked at it, puzzled, and then put it into my document shredder. Then, a week after that, I received a letter from the owner of Purchaser Dry Cleaner, thanking me for choosing their business and asking me to call him with feedback on my experience. Rather than spending time providing the owner with feedback, I tossed his letter in the recycling bin and continued working with the new dry cleaner I found online.

Can you imagine if Purchaser Dry Cleaner had committed the necessary time and energy to plan for the best way to transfer over the customers from Acquired Dry Cleaner? Suppose when Acquired Dry Cleaner delivered my last dry cleaning order, it included a friendly letter introducing me to Purchaser Dry Cleaner and explaining my next steps? Then, what if Purchaser Dry Cleaner had sent out its welcome letter within a week, rather than several weeks later? And, a critical point, suppose Purchaser Dry Cleaner had properly trained its employees, so that the employee answering my call could have told me what my new pickup schedule would be?

The bottom line is that Purchaser Dry Cleaner underestimated the time and effort needed to transfer customers over after the purchase and sale transaction closed. As a result, I’m sure I’m not the only customer who was lost. Purchaser Dry Cleaner likely paid for a customer base that, due to its own carelessness, did not materialize. Similarly, I find that businesses substantially underestimate the legal work needed in the purchase and sale process, which can cause tremendous hardship. I look forward in explaining more about the legal side of purchase and sales transactions in future blog posts.

Photo credit: Simon Law on Flickr 

This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.

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