Why Building On Your Good Reputation Is Bad for Selling a Business

When starting a new business, it is natural to get your first set of customers based on your relationship with them. And many business owners turn this into their marketing strategy. They work very hard to personally connect with their customers and their customers love them and tell others.

At first this seems great. The customers come in requesting you. They love you and you are happy to do what it takes to keep them happy.

Certainly, it is flattering to feel important and needed, but what happens when you the time comes to transfer that business or sell the business? How will the customers feel about the new owner who has a different personality and style?

Building your business based on your good reputation and your character can back fire on you when you try to sell a business.

A new buyer is going to want to see that the customers are loyal to the company and not to one person.

Imagine you are looking to buy an insurance agency and many of the customers of this agency are close friends and colleagues of the seller. You know there is a non-compete for 3 years and 15 miles, but the insurance license allows them to work anywhere in that state. So what is to stop this seller from starting an agency 40 miles away and bringing those customers over to that agency? The answer is sadly nothing.

Also, since these customers were so closely attached to the previous owner, what happens when you do not do things like the previous owner did? The answer: they leave and there goes the business..

Sadly, many buyers will walk away when they learn that the customers are too closely attached to the seller. This can make your business worthless, regardless of its profitability.

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