Buying a Business

[XJ75]

I've been sent details of a business for sale, it's a business that I know a bit about and a close family member knows a lot about. I'm not particularly interested in the business as a whole, I think the branding is poor and it hasn't been well marketed, so I would almost definitely re-brand it. The thing I am most interested in is the client list.

My main question is....if I bought the business, what is to stop the previous owners taking the client list and starting a new rival company? This would make the proposition a lot less attractive. Is this something that can be drawn up in a legal contract? If so, how could it be enforced (i.e. even if they sign a piece of paper, how would we ever prove whether or not they have done just that?).

Any other tips or advice would also be welcome.

Thanks.

[XJ75]

Thurbs said:

Warranties on activities before they sell. Restrictive covenants on activity after.

If the business is only worth their client list, I guess you are not paying much for it?

Thanks for your reply.

We haven't discussed valuations yet but in summary yes, I don't intend to pay very much at all. If that doesn't sit well with the current owner then I will pass on the deal. The company has no physical assets or premises, the website is tired and in need of a revamp (I can do this myself) and as I mentioned before the brand is poor.

[XJ75]

Thanks for the replies. Sounds like it's pretty standard practise to get something drawn up in a contract.

The reason I'm so interested in the client list is because it's a business that provides ongoing services to clients, with a lot of repeat business. So while I'm hoping to expand and attract more new business, I'm also hopeful that I will get a lot of ongoing business from the existing client list.