Hi Lifehacker, My fiancé and her parents are looking to sell their beauty salon so they can open a coffee shop. To keep an income stream, they want to continue working in beauty from home with existing customers. Is this possible or are they subject to some form of goodwill when it comes to the clientele of the current business? Thanks, Good Will Hunting
Pampered customer picture from Shutterstock
Dear Matt And/Or Ben,
For those not in the know, business goodwill refers to the intangible assets that contribute to a company's overall value - stuff like brand recognition, installed customer base and intellectual capital. This is separate from a company's net assets which include tangible resources like equipment and property.
When selling a business, the particulars surrounding goodwill need to be explicitly addressed in the handover contract. Providing an extensive customer database will boost the business' overall value - but you need to actually deliver the promised clientele.
While it's expected that a percentage of customers will be lost during the transition, you can't put a valuation on existing clients and then actively poach them from the new owners. That's just not cricket.
You don't have to hand over customer details when selling a business, but you'll obviously get less money this way. One possible option is to concentrate on intangible assets other than the customer base. For example, is the beauty salon in a well-trafficked location near public transport? If so, you can factor this into the overall value of your business and still keep the bulk of your clients.
In any event, beauty salons are known for forging strong customer relationships at the human level; their loyalties lie with the person servicing them rather than the business or brand. As such, the value of your existing clientele probably isn't worth much to the new owners anyway.
If any readers have experience in this area, please share your tips with GWH in the comments section below.
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