Businesses for sale

I love going into Chinatown to my favorite Chinese bakery to order their Chinese pork buns (known in Cantonese as char siu bao). Priced at 80 cents each, the counter help long ago upsold me by letting me know I can get 4 buns for $3. I have been ordering 4 for $3 ever since, 3 times a week. I was a bit surprised last Sunday when I dropped in, ordered 4 from the manager, and was charged $3.20, 20 cents more than usual. I walked away with my 4 pork buns, 20 cents short of what I expected, without saying anything, in order to reflect upon this trauma and wondered if I should contact my therapist for an emergency session. A couple of things went through my mind:

1. I’ll firebomb the place for overcharging me!! (just kidding – didn’t even cross my mind, thanks to the progress I’ve made under my therapist’s guidance)
2. It was packed with tourists and perhaps the manager forgot the deal I had been getting.
3. They have a new, unannounced pricing schedule.
4. He’s being passive aggressive in saying he doesn’t want my business and I’m too thick to recognize it.

Whatever the truth is, I thought that I spend $468 a year ($3 x 3 times a week x 52 weeks a year) at this bakery, and for a mere 20 cents, they risk losing that revenue stream by alienating a steady customer.

You’ve heard it before: “It’s not the money; it’s the principle of the matter.” You have also heard that customers vote with their wallets and their feet: they walk over to the other bakery, taking their $468 with them. Customers don’t always speak up. Many of them vote with their wallets and feet instead. They will tell others about their bad experiences much more than about their good ones. And there you are, staring at your financials at the end of each month wondering why there’s a steady erosion in your revenues.

Okay, so what’s this got to do with you buying your business? Plenty. When you buy an existing business, you’re usually also buying a customer base – along with physical assets, such as fixtures and equipment. You want to find out from the seller if there are certain steady customers with certain expectations or special deals – and make sure you keep those unwritten agreements.

Hey, this is better than being an early investor in Google: for 20 cents, you keep $468 coming in each year.