The Vendor’s period of assistance (VPA) is, as described in Clause 6.4 (5) a of the General Terms of Sale 4th Edition, a period …… to give the purchaser to such an extent as reasonably required by the purchaser the benefit of the Vendor’s knowledge and experience in the conduct of the business.
This is seemingly one of the most logical but least appreciated clauses in the favour of the purchaser on any SAP agreement on any business sale. It would seem logical that a purchaser buys a business from the vendor and as part of the negotiation the vendor agrees to work in the business with the purchaser for a given time to help him transition the goodwill of the business to the new owner.
Why don’t purchasers in the main take advantage of this opportunity to have trainer wheels on when they first take over the business? There seems to be lots of reasons but arrogance seems to be the foremost reason we have encountered. I think it is fair that when a purchaser buys a business they should feel that they can do a better job of growing that business than the current owner, otherwise why would you buy it? But it is arrogant to think that you can do it from day one. We all have two ears and one mouth and for this period of time we would recommend that you use each in that ratio. Shut up and listen and take in what the owner is passing onto you. You may disagree but that is how the business has been operated up until this point and it is the goodwill of the business.
A 20 working day non-paid period of assistance is the norm for SME transactions in my experience. That it one full month of trading and allows a new business owner the opportunity to witness the monthly machinations of that business, before having to do it for yourself.
It is also true that the outgoing owner can be a bit of a distraction to the existing staff, also he/she can be a little precious about how the business has operated previously, but their experience is invaluable so a new owner needs to manage the distraction but don’t throw out the baby and the bathwater by not transitioning you into the business.
A significant portion of the goodwill in any business is tied up in the suppliers and customers of that business. Having the outgoing owner introduce you to these important business partners provides the best chance for the continuity of the relationship. An explanation of why the outgoing owner has sold the business and then reasoning on why you have purchased the business can give confidence to both suppliers/customers that it remains business as usual.
Buying a business always involves risk, but a sure-fire way to help mitigate that risk is to ensure you properly transition all aspects of the business from the outgoing owner. Give yourself the best chance of success by working in the business for a significant period of time before you start to make changes. To often we see purchasers make radical changes to their new business before they have given truly understand the ramifications of doing so.