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Caught in a Customer Disappearing Act

In today's economy, no one can predict how much atttition will take place.

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This story appears in the June 2009 issue of Start Up.

Q: "I've been talking with the owner of a very popular local service business who wants to retire. I would love to buy his business, but I'm afraid that with the bad economy, the business won't be doing as well next year as it is today. How can I protect myself legally in case the customers all disappear after I buy this business?"

A: When buying any business, there's a risk of "customer attrition"--a significant decline in sales after the business changes hands. In today's volatile economy, no one can predict how much attrition will take place, and you can't legally prevent customers from going elsewhere or buying fewer services. Accordingly, your seller should cooperate with you to keep attrition to a minimum and share the pain if there's significant attrition due to circumstances beyond your control. Here are some ideas:

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