Lester de Vere & Richard Stevens are probably the Shore’s leading Business Brokers. Born and bred on the Shore they represent ABC Business Brokers in their home patch. They have spent many years in business themselves before taking on the role at ABC. Their passion is to 'help vendors transition through the sales process and creating a win-win for both seller and purchaser' Lester is ABC’s No.1 Auckland Salesperson in 2018 & 2020 and being named ABC’s Trusted Advisor of the Year 2018. Richard awarded the Rising Star of the Year 2020.
What is typical with many businesses in New Zealand is that suppliers, especially of services, will have a preferred supplier agreement in place which is not the same as a contract. The majority of businesses we appraise do indeed use preferred supplier agreements, and that’s the reality.
In the case of a preferred supplier agreement (PSA) the definition may well come into play, especially when a business is being sold and the purchaser is looking for continuity of business, post sale.
Let’s look at the example of say a carpet cleaning business where they have a PSA or some casual agreement whereby each party gets on well, so they just get on with it and do business. This casual arrangement is something a buyer will be a little wary of and not prepared to put a high degree of trust in or value on, especially if the relationship is with the owner of the business and the company getting the work done.
A PSA may be assumed to mean a contractor has priority rights, as in preferred over and above all others in terms of providing a service, but it comes down to interpretation.
A contractor may argue that the PSA meant that during the engagement period they would be offered the first opportunity to supply their services in preference to other suppliers, and that the company would not obtain services from any other contractors without giving them a reasonable opportunity to carry out the work first.
The company however could argue that it was not intended that the contractor would have any priority or be preferred over and above other contractors, merely that they would be an approved supplier of the services.
When the owner of a business has a contract in place, this is something that a buyer of that business will put a higher degree of value on, as it offers more comfort around future maintainable earnings.
A small but important difference and definitely food for thought.
Cheers for now,
Lester and Richard.
Lester de Vere, 0274 599 773 or
email: Lesterd@abcbusiness.co.nz;
Richard Stevens, 021 375 149 or
email: richards@abcbusiness.co.nz;
Facebook: Lester de Vere ABC Business Broker
/ Richard Stevens ABC Business Broker
Visit: www.abcbusiness.co.nz
