Question:
My son recently graduated from college with a business degree.  To help him get started my husband and I aided him in purchasing an existing business.  It was a distributorship; the man sold nails and fasteners to building contractors.  Our concern at the time was that the growth of revenue showed no increase over the last few years, but it was stable.  Our son immediately put his education to work, transferring records and financial functions into his computer, printing new business cards, and sending introductory letters out to the established customers.  Six months have passed and revenues are about half of what they should be.  Were we taken advantage of by the seller or is my son doing something wrong?

Answer:
 Your son’s inexperience puts him in a very precarious position.  What he purchased was not a guaranteed cash flow, but the well developed territory of a successful sales representative.  Notice the word “sales” as this is the key to his problem.  Buying an established territory and sales rights to a product line can be a good investment, though zero revenue growth over a few years indicates the old sales rep may have been coasting.  He probably spent some years working hard to market himself and his products and reached a comfortable income level.  He maintained this level by staying in contact with his customers, knowing when they would need product and reminding them to order, and by giving them personal service.

Your son should have imagined himself in the customer’s shoes (a skill anyone in sales needs to perfect).  Suddenly the customer receives a letter telling him the old sales rep has retired.  When it comes time to reorder product the customer may or may not look up that letter.  He may decide to try out some other rep who has been talking up a competitive product for years.  I hope your son arranged to keep the same phone number used by his predecessor, but whether he did or not he needed to “hit the bricks” his first week in business.  Had every customer been visited in person, he could have cemented new personal relationships.  This would have given your son an opportunity to see if they were getting enough product, to offer them an automatic order system that would save them having to call in orders, and to question them on what other products they might want to add to their inventory.  In other words, to increase revenue rather than to let it deteriorate.

You did not specifically say, but I would guess that he has done none of these things.  This type of business is a very competitive one, repeat orders are never guaranteed, and he must be willing to get out there and sell, sell, sell!  He can still save his territory, perhaps even increase it, but it will take a lot more work now then it would have six months ago.  Every day he waits will make it even harder.  He needs to go for it.