Indy,
In a recent MMM the Wizard shared a conversation that the Wizard, Ryan and myself were having regarding some of the challenges that owners face when selling their business. Especially, at the moment of the close, when many professional buyers drop the price. And the business owner feels they need to accept this new – lower price. A number of people reached out to me to share their experiences and I had a some really interesting conversations.
I wanted to share some of the ideas we spoke about. I hope this will help business owners navigate the opportunity / challenge of selling their business.
It is easy to get caught in the thinking that the buyer of your business has all of the power. After all, they have the money. The golden rule is the man with the gold makes the rules. But that is not the case when it comes to selling a business. Especially if you are selling to a professional buyer. They are, in fact, at the disadvantage. When an owner understands this they can truly hold their own.
Here is the reality: If the sale falls through on Friday, all that happens to the business owner is, in fact, nothing. Instead of their life changing, it stays the same. The coming Monday will be just like last Monday. No change.
What happens to the professional buyer is different. You see, their job is to buy businesses. They have investors that they have to answer to. They have a job to do, and that job, is to buy businesses. They now have to find a deal to replace the deal that just got away. They had a whole plan and team in place that was going to go to work on Monday integrating your business into their operations. They have invested hours and hours into this acquisition. They have legal fees that are now being flushed down the toilet. They are now behind the 8 ball on their goals for the year. Your deal not closing is a setback.
Are they really going to walk away from the deal?
When they drop the price at the 11th hour it can be a game of chicken. Who is going to blink?
So when they try to drop the price at the 11th hour are they really going to walk away? Or is this a bluff? In this game of chicken, who has more to lose? You or them?
I am not saying to walk away or to refuse the the lower price. You may need to take it. You may want to take it. You might be done with your business. All I am saying is, don’t be surprised that if by holding firm to your price, they finally come around. They have as much, if not more, to lose if the deal falls apart.