Seller Beware Part III

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Exiting Your Business

Be cautious when selling your business.  My last two posts described some of the dirty tricks a buyer will play on the seller.  Whether the buyer offers a large price for the firm and suggest the deal can be completed in just weeks, engages in power plays or psychological warfare, the seller needs to be on notice that all of this may be designed to weaken their resolve to sell their business at full value. Unethical practices, like the ones Verne Harnish writes in his article Selling the Business:  Games Buyers Play, are not uncommon, and the seller needs to be aware of such tactics that may be used to lower the final price of the business.

So what is the desired result of all the dirty tricks a buyer might employ?  Read what Harnish feels is their end game:

DIMINISHED PERFORMANCE

With the entrepreneur mentally checked out of the business in anticipation of the sale and worn out from missing vacations and the grind of due diligence—and the business suffering from a cutback in critical expenditures to pump up EBITDA—the business unsurprisingly suffers a temporary slump.  It’s all part of the buyer’s game plan.

The corporate buyer wants the company’s performance to suffer a little so it can use it as a giant sledgehammer to drive down the price at the 59th minute of the eleventh hour.

Beat up by the entire process, the entrepreneur will begrudgingly give in to all kinds of last minute demands and concessions affecting the final price of the business.

Harnish finishes with this advice:

Last, as best you can, insulate yourself from the transaction. Have your CFO or another trusted executive work with your broker as a go-between with the buyer, so you don’t get distracted from leading your team. Push back against last-minute demands for meetings.

Use your CFO or another trusted advisor to work with your potential buyers, and keep focused on growing your business.

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