Selling a business is a highly practical exercise wrapped in a thick emotional blanket.  Much like the grief cycle we know so well in DeathCare there are stages that are common and, if you know about them, you can prepare. The more prepared you are the better you will be able to negotiate what you want.

Stage 1:  The Reality Check

Your baby may not be ugly but it isn’t the most attractive either.  Pride of ownership or what you think you need to live on post sale often cause us to be unrealistic in our expectations.   The process of negotiation is a process of compromise to find the common ground between the lowest possible price at which you are willing to sell and the highest possible price someone else is willing to pay.   Read this article to learn how to find that middle ground for yourself before you start.

Stage 2:  Prepare to Negotiate

It is said that a lawyer who represents himself has a fool for a client.  In almost all instances the party on the other side of the table will have done this before and not only will this be your first time but you will be emotionally involved.  The need to master a very steep learning curve and to be objective will put you at significant risk.   All your life you have been in charge.  Now you have to put yourself in someone else’s hands and do what they tell you.   One of my best clients was an incharge type who really struggled at this stage.  He decided that the best way to cope was to take several negotiation seminars outside the industry.  Not only did this help him to deal with his need for control but it made him a formidable partner in the process.  The result: he got more than either of us could imagine because we were working together rather than tugging and pulling

Stage 3: Be prepared to lose your leverage:

There comes a time in even the best conceived plan where you will lose leverage.   One way large acquisition firms accelerate this shift is by purposely seeding rumors that put pressure on you to speed up the sale before everything “comes apart”.    But the official shift comes when you accept the Letter of Intent (LOI) of one company which usually contains a “no shop” clause.  It is then that the true due diligence period starts.  It is a common belief in the Eastern and Middle Eastern world that negotiation only really starts at the closing when the seller is at a disadvantage.  This practice has been accepted now in the Western World and so you might expect a 10% to 20% reduction in price between LOI and Closing.   I have frequently found it effective to provide as much of the due diligence in advance of the LOI so that that offer is based on the information to date and require that any negotiation after LOI be limited to new information that might be uncovered.    I just HATE surprises.

Free tip: no matter how badly you want to sell or how much pressure is on you ALWAYS be prepared at the closing to “quietly close your briefcase and go home” if things don’t go your way.  I coached a real estate friend recently in this when she was selling a house to someone from the Middle East and she was concerned about the closing.  She said that the attempt at negotiation lasted for about an hour and stopped immediately when she and her client got up to leave.   This strategy is bad behavior if there are no real issues and your best defense is to simply walk away.

Stage 4: Be Prepared to Be Outed

It is the rare sale that isn’t discovered before the closing.  At a minimum your unusual behavior and activity will cause people to wonder and suspect.   Beware of the person who pretends to already know in order to get you to confess.  Make sure actual knowledge is limited to as small a circle as possible including your best friend.  But most importantly be prepared with how you will respond and what you will say.   Practice in a mirror because people will look beyond your words for how they should respond.

Stage 5.  Post Partum Depression

As with the real kind this varies by person.  But, if you are like most people, there will be some.  If you decide to stay on after the sale you will have to adjust to being an employee and not having a final say.   Whether you go or stay you will have to adjust to a new self identity.  One of my clients told me it took him 6 years after the sale to actually publicly admit he was retired.

Summary:

For most businesses this is the single biggest and riskiest step they have ever taken.  Because it is an independently owned business it is highly charged and personalized with emotion.   Preparation and focus are keys to success.  It is a process and it takes courage and strength.  I often tell my clients to go to negotiation seminars to fully understand how it works and what to expect.   Having a professional negotiator represent you will pay for itself and then some.   But in the end you will make that final decision.