6 Maxims For Preventing Transaction Derailment
Seller-buyer transactions are often very loaded with emotion for good reasons. For example, the seller may have a lifetime of sweat equity that can never be fully considered in a price and the buyer is making a calculated gamble on an unknown future.
Here are some issues and maxims for preventing transaction derailment.
- Selling partners that are not aligned in a way that is respectful of individual differences in perspective. Maxim: Take your time on the front end to clearly identify individual partner goals, including similarities and differences. This will lead you to deal maker and deal killer issues.
- Confusing the buyer’s tactics with intentions. Maxim: Keep your emotions in check if a buyer says something that rattles you. The buyer may be trying a negotiation tactic, but ending the discussion is usually not the buyer’s intention.
- Confusing the offered price with value. Maxim: As in the previous example an offer is just part of the negotiation process and you have lots of options for responding, especially when you’re looking at you true bottom line.
- Not calculating the true economic impact of leaving a business. Maxim: Project all of your on-going expenses into the future and compare it with any one-time and on-going income, including that related to the sale.
- Allowing the buyer to finance the transaction on your cash flow. Maxim: Always compare your cash flow/net income in seller financing with the results if you didn’t sell the business. Also, the further you get from the closing the less control you have over any post-closing activities related to your business.
- Not preparing for day-to-day life after the transaction, especially if you’re totally leaving the business. Maxim: For most sellers the rhythm of life post-transaction can be very different so it is wise to consider your options to going cold turkey.
These issues and related maxims vary in significance for the individuals involved and the nature of the transaction, but they are all worthy of consideration in such an important transition.