A business sale is a complex transaction that often takes months of negotiating. Once you begin that process with a buyer, you might find yourself in a “make it work” mindset. This is your buyer. They are the one.
You’ll reach a point where having the deal fall through would be devastating, especially if your heart is set on the exit. When has a once-promising deal morphed into one that is no longer right for you? More importantly, how do you make the difficult decision to break it off with that particular buyer?
The Purchase Price is Plummeting
Your initial sale price might not always hold up through negotiations. Oftentimes, buyers will look for ways to knock down the price during due diligence. They might say you have high customer concentration, or that key employees will leave when you leave. They’ll question your books; claim they don’t need certain equipment…we’ve heard and seen it all.
The Payment Terms Aren’t Favorable
While your eyes are fixated on the sale price, we also need to look at the terms. If your sale price is $1 million and a buyer wants to pay only $500k upfront for your net working capital, that’s a deal you might want to rethink. You may never see that other $500k, depending on the contingencies. Why not just shut it down today and get the $1 million? To quote from a previous article:
“[Some buyers] may offer to pay the sale price over time as proceeds of the business, giving themselves the option to walk away if the business fails. In the latter case, the owner could be left with their business ruined and no money to show for the sale.”
You’re Trying Too Hard
You can expect there to be negotiations along the way, sometimes up to the very end. That said, you need to know when a deal is not ideal. If a buyer can see your desire to sell the business, who’s to stop them from pushing the envelope? Only you.
Is it going to be a huge disappointment to walk away from a deal after spending all that time and energy? Yes. Will it delay the trip around the world you’ve been envisioning, or the new venture you plan on launching? Yes. But when a deal strays so far from the centerline that you don’t even recognize where you started, you have to be able to stop and say, “No.” Then, return to running your business while we find the right buyer. Or, better yet, take a one-month vacation and see how salable your business really is.
You’re never too far into a deal to turn back; not when you have Exit Consulting Group here to help you keep the level-headedness you need as you plan your exit. Learn more about our approach.