Buying or selling a business is a large undertaking. From start to finish it can take months of back-and-forth to reach and agree on a deal. One you get to that point, where a purchase contract is ironed out, you should be able to coast through the home stretch – right? Not always. This home stretch period should be a breeze, where sellers tie up loose ends and buyers get geared up to take over the helm – but in many transactions something strange happens. Last-minute greed.
What do we mean?
Buying or selling a business typically involves large amounts of money changing hands. It is completely normal to get 11th hour cold feet and panic for a moment with the thought that you are either paying too much or aren’t getting enough. Maybe you came to this thought on your own, or maybe a friend or family member has chimed in late to say they think you’re getting ripped off.
Momentary panic is one thing, but if you let this fear get the better of you it can have disastrous consequences.
For instance, in this panicked state you call your broker and demand to put the deal on hold while you reconsider or demand to head back to the negotiation table. The other side of the transaction is then appalled at your insinuation that the deal has somehow (very suddenly) become unfair and balks at the suggestion that you renegotiate. Guess what? Your deal is probably dead.
You have spent weeks and months negotiating, looking at numbers, pouring over books – and after all of that you have arrived at a number that both sides agreed was fair. Why the last minute doubt?
It’s just cold feet. The way you are feeling is completely normal, but remember that while you were in a more rational state of mind you decided that this deal was one you wanted. It was a deal you thought was fair. You have had many conversations with your broker, with the other side – and you felt comfortable moving ahead. Everyone always wants the most they can get for their money, and business transactions are no different. The emotional swings are just larger because there’s more money involved.
Last-minute greed isn’t going to get you a better deal. It’s more than likely going to end with no deal at all, and a colossal waste of time for everyone who’s been involved – including you. We’re not saying that you should agree to a deal that’s unfair. What we are saying that if you were fine with a deal until days or moments before the money starts changing hands – you’re probably just momentarily overwhelmed.
If you do suddenly feel like the deal isn’t right and you should be either paying less or getting more – give your broker a call. They’ve seen 11th hour panic many, many times and can help walk you through the ramifications of trying to renegotiate with the other side. They’ve also seen deals where something does come up at the last minute that requires renegotiation – and they can help you decide if that’s really the scenario you’re in.
Don’t destroy a perfectly good business opportunity because it’s scary to take a big plunge. Look to your broker for help, and do your best to remain calm and rational all the way to closing.
Are you thinking about buying a business but are worried about writing such a big check? Have you considered selling your business but want to know how you decide if an offer is fair? Do you have a story about last-minute greed in a business transaction you think would help other buyers or sellers? Feel free to leave any questions or comments here, we would be happy to help.