You’ve worked hard building your business. No one knows the things you’ve done to make it go. The early mornings, late nights, and employee problems: the waking up at 3:00 a.m. wondering if it would all fall apart. While others may have been starry eyed dreaming about entrepreneurship, YOU lived it! On the glorious edge of ruin -- until you built a reputation, customer base, and millions in cash-flow.
But now that your business has been growing steadily over the last several years you’ve decided it’s time to take some chips off the table, get some growth capital or maybe even to sell 100% of the business and move on to something new. You’ve learned through your experience that you can’t predict the highs and lows, so you know that your best opportunity to maximize value is when the business is healthy and growing.
You read a book or two about how to market or sell your business, talked to your financial advisor and lawyer, and you came to the conclusion that you couldn’t market the business yourself. There’s too much there you’re just not comfortable with and you've been approached to sell before. You’ve learned over the years that you get what you pay for. You know you need a professional.
So you picked a firm and a dealmaker you’re comfortable with: one that really understood you, your business, and how to market broadly to create price competition in the sales process. They’ve taken your financials, your story, created an informational memo, marketed you to prospective buyers/investors, presented you with a plethora of options -- and finally, FINALLY you’ve chosen the one buyer you’d like to move to close with.
Okay, now. Here’s what you’ve been waiting for. After all that work, here is How to Skunk the Deal.
Let the emotions rule.
Humor aside, because, who would really want to do these things, the number one thing that skunks a deal by far is declining performance. When a value has been set, and performance does not match projections, the deal is going to be re-traded or dropped. All capital is seeking a balance of risk with ‘knowable’ returns versus cost of equity and or debt. The minute the trends change negatively is the minute your buyers develop the ‘far away’ look in their eyes. And yeah, the checkbook gets that far away look going too.
You will hear dealmakers say ‘Time kills all deals’. It’s very true. But the root causes behind adding time into deals are emotional attachment, financial/business integrity, and the deadliest of all, declining performance.
Please don't skunk your deal. After all, you've worked too hard to not get to a close.
David Walsh is a founder and Managing Partner of Harbinger Partners and a general all-around can’t-sit-still kind of guy. He advises business owners, private equity groups, and random strangers. He also attempts to advise his kids. So there’s that.