Musings on business value, sale preparation, sale negotiations, sale structure.

Get your AFS into gear

Jim’s business was jalapeño hot. He told me all about it in about 30 seconds of polished elevator pitch over a poor cell phone line. It got me into my car on the way to Springs within half an hour.


PrepareYourBusinessForSale™ is all about getting exactly that done. But in going the PYBFS route, you also get to add value to your business. Here is why.


Early engagements

I walked into an old house. It had been kitted out for the administration of a business designed to churn out products in volume. We had a good natter. He told me some stories. I told him a few of my own. We drank his very nice coffee, and a few hours went by as I went through my interview process.

The house was one the owner had inherited from his mother. It was more than adequate for what it housed.
The growth curve of the business had been steepening. Jim felt that he needed to get an equity partner into the operation to help fund the continuing growth. The only thing that did not flow in the day, was the financial information. There were some issues. “But I will get onto my auditors as soon as you leave, and I will email the financials to you before the end of the week.”

Cape Town

The next day I had an appointment with another business owner who also wanted to sell his business. This time in Cape Town. He had arranged for me to see him as soon as got back from his trip to Italy. So I was up early, and onto a plane. I spent the better part of an afternoon with Mario as well. He also had nice coffee.

Mario has had his business valued by us every year for a long time. He had sent his latest financial statements to my office the previous day. My team picked them up and started putting them into our valuation model.

He also had a very nice business which had a similar problem with growth. He needed to buy some impressive machinery so that the business could continue to grow at the same rate. His financial advisor said it would be a better idea to sell some equity, rather than push the debt level higher. So that was what he intended to do. I am not a financial advisor. I just listen to those guys.

Network

We maintain a detailed mind map database of businesses, funders, and clients. It’s a veritable who owns whom, gleaned from discussions and web pages. It has now grown into a thing of beauty. A few years ago, it was more rudimentary than it is today.
So on the plane home, I went through the database mind map. I kind of killed two birds with the same stone, mid-flight, so to speak. I was looking for relationships between each of two clients and listed companies.

As it happened, Jim had more prospects for what we thought he wanted to do, than Mario did.

When I got back to Jozi, Mario’s financial inputs were complete. I was able to start the pitch analysis with a full deck of cards (and a search for a few more metaphors to throw into the mix). We still always start with an exercise to determine what the market would bear. We do this for every new client.

We stepped up our research of the agendas of the targets for both businesses. For targets, the easiest route to growth is often through acquisition. The intelligence gathering has always been very beneficial. And boy does our industry talk about who wants what. So keeping the database up to date is easy, albeit time-consuming.

It was going to be an interesting time, I thought. The weekend came, and so did Monday. As always.

I called Jim. He was still waiting for his auditor. There was another problem.

Processes

We collected the rest of Mario’s documents which would be necessary for the sale. His web person made some changes to his website which we thought would help. Jim made similar changes himself. He was very good at that sort of stuff.

Both provided company documents for interrogation during a due diligence. We quickly added debtor lists, supplier agreements, bank accounts and employment histories. They were all easily forthcoming from both. All was going well, three weeks into each respective engagement.

Except Jim’s financial statements were still not available.

I should explain at this point. We always ask new clients to supply five years of financial statements. We can build a very good story from that sort of history. Jim could give everything except the last two years. We had all Mario’s history on file.

Jim’s trial balances and draft income statements for the last two years showed great results. There was no reason to doubt them. But it is the financial statements which investors want. The ability to provide annual reports in good time tests the whole governance issue.

Mario goes to market

Six weeks into the Cape Town engagement, and we had prepared Mario to talk to investors. It did not take many, and he had something which made financial sense. His machinery would be ordered soon.

Jim, in the meantime, was struggling. But he was also getting pushy. He wanted to talk to investors as well. So, he sat down with one of them. It was a great meeting. They loved what they saw. He would have the financials to them next week Tuesday, he said.

Tuesday came. The investor called. It looked like it would take a few more days. “A really fine business”, said the potential investor.

A week later, and Jim wanted to see another investor. “Just to have a plan B”. But he was already screwing with Plan A. But he met with Plan B. Then with Plans C, D, and E. And still, the auditors (apparently) were dragging their feet.

All the prospective Plans A to E did not so much lose patience, as simply wander off elsewhere. As business owners, we have limited resources. Sometimes we need to appreciate that the attention span of professionals, faced with various options, only have so much bandwidth.

Jim gets his stuff together

Jim’s financials were published. The trial balance figures were largely confirmed.

Plan A came back from his trip. It was difficult to get hold of him. When Jim did, he did not have much time to talk. Another fantastic deal had presented itself, and he was going hell for leather after it. “You know, that price may have been a bit steep”, he suggested. “Let’s talk next month”.

When Plan B did not return calls, Jim worried. So when he spoke to PlanC, he had lost some of his form. By Plan D, the picture was not pretty. The closing price was always going to be lower than the original nibble.

And over to you now

As much as this is a fiction, it is only partly so. I have written this with a collection of similar experiences over more than 25 years of helping business owners to change their lives. When a business for sale cannot provide information quickly and accurately, the momentum in the deal is lost. Value suffers. Always. When the third prospect goes cold, the seller gets desperate to keep the others happy. Silly things happen.

So what about your financial statements? Don’t be like Jim. Be like Mario. Don’t let them stand in abeyance with your auditor or accounting officer for more than six months, at the outside. If you can get them into your filing cabinet within four months, you will have the edge.

Business valuations | Various applications and costs

Accurate business valuations empower you to make proper decisions.

Divorce or partnership valuations

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When partners split up, there are problems with money and value. Almost always. Oh yes; there was that one time…

This post refers to a dissolving marriage as a model. But the points made, hold for most partnership dissolutions. They are not pleasant, but applying some rules keeps things fair.

Complications arise when married people split their joint estate. If one of the assets includes a business, the recipe is more than “take the white from the egg”.

  1. What is the value of the business?
  2. Where are business proceeds entering each spouse’s pocket?
  3. Open and fair negotiation

1. What is the business value?

The dissolution of any partnership is a transaction itself. It should be accounted for, with a market-related valuation. Business valuation methods start with the company’s financial statements. But the concurrent interrogation of key valuation indicators in the business is critical.

Competent and confident valuers are bold in declaring shortfalls in the discovery. Do not ignore their messages. The valuer will have taken heed of the shortfalls, in arriving at a number. Those noted shortfalls can provide valuable information for later use.

2. Where is each partner currently benefiting?

Every valuation accounts for an element of “normalising” the income statement. This involves removing or adding items which are “out of the ordinary”.
That exercise should also examine what each partner receives before the dissolution, and adjust for what each will receive after the dissolution. Consider adjustments for replacing the partner in day to day work. Understated assets and income, or exaggerated liabilities and expenses mean lower business valuations.

3. Negotiation

A fair negotiation recognises pre partnership equity. The change since then is what you are after.
A fair settlement considers an ex-partner receiving double recovery for a single asset. That would be inequitable.

The most significant asset in a marital estate is often the family business. A fair resolution hinges on an accurate valuation of it. Work with an experienced valuation expert who understands sound valuation concepts. Don’t play the “tarms 20” game.

Shareholder register

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Who owns your business?

Who are the owners of your business? I ask this because a surprising number of business owners do not know. Many have forgotten the history of the enterprise. It was once a very convenient relationship. Now it is a muddle. It is easier to get confused about this, and many people do. Here is a scenario:

Some of our clients started out in difficult circumstances. Today’s successful business was not always so calm. He may have founded the business from a position of desperation. A retrenched former employee needed to put food on his table, and clothe his kids.
Having been an employee for years, he ventured out into the small-business world. To call him naive would be accurate. (Yip; it wasn’t only you. And if you weren’t naive, I’m sure you know somebody) The business ran into trouble. Creditors liquidated it. Then his bank sequestrated him. He was not a disciple of Peter Carruthers.

Wiser, and desperate to survive, he started out again. Only this time, he did so from home, without the expense of a landlord. But the second time around there was a small complication in that he had several judgments to his name. We can be so unforgiving of those brave souls who step to the fore. They give effect to the politicians’ platitudes. You know; about small businesses being the cornerstone of our economies.

Our less naive, and now more resourceful entrepreneur, had to make a plan. He approached a friend to stand as a silent partner. That friend would also be the legal frontman of the business.
People do this.

White people fronted for entrepreneurial black people under the old corrupt mob. You know, before the current corrupt mob. Brave or greedy, these white people saw an opportunity. It was an economic reality. Race-based fronting is not new. It was illegal then too.

Some businesses which thrive today, still have the original owners on paper. The friends of the actual businessmen. Owners who never go near the businesses. Owners who have no idea that they own businesses.
This can get tricky at the time of selling the business. And you know, all businesses get sold if they can keep their heads above water long enough. Have I mentioned before that businesses are very valuable retirement assets? Your business might be gold.

Divorce

  • There are many reasons for, and examples of, legacy shareholders still owning businesses.
  • Husband and wife start out in business together and then get divorced.
  • Siblings take over the business from their parents, without defining duties and expectations.
  • Seed capital partners who themselves have diluted or merged.

This is not an issue for most readers. But you do not know until you look at your share register. Your eventual new owner of the business will want to see it.

Go get it out. And give it some thought.

Consider this

It once was preferable to sell your business out of the company or cc. The asset deal was the safest option for the seller and the buyer. For a developing set of circumstances, it is now better to sell your shares. The equity deal could save about 60% of the tax bill on the transaction in the entrepreneur’s hands. Tax calculations have changed to benefit the shareholder as an individual.

Shareholder agreements may have participation and preemptive requirements. The memorandum of incorporation of your business will define these requirements. If your fellow shareholders are not who you assume them to be, then this could get interesting.

It is better to deal with this stuff now than when you are staring down the boardroom table of a due diligence. Do so before you are dead, dismembered, or comatose. Your heirs will thank you for taking action on this advice. They will write songs about you.

Motivation in valuation

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Here’s a game I don’t play:

  • “look I need to have as high a value placed on my business as possible, for purposes of
    • taking my partner for as much as possible
    • to prove to my bank that my balance sheet is really strong
    • to show my employees that the long term investment plan is worth them getting no increase this year”
  • “I need you to keep the value as low as possible so that
    • my ex-wife gets nothing
    • I can offer this guy almost nothing for his shares
    • to make a stupid offer for the business”

If Suitegum conducts a valuation on your business, you should understand that under the conditions mentioned in the report, you are going to be able to get that value for your business in the open market.

I have a simple test for the veracity of business valuations which leave my office:

  • If this valuation is too high, to what extent am I exposing us to a damages claim from the owner of the business being valued when he is unable to realise the value, and exposes himself unnecessarily?
  • If the valuation is too low, to what extent would a commission based broker lose out on potential income if he sells it at that value?
  • If I am hauled in front of a bunch of geniuses (auditors, attorneys, judges, magistrates) will I be able to defend each and every finding in the valuation report?

So far that has worked out well.

So when I received a phone call last week suggesting that our valuation had been cast aside in favour of two other valuations conducted by auditors, both of which came in at more than twice the Suitegum value; I sat up straight and asked a few questions.

The circumstances are that the client has had his business valued by us several times over a six year period. The results have been consistent with time and performance. He found himself in the divorce courts in recent times. It wasn’t pretty. A liquidator was appointed to give judgement as to the value of a minority interest.

He kicked the Suitegum valuation into touch, and appointed two audit firms to conduct their own investigation.

In the final analysis, the liquidator was working for a proportion of the valued figure as his remuneration. We have a valuation competitor in the market who charges on that basis. Somewhat compromising, I believe, and in violation of the USPAP (Uniform Standards of Professional Appraisal Practice). With time, someone will test those valuations. Perhaps there will be some explaining to do. Probably not.

Auditors are not covering themselves in glorious integrity at the moment. A profession becomes a business when it chases money at the cost of principle. Why do we expect professional bodies to hold them to account?

Hashtag: 6 CAs on the board of Steinhoff.

 

Restraint agreements

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Sometimes you need to look at the end effect of what you’re trying to achieve, at the start of, rather than during the process. So, let’s jump ahead to a time when you actually sell your business, or (as I like to remind you) have it sold for you.

He said, she said

There will be an agreement of sale, which should be in writing. Even though verbal agreements are binding, my experience is that verbal agreements are worth the paper they are written on. There is too much of the “he said, I said” for verbal agreements to make sense.

At the time of reaching that agreement, the question of restraints will be raised twice.

In the first instance, and most obviously, you will be restrained from competing against the purchaser and your old business for a period, in a region. Give some thought to the consequences and start planning accordingly. Think about what you are or not prepared to accept, and if there are a whole lot of reasonable conditions you are not prepared to accept, ask yourself why you are selling this business in the first place.

It is reasonable for a purchaser of a business to expect to not have to compete with the guy who knows all his customers really well. Allowing the seller to market himself to these same customers could put any new owner out of business really quickly.

What have you been up to?

The second, less obvious instance of restraints, refers to the restraints that your business itself may be subject to. Many buyers’ attorneys ignore this very important element for some reason, I suppose because it is not so obvious.

But can you imagine the problems which would precipitate out of this situation: A buyer, makes a careful study of the target business and is satisfied with the cash flow issues discussed with a seller, and decides to buy. He then satisfies himself that together with his plan to acquire the rights to several other lines, the value of this investment warrants him taking out a second bond on his home, and borrowing some money from his elderly parents. Six months after the deal has been consummated, his biggest and most important supplier pulls the plug because the seller never told the buyer that this major supplier had only agreed to supply him on condition that he did not represent the supplier’s biggest competitor, which the buyer now does, albeit without being aware that he has breached an agreement.

When Suitegum is involved in the transfer of a business it does so, generally on behalf of the seller, but in good faith for the purchaser as well. One of the elements which we interrogate through our valuation process is the integrity of, and the exposure to suppliers.

So…

Think about what restraints you will be prepared to subject yourself to, once the business is sold, and have another think about what promises you have made to suppliers with respect to giving them special prominence in your business. The latter should be listed in your PYBFS files, both electronic and hardcopy.

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Imagined reality of business value

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The owner of a business has a reality of value based on his real experience of the benefits which flow to him on a consistent basis. He knows 100% that “the business” makes money for him. He knows that it is more valuable to hold on to it, than to sell it below that value reality.

If a perceived premium offer is made – one which tips the scales of value from worthwhile holding, to worthwhile disposal; the run of play changes. In other words, if the offer received “makes sense” in that the owner will be happier as a former owner than as the current owner, then he will sell.

A buyer of a business can only act on imagined reality. Sure, that imagined reality is based upon thorough investigation; but until it is actually lived, the reality can only be imagined. That imagination is unique to the human race, and I suggest is bound up in the fear and greed dichotomy which grips us all, in all the decisions which we make.

For a business owner to dispose of his business, it is incumbent on him to translate his reality of value into perception of value – imagined reality – in someone else’s hands. Again, in other words; he needs to convince the purchaser of the value. Essentially, he needs to sell the darn thing, just as he would sell anything else.

That is what we strive to achieve with our clients – in helping them through the “PrepareYourBusinessForSale™” program to make them “Prepaired” with their eventual new masters. “Prepaired” is not a spelling mistake. It is what shareholders do in advance of selling their equity: They identify the market, and they make what they’re selling, attractive to that market. They pair their offering with the anticipated requirements of the future owners. They get “prepaired” through PrepareYourBusinessForSale™.

Where realised value meets imagined reality – made incarnate through the transfer of retirement funds. That’s a good thing!

 

 

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Does your business need an auditor?

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Does your business need to be audited?

  • Perhaps your memorandum of incorporation or shareholder agreement insists on an audit.
  • Perhaps your business is within certain industries which require one.
  • Perhaps your funders require an auditor’s report annually.
  • Or perhaps you believe still, that all companies need to be audited?

If your PIS falls below 350, you do not need to be audited, and you may be wasting a great deal of money on the annual event.

Oh, but perhaps, just because a firm of auditors send an accountant around to your business every year, you believe you are being audited. Perhaps you are simply being reviewed.

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How KPMG destroys a business’s value

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Background 1

There is a sanctimonious attitude in the auditor profession, generally. It is well earned, and indeed, advertised by SAICA:

  • Years of study.
  • Stringent examination.
  • Long hours of apprenticeship.
  • Big pay cheques – commensurate with experience, dark suits, green pens, and the ever present gravitas.
  • Non auditor CA(SA)s take up the lion’s share of CEO positions in JSE listed companies.

They are apparently beyond reproach.

The trust placed in the auditing profession is borne of its rise to excellence, welded to its strict code of conduct, compliance with regulations, and sheer earning power.

By way of illustration on this “earning power” subject; please remember KPMG was paid R23M to “cut” from Tom Moyane’s list of requirements in his brief to the auditor:

  • the required findings, and
  • the names of who’s careers to destroy,
  • which facts to create, and
  • what recommendations to publish…
  • and post those emissions as their own.

(Tom Moyane was also the guy who signed the release from prison of Shabir Shaik, on medical parole, shortly before his unconsummated death).

Background 2

The KVI approach to business valuations and evaluations (and due diligence studies) is based on a potentially exhausting series of probing questionnaires which are scored on

  • Sliding scales
  • Nine box grids
  • Yes / no binaries
  • Weighted averages
  • Vector resultants
  • Answer clouds and
  • Common sense

The outcome is a series of scores which identify the effect of exposure to inherent business risks, balanced against mitigation by imperatives, and the importance of each indicator in

  • The market
  • The industry
  • The geolocation and
  • Any particular point in time.

Background 3

With the “new” Companies Act being enacted in line with the requirements of similar legislation of our trading partners, and international norms, South African companies are increasingly able to compare themselves in performance and value to their international counterparts.
South Africa has a range of reporting requirements, dependent on public interest scores (PIS), Memorandums of incorporation (MOI), and industries and stakeholder requirements.

  • There are various PIS levels.
  • The MOI of the company may require it to be audited.
  • Some industries insist on audits for their members – the estate agents and lawyers, for instance.
  • Investors and lenders may require an audit as part of their covenants.

Background 4

In the sale of a business I brokered about 15 years ago, the target had been well audited, and the buyer was well versed in audit requirements. As part of the negotiation, the new owner asked the auditors to remain on, post deal. The buyer’s thinking, he explained to me, was that the continuity of audit practice gave him comfort in the veracity of the accounts used as a basis for valuation.

In that deal, the purchaser was happy to pay full value, and even higher. He knew that the auditor was on the line.

Summary, so far

  • Auditors are held in high regard, and trusted
  • Each business has its own DNA, expressed through a variety of key valuation indicators (KVIs)
  • Auditors although trusted to give veracity to the numbers, are not always required
  • Where auditors have their round bits on the line, the numbers can be relied on, as a basis for value.

This rather long post serves as background for the the developing requirements in business valuation standards. We have always looked at the requirements of various compliances. The adherence to those requirements as a single KVI among many, determines the nature of the valuation method, its multipliers, discounts, and sums.

In the days leading up to the sudden resignations of the leaders at KPMG in South Africa, I was quizzed on the valuation of a business for which I had lead a valuation a few months back. The base figures were audited by KPMG. This was the problem. The valuation technique was not being called into question; but rather, the auditors report. “Do you have any idea of what is coming here?” said my critic. I did not.

I do now.

KPMG has taken a small slice of your pension away from you

Which brings me KPMG and the value of your business

The cynic might suggest that by subjecting his business to an audit, the business owner is purchasing value. By subjecting his company to an audit, conducted by a premier league auditor is no cheap affair, but it does give gravitas to the financial statements, and lightens the due diligence expectation in a sale. At an honest level, this is indeed so; the company pays to demonstrate its integrity. But we have to expect that at that honesty level, integrity is also present.

In the cold light of the dawn following the KPMG-SARS cut and thrust paste revelation, there may be several dusty mirrors wedged in the fat, smoky invoice.

{Ed- how the heck does one itemise an invoice over four pages, to the cent in each item, and come to EXACTLY R30,000,000-00? And then you have the friends at SARS to ensure that this amount spent on a family member’s wedding, is written off as a business expense!}

Since the first exposure of KPMG’s nefarious dealings with SARS, I have had two separate and independent parties question the validity of our valuations – not for reason of our methods, which are well regarded, but because the underlying financial information was green penned by KPMG.

Imagine THAT happening before Zuma came to power. Oh wait… there was Arthur Anderson. Remember them? The consulting and audit firm collapsed world wide. The local chapter was bought by… ah yes… KPMG. I really should spend some time penning my views on the merging of cultures in mergers, acquisitions and disposals.

Where once subjecting financial reporting to the rigours of an audit gained KVI points, well, for the time being that is going to be diluted by the criminal actions of KPMG.

#TheMostRobustAuditRegimeInTheWorld – South Africa

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It gets more complex

Zuma, the man who would be king, and president of the country for the time being, having admitted via his legal counsel that he has been stringing us all along for fools, for almost a decade, now wants to make representations to Shaun the shawned wether, as to why he should not be tried for corruption.

We can all be quite sure that the veracity of the corruption report used in Shaik’s trial will on the agenda. That report was authored by … KPMG.

Any more of the current nonsense, and South Africa will be downgraded further. And that WILL destroy further value in your business, ragardless of who the auditor is.

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Valuation indicators Shareholder agreement

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If there are more than just you as a shareholder in your business, chances are that you have not put in place one of the most fundamental building blocks for the creation of value in your business:

The shareholders’ agreement

Let me explain. (Oh, and even if you are the sole shareholder in your business, you should pay heed.)

The shareholder’s agreement is more than a document governing the number of shares or percentage of shares held by each person (or entity). It helps deal with the other shareholders’ family in a time of crisis. It provides you all with a negotiated plan of action in the event you are incapacitated on a Sunday evening. It is something which can possibly stop your bank accounts being put under stress by the wife, girlfriend or children of your now dead partner.

The shareholders agreement will dictate how shares, or even the whole business will be sold or otherwise dealt with in the case of a fallout of shareholders. When you guys got together you never considered that one day there would be a divorce. The state forces us to contract for this eventuality in our personal lives, or face the whim of the courts. But in our business lives, which usually get started some time after our marriages, we are reluctant to take the same steps.

The shareholder’s agreement will help to protect minority shareholders in the case of a sale of the business. If you own less than a portion of the total equity, you are at risk of arriving at work tomorrow morning to find that in place of your shares, you have a cheque for the proceeds of the sale, which you knew nothing about.

A shareholder’s agreement can insure that all shareholders have a preemptive right of first refusal on the sale of any of the other shareholders’ shares. That can be very valuable in five years time when Big Larry wants to take off with his mistress.

A shareholder’s agreement can regulate the manner in which new shares are issued, and give you some say in the manner in which new issues are taken up, and by whom.

What happens if one of the other shareholders is a company, and that shareholder’s shareholding changes? Concentrate here. The control of your biggest shareholder changes to that of your competitor, or your ex wife’s new boyfriend… You don’t want to find that your electronic key no longer works on the first of next month.

What have you agreed to in the event one of your shareholders is sequestrated or liquidated?

How, or on what basis will you value the shares of the company in the event one of the shareholders wants to sell his shares to the other shareholders?

How will the shareholders’ loan accounts be handled in any of the above circumstances? And how will funding be sourced and repaid?

What is your agreed dividend policy; or do you simply have an argument at the end of each year? Wouldn’t you prefer to have left some of that money in the account after the last financial year end?

Many businesses actually fail because this very important document is not in place to regulate the way shareholders direct the directors, who (let’s face it) in our realm, are usually the same people. Such a failure leads to all the shareholders losing all the value built up in the business from the start to the time of the failure.

But most important, one day when you decide to sell the business, and all has gone well, how will you agree on the method of sale, and the distribution of the proceeds?

If you are a one man shareholder, read the above again, and give it a think. What will you do when someone offers to buy a portion of your business one day. I know what you should do. Visit an attorney with all these questions, and a bunch of others I have not brought up.

But there is more…

The memorandum of incorporation (MOI). The government put this into place for us a few years ago. Of course we were given an opportunity to make it agree with what we intended in the shareholder agreement, but most of us didn’t bother. The problem is that if there is conflict between the MOI and the shareholder agreement, then the MOI will hold.

Really. It may really be time to spend some money with an attorney.

Very willing sellers

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Selling too high doesn’t happen often. But hey, if you can get it to happen without lying, cheating, defrauding and incurring financial or liberty liabilities, then why not?

Let’s be clear “selling too high” is not a seller problem. For the most part it is not a buyer problem either. Willing buyer – willing seller, and all that. Nobody buys a business the way one buys a house; you know, half an hour snoop, some estate agent pressure, a clumsy deed of sale, and the deal is done, save for the bond arrangements.

Selling businesses is an entirely different matter. Weeks and even months of investigating the business history and the likely future are condensed into a variety of different business plans and financial forecasts. Through that process, if any undue pressure is suggested by the seller, that bluff is called quite quickly, and usually with devastating consequences.

The best way of speeding the process up is to give the investor what he wants, and in an easily usable format. The investigation and due diligence process is a gruelling one. These guys are often tasked with other people’s money, which demands a return. If it goes wrong, then their round bits are on cubed things.

In a forest of poorly prepared businesses with high asking prices, a well prepared business and owner has a better chance at hitting the jackpot.

I was involved in the sale of a business about ten years ago where a plan came together quite beautifully. It all happened like this:

About a year before the sellers placing their business on the market, they had spoken to me. I’m a “call a spade a spade” kinda guy. They hadn’t liked the message I gave them. So they went off somewhere else for more comfortable sale story. It did not take long to get an offer. Sort of in mid reality check, a mutual friend suggested that they run it by us for another opinion before accepting.

That took some doing, but we all put our big girl panties on, and had a look. Frankly, the deal in offer was such a waste for the sellers. They were selling too low, on lousy terms. I told them as much. Well not exactly.

What happened after that, taught us all some valuable lessons in being prepaired for sale – the gentle art of identifying a bunch of potential future owners of a business, and pre pairing for future benefit to all.

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