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

Posts Tagged ‘Ramaphosa’

Mangaung and the value of your business

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It is no secret that I have a fascination with developing politics and world events. So much so, that I follow events, often on two different media at the same time.

I was listening to President Zuma’s opening address at Mangaung. There was some really good singing by the man, and then some introductions and welcomes. He was careful around the business of introducing his election opponent Kgalema Motlanthe. He did so by saying his name, pausing, then saying: “Deputy president”.

No matter the views we may hold on his performance or motivations in running for a second term, our president is a very clever political campaigner in both rising to power to now maintaining it.

But this isn’t about that speech, as much it is about perceptions. When Zuma introduced the deputy president, I looked down at my Twitter feed, and saw three independent commentaries on the introduction:

  1. @MandyWiener: #Mangaung Zuma begins by greeting everyone. Particularly loud clapping for Motlanthe. Original Tweet: http://twitter.com/MandyWiener/status/280266396426985474
  2. @carienduplessis: The crowd goes wild. But as Zuma mentions Motlanthe they go lukewarm #ANC2012 #Mangaung. Original Tweet: http://twitter.com/carienduplessis/status/280266416349908992
  3. @KarinLaB: #Mangaung awkward moment as Zuma acknowledges DP Motlanthe here…and absolute silence from delegation @Jacanews KL
    Original Tweet: http://twitter.com/KarinLaB/status/280266564811513857

How is that possible? Three well trained and respected journalists. All three of them sitting in the same tent. All three of them tweeting within seconds of one another. All listening to the same person, All within the same realm of the audience. And yet they have such totally removed responses:

  1. “Loud clapping”.
  2. “Lukewarm”.
  3. “Absolute silence”.

If you follow the links to the original tweets, you will notice that they all three tweets went out within a minute of one another. You will also notice from the comments attached by their followers, that I was not the only one to notice the discrepancy.

I have witnessed similar differences in perception when taking more than one person to see a business seller. The first guy walks out full of objections, while the next guy cannot be more excited about the prospects of the business, going forward. To the first person, the business is dead and the asking price is a pipe dream, while for the second, within his own paradigm, sees great prospects.

So two things spring to mind when we consider approaches to negotiating the sale of your business, particularly in the light of almost guaranteed differing perceptions:

  1. Keep your valuation of your business close to your chest. As soon as you declare an asking price or a value, you have effectively clamped a lid on the upside. From there, the price can only go down. We counsel all our valuation clients to keep the results to themselves, using it as a benchmark to gauge the progress of negotiations, rather than a weapon to beat your opponent with. If he believes the business has little value, you will be unable to beat him into submission. If he sees a higher value than you, well you have a winner.
  2. Negotiate with more than one person concurrently. I stop short of saying “as many potential buyers as possible”, only because if you are using a good agent, this may become logistically very difficult, and needs to be managed carefully. But certainly spread the negotiation widely, so as to give you every advantage, and the luxury of walking away from difficult or obnoxious buyers. Having several buyers at one time improves the outcome significantly. In tense discussions of selling price, the concerned buyer will always ask if there are other interested buyers. Your answer will make a tremendous difference to your life, but more on that in another blog…. By doing this you will be well set to make the most of differing perceptions.

Your eventual deal will happen when your expectation is usurped by the perception of value which your buyer sees. In this instance he applies his own values within the spectre of what he intends to do with the business. He will never make an offer higher than what he believes the value of the business is to him going forward, so don’t worry about ripping him off. (And nor can you ever be accused of ripping him off). You can only be held to warranty on the figures you have achieved, and withholding information in your knowledge which will have a detrimental effect on the business going forward.

This is where preparation of the sale is so important. Proper preparation takes some time to get together, and should be tackled sooner rather than later. Our PrepareYourBusinessForSale program is a first class initiative to help you with this, ranging from a free offering over time, to paid for options for the more urgent.

Just a reminder: There are only a few days left in the year to take advantage of our end of year valuation special, although the Johnny Walker has now “walked”.

Oh, and in case you have been on another planet, President Zuma despatched Kgalema Motlanthe into the ANC wilderness, and the throbbing masses took that great disciple of Big Black Boss Enrichment Enterprises (BBBEE), Cyril Ramaphosa, to their hearts, giving him more votes than any other candidate for any other position. They will now try to convince us that a man with more than 200 directorships can act impartially in the interests of the country. Viva!