Getting stung by one of the dreaded D’s — Divorce, Death, Disability, or Dork partner — can be very painful!
Any one of these unforeseen events can be the catalyst that forces you to sell your business.
Even if you’re smart enough to plan for every eventuality, selling your business is going to be full of surprises. Here are things that caught me off-guard on my maiden M & A voyage.
Not All Cash
You won’t get cash for your business. Deals can be struc- tured countless ways and 100-percent cash is no longer one of them. Earn-outs, hold- backs, and stocks are some of the ways buyers try to skin the cat.
Speaking of cash, all that money in the bank is not yours; it’s your company’s. It’s called cash ﬂow. Determining the amount of “extra” cash that ends up in your jeans is the last and most difﬁ- cult part of any negotiation.
Hold the Sub Sauce
The day the ink is dry on the sales agreement is the day your non-compete kicks in. You’ll be limited to three options: retire, work for the purchaser, or buy a Mr. Sub franchise. No one is going to buy your business and let you work for a company that remotely competes with the one you just sold. A ﬁve-year non-comp doesn’t sound like a big deal, but wait until you start paying all of your expenses with after-tax nickels. When you walk away, your ability to earn an income in the transportation industry becomes severely impaired.
Looking Over Itsy-bitsy
After months of intense negotiations, the LOI is ﬁnally signed. It’s almost time for your long-awaited drive on Easy Street.
Minor problem: your com-pany has not been bought yet.
LOI stands for “letter of intent,” a non-binding document that only sets
the parameters of the deal. It begins the due diligence phase of the transaction,
where the burden falls on you to prove the minutia.
During due diligence, you have three jobs: selling the company, running it, and explaining to everyone what the frig is going on. The buyer has the trump cards and watches you like a hawk. Losing a big customer during due diligence will cost you serious coin at closing. There’s a reason why only one out of every three LOI’s results in a sale.
What’s Up, Doc?
Conﬁdentially is critical in any negotiation. It’s easy to keep a lid on things early in the pro- cess, and virtually impossible once the LOI is signed and
the dark suits start parading through reception. Once you start involving third parties, you might as well burn the NDAs. So plan for the inev- itable. You don’t want to be doing the Curly shufﬂe when your biggest customer calls to discuss the rumor she’s hear- ing from Joe Competitor.
Every successful transportation entrepreneur can sell. It’s virtually impossible to build a business if you can’t ﬂog a widget. When you go to sell your company, you’ll be surprised how quickly your sales savvy vanishes. Why? Because your needs become the priority.
Like any other sale you make in your career, getting the best deal for your business depends on how well you meet the needs of the customer. If you don’t under- stand the buyer’s needs and meet them, a deal will never get done. It can be hard to fathom that it’s not about you when a lifetime of work is at stake.
Your ﬁnal surprise comes the day you walk out the front door. That’s when the postpartum depression whacks you. Instantly, there is a huge void in your life. You’re no longer “the guy.” You have to ﬁnd a new purpose when you wake up in the morning. When you sell your business, the biggest surprise may be just how difﬁcult it is to adjust to the next phase of your life.
What do you do next?
I suggest you begin by embracing the delightful D’s: Drinking, Dancing, and Doing Diddley. TT