There are No Perfect Deals
There are No Perfect Deals When Selling a Business or Buying a Business.
Should we always aim for perfection? Sometimes perfection is the enemy of production. Several years ago a co-worker and I were setting up a dinner presentation for our organization. I wanted everything to be perfect. It was my first year in the organization, and I was trying to change the organizational culture from mediocrity to excellence. I’ve always believed whatever you set your mind to, you should do your absolute best. I wanted every part of this event to be perfect.
We were coming up against some deadlines and because I was so focused on some insignificant details, I was risking not having the most important parts of the event ready. So while trying to make everything perfect, even some of the less important parts of the event, my co-worker said. “Man, we aren’t building a watch.” At first I disagreed with him, because I wanted everything to be perfect, every gear and wheel of this event needed to be working in unison. But then I realized what he was trying to communicate.
He was trying to get me to realize that sometimes trying to be perfect actually keeps me from producing the results that I’m trying to achieve. I was overly focused on a detail that didn’t matter greatly in regards to the overall result. I learned a great lesson that day that translates today as I watch and help people navigate the buying and selling of businesses.
I’ve watched seasoned business people make the same mistake I was making at that dinner event. Unfortunately, the stakes for these business men and women are much higher than my dinner event.
I once watched a business owner walk away from a negotiation table because the situation wasn’t perfect. This owner wanted to sell. No, actually this owner needed to sell. He was retirement age and his health was not great. The business had been on the market for sometime without a ton of inquiries.
Eventually, I was able to find him a buyer and the buyer made a good offer--almost full price. This offer was going to put about 75% of the purchase price in his pocket up front in cash. The buyer wasn’t getting any bank financing. The buyer asked the seller to carry the note on the remaining 25%. Because the seller understood the upside of seller financing he was willing to agree to the deal. He knew he was going to draw some interest and be able to defer some of the tax burden on the portion he carried. He accepted the offer. Everyone was happy. That was until the seller decided he wanted everything to be perfect.
He decided that he wanted collateral on the 25% other than just the business and FF&E. He wanted the buyer to put up additional collateral, which by the way is a little unusual. Because of the circumstances, this just wasn’t possible for the buyer. Despite my best efforts to explain to the seller that he had a really good offer in his hand that he should take, he wouldn’t budge. Therefore, the buyer who did everything he could to make the deal work, walked away.
Unfortunately this isn’t the end of the bad news for the seller. About two months later this seller’s health took a turn for the worse, he was not able to work, and he basically had to shut the doors. He later ended up just selling the real estate and receiving about a third of the amount that he was offered by the buyer.
Sometimes when we try to be perfect, we end up keeping ourselves from the progress that we ultimately want. When you are trying to buy or sell a business, rarely do you get everything you want. If you are waiting for everything to be perfect you will never make progress. The money won’t be perfect, the timing won’t be perfect, and extenuating circumstances won’t be perfect. If you need to sell your business, don’t wait until it’s too late. If it’s time for you to buy a business, don’t expect everything to be perfect in order for you to make the offer and move forward. Don’t let your unrealistic expectations of perfection keep you from achieving your goals.