Entrepreneurs really do say the darnedest things.
Teddy (not his real name) is ready to sell his manufacturing business. In his mid-60s, he has run the company since taking it over when his dad passed away in 1993. Teddy’s brother is a minority shareholder, but as a pharmacist, he hasn’t had much to do in the business, leaving control and decision-making in Teddy’s hands.
Teddy retained me to lead him through the complicated process of selling his business. We started by determining its market value. When I met with Teddy, his brother, and the company accountant, we all agreed the right valuation was $20 million. After preparing the marketing documents, I began the outreach process to talk with the companies we had identified as potential buyers.
Fortunately, several of the potential buyers we identified were indeed interested. It wasn’t long before we were involved in Zoom calls between Teddy and the potential buyers. One of the buyers was particularly interested and said he wanted to visit the next day. Given that he was located several states away, I assumed he would be flying to town. Little did I know that he would be piloting his own private jet. When I picked him up at the airport the next morning, I couldn’t help but be impressed and wondered if he was indeed our right buyer.
After a full day of meetings and review of plant operations, Teddy drove the buyer back to the airport. Later that night, I was debriefing with Teddy, and he said he had told the buyer his asking price was $30 million. I had to wince, I thought that comment might come back to bite us. I asked Teddy why he did that, and he replied with a chuckle, “After he gave me a tour of his private jet, I knew money wouldn’t be a problem for him.”
Suffice it to say, it’s one thing to negotiate, it’s another thing to put a price 50% beyond the market value. All that does is scare away potential buyers. Said this way, buyers hate (and I mean hate) dealing with sellers they perceive to not be realistic. Sure enough, early the next morning, the buyer called to tell me he was not going to submit an offer because Teddy‘s expectation was excessive.
Astute buyers are willing to negotiate, but they don’t want to be toyed with. More times than not, the second they think they are dealing with an unrealistic seller, they will pull the plug, just like this potential buyer did. Of course, I delicately tried to explain to the buyer that Teddy was being enthusiastically aggressive, but the buyer didn’t see it that way. He told me he knew Teddy‘s reach for an excessive evaluation was likely precipitated by the buyer’s fancy mode of transportation. After all, I thought the same thing. If this guy can afford to fly his own private jet to see us, he might have some loose money in his pocket. But here’s the kicker, the buyer told me he gave Teddy a tour of the jet just to see how he would react.
A business owner brings a lot of doubt to the process of selling their business. It’s my job to help them sell with confidence, knowing the process has been fair and managed reasonably. Going through the process to sell a business is hard enough, and bringing a perceived sense of greed to the table generally will not end well.
Entrepreneurs really do say the darnedest things
Tennessee Valley Group
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