FREE TRAINING: 3 Keys to Sell Your Business with Confidence

The Truth Can Hurt

“They offered $8.5 million for my company, and now you’re telling me it’s only worth $5 million. What did they know that you don’t?”

Sandra (not her real name) was not happy with me. After reviewing her company’s financial history and her forecast for 2018, I told her that her company could be sold for $5 million, maybe $6 million, if a couple of things fell in our favor. I could see her obvious frustration as she explained that a few months earlier she had an offer of $8.5 million for the company. A guy who knew her industry seemed to be the perfect buyer, and he had a partner to help finance the deal. Sandra was going to stay on for a year to facilitate the transition.

It all seemed so great, until it wasn’t. Sandra told me this seemingly-perfect buyer was excited to buy the company but his financing partner got cold feet during due diligence. Sandra and the buyer tried to keep the deal alive, but after a few weeks, it was clear the buyer didn’t have the financial capability to get the deal over the goal line on his own.

With that deal dead, Sandra needed a new plan to sell her company. The topic of valuation came up early during our discussion of my strategy. My $5 to $6 million valuation did not comport with her expectation of $8.5 million. Sandra had a perfectly legitimate question: if the first buyer would offer $8.5 million, why wouldn’t the next buyer do the same?

I relate this story because I see this situation all the time. A business owner gets an offer or an expression of interest, and though the deal never closes, the valuation sticks in their head. I have to be the one to explain the obvious …perhaps one reason the deal didn’t close was the potential buyer was inexperienced or didn’t know how to value a business. I have to communicate this carefully; I have been in conversations like this and have seen how it can be terribly deflating to a business owner. Sometimes they just plain get mad at me, like Sandra was. She decided to not retain me but instead find an intermediary “who understood her real valuation.” I gave her the names of two brokerage firms in town that I knew would tell her what she wanted to hear. Maybe she will call me in another year when those firms don’t get her business sold.

I will never tell a client or prospective what they want to hear if I don’t believe it to be true. My professional counsel built on 30+ years of deal structuring is what it is. Sometimes the truth can hurt, but never have I regretted relying on the truth of my experience and market knowledge. Even when it hurts.


JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from Harvard Business School. He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee.

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Tennessee Valley Group

Jim is an attorney (non-resident status with the Missouri Bar) and though he no longer practices law, he has read and negotiated enough legal documents to fill a cargo tanker. He has an MBA from Harvard Business School and knows how Wall Street and private equity operates. Jim is a Tennessee Supreme Court Rule 31 listed general civil mediator with tons of experience helping business owners (large and small) work through sensitive problems to achieve winning results. He is the author of "Home Run, A Pro's Guide to Selling Your Business, Seven Principles to Make Your Company Irresistible."

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