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May 24, 201810:39 AMExit Stage Right

with Martha Sullivan

‘Fired for no reason!’

(page 2 of 2)

With Sam and James there was a similar breakdown in communication. Sam, having shared his asking price with James, wasn’t clear about what he wanted for the business versus the real estate. (Whether he should have shared his target price with James at all will be the subject of a future blog.)

Sam’s expectation to be paid for the future growth is also problematic. Certainly, there is room for some negotiation and recognition of the market potential. However, Sam has made it clear that he:

  • Has been the predominant sales driver despite having a sales team on-board;
  • Has been slow to build the infrastructure and momentum needed to tap into the opportunities for growth;
  • Is not interested in having an active role in the company post sale; and
  • Wants all his money up front with no earnout.

In short, Sam’s expectations are not realistic. Sam won’t be taking the same degree of risk as James needs to take to realize the growth in the company’s current markets. While there are strong opportunities to expand into new untapped markets, considerable research and development is needed to design the products. Further, there is risk that the relationships that Sam has will not transfer well under the new ownership. These factors suppressed the multiple James is willing to offer.

There is another parallel between Sam and Casey’s situations. Both of these individuals went into the new situation without adequate coaching. Casey was re-entering the workforce after a considerable time away and was not skilled in how to perform her own due diligence on a new employer. When offered assistance, she stubbornly refused and wanted to do it all herself. She missed the signal, failed to ask the right questions before and after being hired, and set herself up for the fall. In the aftermath, she is turning her face away from the mirror.

Sam is also doing it himself. He has had no counsel on a realistic valuation of his business or real estate, how to position his company in the marketplace to garner multiple offers, or what elements are common in letters of intent and offers to purchase. He, too, has set himself up for a rough ride — if not a fall — if he continues to go it alone and turn away from the mirror.

The bottom line is that there is always “a reason.” The question is whether we will take the time to pause, understand, and learn from it, marshal our resources and advisors, and then move forward.

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