Why you should kiss lots of frogs

Dating has changed a lot since I was in the market. Today, soul mate seekers spend less than 60 seconds looking at a profile on a dating site before swiping on to the next one. Viewers focus predominantly on the photos, not your cleverly worded description. According to some research, it takes an average of 84 “matches” before you really hit upon a successful match.

For those currently in the market, the message of “you have to kiss a lot of frogs” has been heard loud and clear. Our relationships are deeply personal and important to us, so it make sense that you don’t want to settle down with the first toad to pop up on the screen.

Similarly, when selling your business to a third party, you want to have confidence that you are putting the care and future of your company and all your stakeholders in good hands. So why is it so many business owners settle down with the first frog to hop up to and kiss them?

Time and time again, I see this in our practice. A known friendly competitor calls you up, asks you out for a beer, and you get talking. Or maybe a call comes to you out of the blue with someone interested in your company. Before you know it, you are walking down the aisle and signing papers without really having checked out your other options. I’ve heard many explanations for this, including:

  • I know and like this person — meaning I think it’ll be an easy sale and this person won’t screw me, right?
  • I don’t have alternatives, although I haven’t really explored the various options out there.
  • I can do this myself — meaning I don’t want to pay a fee.
  • It seems like a great deal!

This match made in heaven may not give you your best outcome though. Consider:

Quality of the match: You know that selling your company has many facets, as I’ve talked about in other posts. You face many decisions: What are my alternatives for exit? Do I want to take all the chips off the table or stay in the game in some way? What’s non-negotiable? How do I want to advocate for my stakeholders?

You have goals and priorities. When you go with that first frog, you take a big risk that you may unknowingly fail to honor what’s important to you.

Experience: Chances are your frog has been playing at the pond a lot longer than you have. He buys companies as often as he eats flies. He knows what he wants from you.

You’re skilled at running your business. You may or may not have thought about what you really want from him, but you’ve heard about frogs and toads and even educated yourself about them. However, that is very different than hopping into the deep end of the pond when you’ve never learned to swim.

No competition: Your stunning suitor faced no competition. This gave them control over the relationship before you ever finished your first beer. Did you get the best price and deal structure with all your priorities met? Chances are you didn’t

This is a time to explore your alternatives and create some competition.



No chaperone: How many of us let our inexperienced daughter go out with a boy for the first time without a chaperone or way to verify that things are on an even keel? Not many of us. We usually take determined, and sometimes quite creative, precautions to protect our kids the best we can. (One dad I know used to be “coincidentally” cleaning a shotgun when the young man came to pick his daughter up for their first date!)

However, when it comes to selling a business, and especially with a sole suitor, too many owners try to go it alone. They don’t hire advisers experienced in buying and selling businesses, relying instead on the attorney that may have drafted their will or the accountant that only does their taxes. In that case, they are that novice without a chaperone.

This is one of most important times to stay focused on running your business. Selling it yourself all but guarantees that you will be distracted. Finding potential buyers (assuming you take the time to create competition), courting, entertaining proposals, and enduring their negotiation and due diligence demands is time-consuming. Going it alone significantly increases the risk of taking your eyes off the ball, as well as missing the potential consequences of a more-experienced suitor’s moves.

Even in a sole-suitor situation, it’s important to have someone else manage the conversations and process. Experienced advisers see the parts of the deal that may not meet your objectives or could backfire on you. They know the “moves” and have seen the consequences. While they do their job, you can concentrate on doing yours.

You’re in a very lonely spot when selling your business due to its highly confidential nature. Your adviser provides you with someone experienced and objective to talk with about the deal, especially when your emotions spike — and they will spike. There’s tremendous value in having them there to help you sort through the issues, pros and cons of the situation, and facilitate your decision making.

Mirage of more money in your pocket: In a sole-source deal, brokers fees may be avoided, which further encourages business owners to go it alone.  It’s true that when you work with or are approached directly by a single suitor or do it yourself, you will likely save on broker or investment banking fees, but that does not mean that you got the most cost effective or lucrative deal.

Your chances of leaving money on the table go up significantly without an experienced adviser working for you and creating competition. Further, legal and other fees may spiral out of control because of the lack of support, direction, and negotiation experience. Worse yet, if the deal turns out to be difficult to enforce or worse, the cost of litigation can quickly escalate. The money “saved” in broker fees is often only a mirage of the pond.

The moral of this story is that you should not simply settle for and talk with a single potential buyer when looking to sell your company. Nor should you do try to do it yourself. Engage your advisers to support and guide you, bring multiple suitors to the table, and leverage their experience to find your prince or princess.

Otherwise, you may end up with an ugly toad.

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