Congratulations, founder! You made it! The final chapter in your leadership journey has finally arrived. You have graduated from the school of hard knocks, clawed your way to the top, maybe even broken the glass ceiling, and the day is finally—finally—here.
After countless meetings with brokers, bankers, venture capitalists, private-equity guys, accountants, auditors, and every other white-shirt-and-blue-tie guy in town, you finally have a deal to sell your baby. Your one-and-only business, started from scratch with a credit card and a few good friends. Here you are, with a deal for enough money to live the rest of your life without ever having to stress about money, employees, customers, technology, email, or even getting up in the morning if you don’t want to. You can do whatever you want, go wherever you want, for as long as you want, and never have to answer to anyone again.
Due diligence was a nightmare. Six long months of finance people digging through every bit of clean, moderately clean, and downright dirty piece of laundry you’ve got. They grilled you about your employees, scrubbed through your client contracts, analyzed every entry in your books, and forced you to rebuild your last three years of financials to their specifications. They dragged you all over the country to meet with other founders of businesses in their “roll-up strategy” and they’ve put you on display to board after board. They nearly broke you, but you knew it was worth it. You knew the payday was coming.
And here it is. Here’s the term sheet. Go ahead, sign it. Make it happen. The future is right there on your desk…
But wait. It wasn’t that bad. Maybe you could go through it again with a different buyer and get a BETTER deal! Maybe you could make enough money to live two or three lifetimes! Maybe you could double down for a few more years, make twice as much as this deal, and you’d be running with a whole different crowd, the big-money crowd. Oh, the temptation!
Your advisors say that your competition is on your heels and there’s a downturn in the market coming. The dealmakers say that “money is moving right now,” but predict a slowdown. Phffff! They’re probably just saying that so you’ll sign on the dotted line. If you can get a deal this big, why can’t you get a big- ger one? Look at you! You can do anything! And there’s power in saying no, right? Turning down this offer will just make the other, bigger buyers want you even more.
Let’s face it: it’s simply not enough money.
LET’S GET REAL
All right, poker players, if you want to go all-in with your last hand at the end of the night when you’ve been on a roll and sitting at the table for twelve hours, then you just go right ahead. But that’s not how we think great leaders should play the game.
There’s something fundamental missing from our CEO’s self-talk above: the consideration for what becomes of the business, the employees, and the customers after the deal is done. Money isn’t the only currency changing hands when a business is bought or sold. There are people involved at every level, people who will likely remain with the business long after you’re gone. So whether or not a “deal” is good for them should be an essential part of your decision-making.
There is also the legacy of your brand to consider—how you want it to be regarded and what you want it to be known for once it has changed hands. The brand itself may go away or be transformed into something new, but the story of what your business once was will always be there. How do you want that story to live on?
On the topic of actual currency: our CEO in the story above seems to be experiencing a self-inflicted doom loop. The doom loop occurs when you make more money than the people to your left but not as much as the people to your right, so you keep needing to make more money than the people to your right, then people next to them, and so on and so on. It’s a never-ending doom loop when you are playing the game of one-upmanship.
We could go on for chapters about our respective philosophies about money, the kind of relationship we believe business owners should have with money, and our personal opinions about the social responsibilities we think people with money should have. But suffice it to say, if you are in the most fortunate position of being able to sell your business—by choice, not by necessity—then we think you should think first and foremost about these three things:
- Are you being offered what your business is truly worth on the market? Not what it is worth to you, not what you want to be paid back for all those years of barely making it, not what someone owes you for your pain and suffering of building a business, but what it is actually worth without
- Will your employees and customers be treated respectfully? Will others who have invested their time and talent into the success of the business be given a soft landing after an ownership transition?
- Are you clear there is nothing about your decision that is coming from a place of greed?
If you can answer yes to these three questions and there is a deal on your desk, then the time is now.
Congratulations, you made it! Now sit back, relax, and enjoy the legacy you’re leaving. Give yourself a nice long break and don’t do anything for a while. You’ve earned it.
But when you do decide to get back in the game, be sure to pass on what you’ve learned as a business leader. It’s on all of us to make better leaders and better businesses for the future.