When selling your business, sweat the details

The details of closing can make all the difference when selling your business. Watching the details may not be fun, but it's vitally important.

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Illustration / Don Coker / Newscom / File
Selling your business is a complicated legal transaction, but don't give up too soon – it's worth it to sweat the details. All of the details. So take a deep breath and keep moving forward.

My lecture on the exit process is one of my favorites to give to my students. I use my own experience in selling our company as a case study in the complexity of the deal terms and their implications. Even my more experienced graduate students have an unrealistic view of the exit process. Most seem to imagine a process more akin to selling a house.

They soon realize that issues such as what gets sold, how you get paid, when you get paid, what your payment is eventually based on, what you guarantee post sale, and how the deal gets structured can have huge implications on what actually finally ends up in your personal checking account from the sale of the business.

And then there all of those intense emotional questions that many business owners wrestle with. What will I do after I sell? What will happen to my employees? Will the culture I worked so hard to build be unraveled once the new owners take over? Did I sell too soon?

Charlie Crystle shares his own sorted exit story from the sale of his business in an article at CNN Money:

"My software company ChiliSoft sold for $100 million in 2000. Or $70 million. Or $28 million.

"It depends on the date you choose, the built-in triggers, and ego. Notably, from December 1999 to May 2000, my stake dropped from 40% to 15% when the deal closed. Most employee stakes dropped as well -- but not all employees."

Crystle's lesson learned from his experience is to "sweat the details."

While that sounds simple enough, many entrepreneurs get beaten down during the process of selling their business and end up agreeing to terms that come back to haunt them post closing.

I remember a phone call I had with our attorney as we were working on the details of closing the sale of our business. We were getting bogged down in the language in the various closing documents. I was worn out, as we had already had two aborted closings. I was worried that the whole thing was about to come undone. I just wanted to get the business sold. I said to him, "I don't care about all of these stupid terms. Just work it out and get the deal closed!"

My attorney was silent for a few moments on the other end of the phone. Then he said, "Jeff, I know this all seems incredibly tedious, but it really matters. Some of what seems trivial now could cost you dearly later. Get a grip and hang in there with me."

He was right. When I looked back on the deal post closing I began to realize why so many of the details that seemed at the time like lawyers being lawyers actually mattered.

For many entrepreneurs, selling the business is a once in a life time opportunity. Don't leave anything to chance. Know that the buyer has hired very smart and experienced M&A attorneys. You do the same and listen to their counsel.

Sweat the details, indeed.

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