Wednesday, October 5, 2005

This is a page from my book, “How I Sold My Business: A Personal Diary”

I met with George and David at a coffee shop this afternoon to answer their questions related to my ROI spreadsheets. The technical questions they asked were interesting, but the positioning between George and David was probably more interesting. I've noticed George taking more of an active leadership role in these meetings lately, especially today, while David seems to be regressing a little bit, back into his "I just want a job" personality.

Regarding my ROI spreadsheets, they're still reworking my numbers, but they think I'm way too high. They have more or less figured out the tax consequences related to my "24 month ROI" plan, so they tell me they're going to want to reduce their offer a lot there.

For my part I told them I can't think that way, because an outside entity won't think like that. I explained that I talked to my tax attorney, and he said he can't talk to them directly, but that they need to talk to a tax attorney of their own about how to handle this. That being said, I expect that I'll have to negotiate this, and hopefully we'll split it down the middle.

Payout from business revenue

They also want a 50/50 split on how I'm paid out, with 50% cash up front, and the other 50% coming from the revenue of the business, basically an "earnout." (At first they wanted to base it on the net income of the business, and I told them there was no way I was going there, that net income is way too easy to make disappear.) They think this is a much more "fair" way to deal with the risk of losing business after I leave. They're also worried about me leaving and then competing with them, but I countered that concern with two arguments. First, I'm planning on a long vacation and then returning to my hometown. Second, if I wanted to start a new company, I'd really just get rid of Jack, based on his offer to sell, and stay with this company.

I didn't argue the 50/50 earnout split today. I don't want to argue, er, negotiate, something like that without having any idea what they're willing to offer.

They also said my offer didn't account for me not staying very long after the sale. Based on what they're heard all along, they thought that if I sold the company to an outside entity I would have to stay 12-18 months after the sale, and here I was, looking to leave town in less than seven months, and we aren't anywhere near a deal yet.

As a final note, they also said they want to find a lawyer to represent their group, and haven't done that yet. I expect that will take at least a week for them to do, even if they found someone they liked while searching for a company attorney.

I thought they would bring my numbers down some, but they're bringing them down even more than I expected. In positive news though, they seem pretty happy, and nobody is talking about quitting or stress right now. All of our current projects are rolling along right now as well, though I am concerned that all of these extra phone calls and meetings are causing missed time for all of us. If any of the employees from different locations are talking to each other, they'll soon realize that a lot of the partners are having a lot of meetings with each other. I can't think of any other way to handle this, other than to communicate more by email, and keep our phone conversations until after hours.

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