Friday, October 7, 2005

I called my lawyer today to talk about a couple of things related to the business sale, and specifically mentioned the partners wanting to pay me 50% up front and 50% from the business revenue (an "earnout"). He repeated what he said earlier, and said I should absolutely not take that offer. He didn't give me any specific examples I can remember, but he said there are too many ways for people to wiggle out of deals like that, and all the money should come up front.

He also said that while they were stating it as the business partners trying to minimize their risk, he said I needed to look at it as opening up myself to the risk of their potential incompetence, infighting, possible turnover, etc. I told them none of them were incompetent, but that certainly with all the partner shares moving around, there could be some infighting. The possibility for turnover is also there, and indeed, Jack may negotiate his own deal as soon as I leave. While I've written about a lot of concerns about Jack, he at least offers them some stability in the sales area. At the very least he's willing to pick up the phone and talk to customers, where most of the technical people seem to avoid that as much as possible.

A great piece of advice from my business lawyer

When I told my business lawyer that they were trying to build all the negative possibilities into their offer to make it as low as possible, he mentioned one thing that made a ton of sense. He said that as long as nobody was threatening to quit any time soon, a very good tactic is simply to delay the business sales process as long as possible. In short, I make at least $1K/day for every day I own the company with the current ownership shares, so the longer we don't come to an agreement (with nobody quitting), the more money goes into my pocket. Looking at it another way, if I can get the same offer from the partners in December that they're willing to make now, I'll leave in April with at least $90K more in my pockets if I don't accept their offer until December.

He didn't offer any specifics on how to "stall", but he said if they weren't willing to pay what I wanted, I was under no obligation to sell, especially if everything was relatively peaceful. He added his advice that he's seen sales end up two good ways: Either everybody is happy (win/win), or nobody is happy (lose/lose). In any other arrangement, one group ends up happy and the other group isn't (win/lose), so he suggested I needed to keep pushing for what I wanted until the other partners couldn't take it any more. He said this is certainly risky, but I'd know that I was getting all I could get.

After I hung up with him, I was reminded that it feels weird to be doing battle against a group of people I personally hired. You hire all these people, train them, invest in them, and now as I try to sell my business ownership to them, we're on opposite ends of the table, and I have to use everything I know about them to try to get what I want in this sales process.

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