Once you've driven a hard bargain, it's important to do what you said you would.
Once you’ve got your business ready to sell and engaged with purchasers, you will need to negotiate a good deal, but then deliver on what you’ve promised.
There is a real danger of agreeing to lots of binding terms without really thinking about them because you’re being offered a great value for your business. These terms will be in your contract, usually as warrantees or indemnities, which if broken can be used against you! Break your promise and the buyer may have the right to amend their offer or seek recompense as you’ve not upheld your end of the bargain.
There are two parts we suggest you consider:
1. The terms you can negotiate
2. What you’re agreeing to as part of the deal
Firstly, it’s important to negotiate as good as deal for you as possible. Whilst most people selling their business will go for the maximum financial package, that might not be the best thing for you. If having some free time (ie not working 5 days) is more important to you than all our maximum pay-out, you’ll need to negotiate this into the deal, which may mean accepting a slightly lower offer price.
The same goes for any requirements you have about your staff being kept on, the length of the handover period, what you are expected to do as part of the handover, etc.
From a financial perspective, the shape of the deal will be largely governed by the acquiring party – most will have “their way” of doing an acquisition, which you’ll have to fit into to a large extent.
Take some time to think through what you’re agreeing to. If you’ve been working 3 days per week for the last few years, agreeing to go full time for 3 years to get the best financial deal sound OK to start with, however once you’ve agreed your terms, you need to stick to them, even if you don’t like them once things are underway. It is possible to ask for a change in terms, however this could be seen as a material change to the contract and give the buyer room to change the price.
Changing terms midway through the deal is the last thing you want to do as you are in a VERY weak negotiating position! You’ve already told your clients about the sale and introduced some of them to the new adviser – pulling out would be difficult and embarrassing at this stage, so it’s hard to have any real teeth in a new negotiation.
In short, think very hard about what you want, what you don’t want, what you can deal with and what you can’t BEFORE you sign the deal.
Once you’ve agreed the terms of the deal, it’s your responsibility to adhere to them, to the letter! Any deviation in terms gives the buyer the opportunity to challenge the sale price or seek recompense.
One of the hardest things to get used to is having a boss. As a business owner, you’re an entrepreneur – used to making your own decisions about how the business runs and how you spend your time. Once you’ve sold, you now work for the buyer (assuming there is a handover period) and you must adhere to their rules.
Want to come in late? You’re probably going to have to ask for permission, or at last let they know. Fancy Friday afternoon off – that’s a holiday request, which may have to be submitted in advance. These things shouldn’t put you off doing a deal, but it’s important to remember that you have committed to this way of working during the pay our period.
But what’s the risk? If the contract says you’ll be in the office 4 days a week, you’ve committed to being in the office 4 days per week. If you go in 3 days one week, without permission, you’ve not fulfilled the terms of your contract and therefore the buyer may have the right to penalise you for this in some way. It may be that the buyer isn’t so bothered about attendance at the office, however most buyers are interesting in getting the most return they can for their investment, so if there is a chance to issue a penalty against you (and therefore increase their return) they’ll evoke it.
Sounds simple, but it’s incredible how many IFAs fall foul of the contracted conditions they’ve agreed to thinking “it’ll be fine” “they won’t care about that” whereas most are held to the contract like a magnet by the acquirer.
The person buying your business is trying to get the best deal possible. As nice as they may be, and whatever they say will be “fine”, what’s written down is usually enforced so take plenty of time to ensure you know what you’re signing up to and then stick to it, otherwise you may find the final value you get for your business is less than you anticipated!