(Time to read this Blog article is about 40 seconds)
One of my recent coaching clients has been negotiating to buy out a competitor. As usual, the seller thought their business was worth much more than it actually was. How could they have worked so hard and the business be worth so little? Because working ‘hard’ and working ‘smart’ are two different things.
The prospective purchaser, my client, really wanted to do the deal for a number of very good strategic reasons. They were tempted to overpay to make the transaction go quicker and more smoothly. But I cautioned them to walk away for a while if the price wasn’t right. Sometimes it takes the seller some time to emotionally adjust their expectations.
For you, the buyer, it’s all about getting the right ROI (Return On Investment) on the deal and you can’t get a good return if your investment was too high in the first place. And integrating another business into yours is always more difficult, more time-consuming and more costly than you think it will be.
So my client walked away, leaving the door open, and the seller came back and did the deal at a price that made sense.
Note: It’s especially easy to overpay when there’s a bidding war, real or imagined. Keep your cool. Don’t get sucked in. If you’re the seller, a bidding war is great…but not if you’re the buyer. It’s far better to walk away than to do a deal that will be an unfixable financial burden for years to come.