The Vital Decision Every Entrepreneur Must Take Before Selling Their Business

Capital Asset Management, Alan Smith, Entrepreneur Business Sale

The Offer to Buy Your Company

Most offers to buy your business will include some form of ‘earn-out structure’ and you could be asked to stay on at the new company for another three to five years.

Usually, a significant part of the financial offer you receive will be conditional on you staying around until the end of the agreed term.

Stay on and receive a bigger pay-out. Walk away and give up the extra money – tough choice. 

Two Quick Stories

The Entrepreneur’s Dilemma

At the height of the dot-com boom one of the greatest ever tech entrepreneurs, the late Tony Hsieh sold his first business to Microsoft for $265m. One of the conditions of the sale was that Hsieh would stay on at the company for at least 12 months after the acquisition was completed. 

If he did so, Microsoft would make a further pay-out of $40m. He agreed

So now he was no longer head of the dynamic, energetic business he founded. Now he worked for Bill Gates. 

He hated every minute of it and only a few months later, walked out and said goodbye to the extra money.

Should I Stay or Should I Go?

In 1998 when Seinfeld was one of the most popular shows on TV, bosses at the broadcaster, NBC, sat down with Jerry Seinfeld to negotiate a new contract.

They were prepared to ‘break the bank’ to secure the deal. They proposed a new run of 22 shows for which he would be paid $5m a show – a cool $110m was on the table. This was an offer he couldn’t refuse.

Except he did. 

Jerry had decided that he was done, he had enough, he wanted to move on.

Get clear and negotiate

How do you feel about working for a boss after all these years running your own show? 

It may be a blessed relief, or it may be your worst decision.

Think carefully.

Alan Smith

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