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Turning an Offer on It’s Head

By: Ned Stringham

A very clever deal guy taught me a simple mental trick when evaluating an offer to sell part or all of your company. He told me, “if you say no to this offer to sell, it’s the same as you buying the business for that price.” The price you turn down is the price you effectively ‘paid.’ It is now your new baseline. You now have to create value above and beyond that baseline. Can you still grow the value of your business at a rate and to a size above that level which justifies saying no to the offer?

Even though the stories in the media are often about the founder that said no to seemingly attractive offers, there are a lot more that wish they would have said yes. I personally know at least two people that had a chance to sell their businesses and take over $1 billion off the table, they said no and ended up with less than $50 million when the businesses were finally sold. The media tell the stories about the big successes. They often praise them for having the guts to say no. That’s fine for the home runs, but what about the rest of the opportunities.

Turning an offer on its head as suggested is a great technique to put you in the mind-set of the buyer. It is easy for entrepreneur’s to see the upside and many times they are so bought into the vision they are selling, that they struggle to step back and rationally evaluate an offer clearly. My experience is that the best owners know it is time to consider selling when their story is the strongest, yet many sales happen at exactly the opposite time, when people are in trouble.

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