Busting the Biggest Myth About Selling Your Business

August 05, 2021

by an investor from Harvard University - Harvard Business School in Toronto, ON, Canada

Among entrepreneurs and CEOs who don't have much experience buying or selling businesses, there is a common (mistaken) belief that the seller bears no further risk after the sale of his or her company is completed. In most cases, this is simply not true, and this reality tends to catch a lot of selling entrepreneurs by surprise.

As prospective buyers and prospective sellers of businesses, it's really important that you understand the major mechanisms featured in most deals that that shift risk between buyer and seller. Most selling CEOs aren't prepared for such terms, and as a result, friction is often created in the negotiation process. Knowledge of these risk sharing mechanisms can help reduce that friction, and as future buyers of businesses, you can utilize many of these tools to attempt to mitigate your own acquisition risk as much as possible.

You can check out the link to the blog below, which includes an option to listen to the blog post in audio format:

Busting the Biggest Myth About Selling Your Business

Reply by a professional
from Hobart and William Smith Colleges in Chicago, IL, USA

Steve great stuff. I try to make sure that my sellers can secure their interests with some sort of essential collateral, whether this be intellectual property (such as code), equipment (of course), and even personal guarantees. Of course the type of financing the buyer has can make this difficult, but pushing the envelope on these sorts of things at least sets a tone that simply underperforming or (god forbid) reorganization may not be the path of least resistance.

Reply by a searcher
from Swinburne University of Technology in Melbourne VIC, Australia

^redacted‌ great content, thank you very much for that. Looking forward to the piece about the working capital peg!

+4 more replies.

Join the discussion