By Zane Markowitz Every business owner has a favorite reason for not selling.

Having heard them all over the years, I have collected a list of my favorite excuses. #10. I want to continue not going fishing every chance I get. Some business owners are just having too much fun. They in fact are having so much fun not selling their businesses that they don't ever want to stop not selling them. It doesn't take much time to attend get-acquainted meetings arranged by others. In fact, being courted, flattered and wooed becomes addictive. You might even be surprised: "not-forsale" sellers are acquired all the time by strategic buyers that see more value in their businesses than they do. And if you're one of those executives who plays well with others, a surprising number of CEOs turn out to be the former owners of the now-acquired companies they lead. #9. I am waiting 'til the business peaks again. Congratulations, but you're already too late! It will take 6 months to create a selling document and eliminate the tire kickers. It will take another 6 months to negotiate with the first serious buyers and another 6 months to complete negotiations with the final buyer. That adds up to a year and a half. To maximize price you might want to lower the risk to the buyer by accepting a 2-year earnout or a partial stock deal with a 2-year selling restriction. Remember that a positive outlook will drive your earnout or protect your stock position. Now we are talking 3.5 years (very likely at a minimum). Make no mistake, acquirors buy future earnings. #8. I'm getting ready to get ready. You're right. You're building a longer growth history that should be of value. It's important to the buyer, especially when you don't have it. But once you have established that strong sales history, your company's future will be discounted in some other way: your company's future always will be discounted on one basis or another. Too often, quite drastically and unexpectedly on the basis of circumstances you never anticipated. In 2006, a healthy 78 year old owned a Toyota dealership that boasted 20 years' uninterrupted sales and profit increases. The dealership was managed by a strong professional manager and its prospects were so bright that the owner outright refused an unsolicited offer of $300 million for the company. The dealer was absolutely certain of one thing: the business would be worth even more than that a few years down the road. Within months of rejecting the $300 million offer for his dealership, the owner experienced heart problems and his professional manager was fired for making "unauthorized withdrawals" from the business. Confronted by these unexpected circumstances, the owner began reevaluating his situation. He decided to reach out to his $300 million suitor the following year. The buyer was still very interested in acquiring the dealership and serious discussions ensued even as the real estate market silently crumbled and oil traders began to hedge

their positions and Bear Stearns collapsed and then Lehman Brothers. Discussions with this single prospective buyer stretched on for a year or more, by which time, gas prices had doubled, auto sales had plummeted (along with the stock markets) and the dealership experienced it first back-to-back monthly losses. The buyer did not want to insult the seller, and so he made offer for the dealership he once thought was worth $300 million. In the midst of a global recession and a raft of financial crises, the buyer said could not have raised the necessary capital anyway. And so it was that a $300 million Toyota dealership no longer is worth $300 million and very likely never will be. #7. I don't know where to better invest the proceeds. Few can be sure of where to invest their money in these times but one is certain. Were you to sell, no one could possibly convince you to invest the entire proceeds in a medium-sized, privately-held business, even if you were offered the titles of Chairman and CEO. Like you are now. #6. I'm waiting for the kids' IQ to improve. Well, there are lots of people holding out hope on that one. It certainly is most admirable wanting to eventually entrust your retirement to the hands of your children rather than dispassionate pubic company business executives who are expert in the management of millions or billions of dollars in corporate assets. #5. I can't spare the time. It does take a lot of time to manage the sale of a company, especially when the seller is dealing directly with the buyer. As one or more buyers becomes more serious about an acquisition, resulting discussions consume more and more of the seller's time. As a result, sellers may tend to focus on one buyer at a time, losing the advantage inherent in an auction process in which several prospective buyers compete to acquire the seller while also setting in motion a never-ending pattern of sequential negotiations by ending discussions with one buyer whose interest falters or whose terms disappoint only to enter into discussions with another interested party. Buyers know that unforeseen circumstances frequently arise (on an annual basis at least) that make every owner think more seriously about selling. By drawing out the getacquainted process through serial negotiations, the seller increases the odds that unforeseen circumstances will arise to force a sale at an inopportune time while giving the available buyer unexpected leverage in discussions with a seller who may have run out of room to maneuver. Sellers who are truly time haunted should consider the advantages of undertaking multiple simultaneous discussions. For less time than it takes to talk with one unsolicited suitor, 100 strategic buyers can review the opportunity. From that group, 10 serious buyers likely will emerge, requesting additional information and submitting offers. This process enables sellers to evaluate each suitor's relative seriousness even as the competitive process ensures that each buyer offers maximum value. Should prices fall short of expectations,

sellers will have learned the size of the gap, enabling them to create an appropriate action plan. Should unforeseen circumstances arise, remember who always wins the auction: the seller. #4. There are plenty of interested buyers: I get calls all the time... Most active acquirers maintain a prospect list that they routinely contact and they also tend to re-establish acquaintances during trade shows. To the greatest degree possible, they make every effort to avoid auctions because auctions always drive up the price. If you see no point in hiring an investment banking firm to keep the potential buyer honest because you really have no interest in selling, you may be absolutely right. However, if you think there is even a 1% chance that you will sell, consider this: if there is one thing buyers hate more than unrealistic sellers it is the specter of other overly anxious buyers entering the picture. If you already have taken the first step and met with the buyer and see enough potential for a second step, your next step should be to hire representation to identify 10 to 20 strategic buyers to keep the process honest because the next step probably will be signing a "stand still" agreement. Be sure to view the cost of representation as acquisition option insurance. For an investment of $35,000 to $50,000, your investment banker will produce a selling document and initial strategic buyer research that likely will save you 6 to 12 months of "getting ready to get ready" time. More importantly, the time savings and the value of an investment banker's insights and advice likely will increase the odds of hitting the narrow window of an ideal selling opportunity. Ideal selling windows tend to open for a very short time because of the multitude of variables involved, most of which lie beyond any seller's reach or control. For example, sellers have no control over interest rates that inevitably have a huge impact on prices that buyers are willing to pay (and afford). As interest rates rise, prospective buyers scale back prices they are willing to pay in order to maintain their return on investment ratios. Buyers begin to disappear from the market altogether as interest rates make acquisitions more and more prohibitive. The fewer buyers in the market, the lower the prices paid. Stock markets also have a major impact on valuations, especially when buyers plan to use stock to complete an acquisition. No one pays a premium with undervalued stock price. Strategic buyers come and go very quickly as do the perfect selling opportunities. #3. I don't want to face what it's not worth. Value is in the eye of the beholder and the best value is realized when you make sure you're talking to the right buyers. Financial buyers use a discounted cash flow model to establish value base upon the cost of capital, a worst case scenario of a 5 to 7 year payback and require every deal to be selffunding. They create added value by exercising greater financial control to improve profitability and expecting, in turn, to identify a strategic buyer willing to pay a crazy price in the next 5 to 10 years.

Strategic buyers use the same discounted cash flow model not to establish value but rather as a negotiation tool to ensure the seller's expectations remain reasonable. The valuation model they present to the board calculates the return on capital employed while featuring some synergistic benefits between the two companies or some avoidance cost showing the buyer making a killing. The bottom line is this: you never run into a price problem when the buyer recognizes a greater value than the seller sees. Not every buyer sees the same value but at any point in time, every business is worth a premium to someone. #2. I'm gonna live forever. Besides, you're riding a winning streak, and every gambler's motto is: "cash-in later." The plain truth is that few of us will know when we will be called to cash-in. You don't want that burden to fall on those left behind. Expecting a widow or children to manage the selling process from scratch, even when assisted by a good attorney, invites disaster. Your heirs will be pegged as "desperate" sellers by every suitor and the longer it takes to close a transaction, the worse things will become. #1. I'm waiting to lose a few more options: I always do best when I'm under pressure. If you're market share is slipping, your product line needs updating, key personnel are leaving, key customers are defecting to competitors, revenues and/or profits are declining, and your market is disappearing, what are you waiting for? Do you want to see your business model completely invalidated? 99% of all entrepreneurs hold on too long and sell their businesses 3 to 5 years too late. They postpone the inevitable decision until they find themselves trapped by "must sell" circumstances. Or, on the other hand, the seemingly "right time" to exit suddenly turns into the "wrong time" quite unexpectedly. Holding on till the last minute must be a "primate thing." In the 1930s and 1940s, there was a hunter and collector of big game named Frank Buck who created an adventure series called "Bring Em Back Alive." He captured baboons for zoos with nothing more than two feet of rope, a cider jug and a handful of peanuts. First, he baited the ground with a few peanuts. Then he dropped the rest of the peanuts into the jug. Baboons who found the nuts on the ground always wanted more. As if scripted for a "B" rated comedy, an enterprising baboon would reach down the narrow neck of a staked-down jug to grab just one more morsel. Unable to withdraw a clenched fist full of nuts and unwilling to let the nuts go, the baboon stubbornly sat, caught in a trap of his own making. While some might consider the analogy unflattering, business owners all too often fall victim to an unwillingness to let go at the appropriate time. Business owners recognize the critical importance of timing even as they admit to postponing the process, perpetuating delays even as they seem powerless to know when to let go and escape the inevitable trap.

Sooner or later, the executives recognize the true price of their reticence: Mr. "DeFault" winds up making their estate planning decisions.