I recently completed the sale of a fantastic cafe and there were some reflections I have on how the deal went that I wanted to share with you.
Up until the contracts were exchanged the buyer and the seller were getting along very well together. We got together and had a meeting about how the training and transition period would go, agreements were made and it was a positive meeting that went well and I felt positive about how the transition period up until settlement would be handled
Unfortunately, from there the wheels fell off…
Both parties in the deal were well-meaning and very nice people that had the intention of doing the right thing by the other but due to some poor communication as well as some other external factors by the time settlement came around they were at loggerheads and it was all very frustrating.
It was avoidable. Here are some of the mistakes that were made and how they could have been avoided.
It was initially agreed that the business owners would coordinate with the purchasers to manage the social media messaging of how the business was going to change owners, but unfortunately, they forgot about this and posted saying goodbye to their customers and this understandably angered the purchasers. It was an error of judgment that came from a place of wanting to say goodbye to a loyal customer base but it was handled badly.
The learning from this is that if you are selling the goodwill of your business then you need to coordinate with the purchaser over any messaging you put out on social media, they may well not want to signal the change of ownership to the market, and doing so could potentially damage the business. Good communication would have avoided this situation.
Another situation that came up was that a key staff member decided to resign as soon as she heard about the sale. My clients had not informed the staff member about the sale of the business until the last minute and as it turned out the staff member had been considering her future and it was a catalyst for her decision.
Whether you tell your staff that you are selling prior to going to market or not is a personal decision my view is that if you have a healthy culture and a good team then you should be able to recruit them into supporting you through the sale process and really talented staff can sometimes find new roles for themselves by negotiating with the owners and showing their value.
Staff issues during the sale can be one of the most common obstacles to deal with during a sale and another common scenario but not one that happened in this sale is that buyers can be a little bit overbearing and dominant during the training process. I always encourage a listening mindset, the training period is a time for you to observe how the business operates and to start to develop relationships with staff, suppliers and customers. If you see things you are not happy about then they should be noted and dealt with at a later date.
Another thing I would say is that if there is a broker involved in the deal then use them, it is our role to ensure the deal proceed smoothly and we can often ensure that small problems don’t turn into large ones and that all parties fulfil their obligations (of which there can be a great many) to allow settlement to take place on time. Remember that it is often the first time a buyer and vendor are going through the experience but brokers do it for a living…
In this deal I found that the solicitors were not keeping me in the loop and that definitely caused some issues that could easily have been avoided.
As with many things in life, good communication is the key to a successful outcome.
In order to help our clients we have put together a transition checklist with most of the major tasks that will need to be completed between exchange and settlement so if you would like a copy of that then feel free to reach out to me.