Never Let the Buyer Work in the Business!

“After the troops have crossed the bridge, burn it,” ordered the battalion commander.

“But that’s our only way out!” shouted a shocked lieutenant.

“Yes, burn the bridge,” insisted the commander. “Our only option will be to defeat the enemy.”

Sometimes, if the job is really tough, the only way to ensure success is by making it the only option.

Assuming ownership of a new business is one of those tough, scary-as-heck jobs.  It’s tough for the business buyer. It’s also tough for the seller, employees, vendors, customers, et al. Nobody’s comfortable with change. In a business purchase-sale transaction, if you don’t burn the bridge, retreat will be the more likely result.

One of my favorite quotes is “The path of least resistance makes crooked rivers and crooked men.”

Buying a business is not easy. Neither is selling one. An often-discussed and occasionally attempted “path of least resistance” is to “let the buyer work in the business for a while.” That way the buyer can get more comfortable with what he is buying and the seller doesn’t have to immediately and abruptly begin life absent the “owner” title. This is a natural “middle ground.” But it does not work.

I know, your situation is different. So go ahead. But be prepared to waste a lot of time and energy – or worse.

Buyers unwilling to take the plunge either don’t have the money or don’t have the guts. Or they could have other plans altogether. Take the case of Paul Westing. He owned a company, and finally found a buyer – Kelly – who was willing to pay a fair price. He was also a nice person. Kelly did have money – quite a bit – but darn it if by a strange quirk he could not get his hands on it just yet. His explanation made sense, so it was decided that Kelly would work in the business until his money became available. All the better it seemed.

Four months into the arrangement, Kelly failed to show up for work. Turns out he had embezzled cash, credit cards and other valuables. Another lesson here: If the buyer is offering more than others, there may be a good reason.

Sellers also get cold feet. Serious buyers (those with both guts and money) should be aware of this. Ask Danny Gainsburg. He worked out a deal with the owners of a successful bookstore. Together, they agreed on the path of least resistance. They’d “move slowly” and introduce the buyer over a few years. But the employees became suspicious and, once the plans were announced, resented the subterfuge. And, of course, the employees were not comfortable with a new boss. He was different. The employees undermined the newbie and eventually the buyers buckled under pressure. Mr. Gainsburg wasted two years of his life.

Perhaps your situation will be different but take it from a guy who has spent years putting buyers and sellers together. The business purchase-sale transaction is one that is tough for all involved. I don’t recommend that you first dip in your big toe. Wait until you’re good and ready. Then take off all your clothes and dive in.