The Price Of Emotion

Your attention, ladies and gentlemen – a little scenario!

Imagine you’re a book collector browsing in a Rare and Second-hand Bookshop. You spot what you want, a first edition of A.A. Milne’s The House at Pooh Corner, published 1928, drawings and designs by E.H. Shepard, acceptable condition, only £200.

But the purchase goes badly. The shopkeeper is unhappy about parting with the book, which apparently has sentimental value, a gift from the author to a relative. You’re harassed with questions: why do you want it? Will you look after it? Do you understand its value?

Exasperated by this irrelevant pestering, you resort to sarcasm. Actually, you tell the shopkeeper, you don’t give a damn about the book. It’s all about your neighbours, whom you hate, and who are Winnie the Pooh fanatics. What you’re really intending to do is kidnap them at gunpoint, shred the book before their eyes, and laugh while they weep. You offer £180: unsurprisingly, you’re turned down. You leave, knowing where to find a slightly damaged copy for £160.

Does this behaviour seem odd? It’s actually very common in business transfers, with owners feeling they have an emotional stake in the business they’re selling and becoming precious about what buyers will do after the transaction is complete. Selling a business, however, is a commercial process allowing no place for emotion.

Soon, your business will not be yours. Live with it!

Focus instead on the purpose of your exit. Whether you’re retiring, re-investing or buying a new business, the new owner’s plans are totally secondary to your need to obtain the market value of your property.

Likewise, buyers should think along similar lines. By all means negotiate with sellers, but don’t aim to make the pips squeak! You could find it advantageous later to have paid a slightly higher price, when you’re looking to the previous owner for goodwill and support. It is not better to find the business you would rather own than the business you would rather pay for.

Both parties to a business sale should think long-term rather than short-term. There’s no emotion in buying a Mars bar: think of transferring a business in the same way.

This entry was posted on 09/02/2011 at 01:55 pm and is filed under Selling Your Business, Buyers, General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.