Don’t Gamble on the Sale of Your Business Unless You Have To

Mike Ginsberg

Like some of you, I enjoy gambling every once in a while.  A quick stop in the casino during one of the many trade shows in Vegas every year breaks up the sessions and late night meetings for me.  A Friday night game of poker among friends is a great outlet for me.  The bracket wagers during the NCAA basketball tourney attract my attention.  However, when it comes time to sell a business, betting the entire transaction price on generating future revenues after a sale is a risk most owners are not willing to take…unless they have to.

Since the start of the Great Recession, a number of collection agency transactions involved deal structures that included no cash payment at time of closing.  Instead of being paid some defined amount at closing in cash or a seller’s note, some owners have been paid the entire purchase price based on a percentage of revenues generated over some defined period of time.