The Question Nobody Was Paid to Answer (Part 3)

Stage Six: I Want to Get Paid

Both sign employment agreements to stay through transition. That is ordinary enough. Show up, do the work, get paid.

Only Priya has a meaningful earnout.

A buyer can pay with confidence for what it can establish will transfer. When historical earnings are clear but continuity is not, part of the uncertainty gets pushed into the future.

Priya's general manager runs the operation, but much of how he runs it has never been made explicit. Her financials were converted under transaction pressure. At signing, there are still things the buyer cannot confidently establish will remain true once ownership changes.

So part of Priya's price depends on the business hitting numbers next year.

Except it will be next year's business. She will no longer control pricing, decide what gets bid, or make every hiring decision. The business will belong to someone else, but part of the price she receives for selling it will still depend on how that business performs.

Curtis has no earnout.

Not because he had a better advisor. He had the same advisor.

The difference is that much of what otherwise would have remained conditional had been examined and resolved before the transaction depended on the answer.

The Question Nobody Was Paid to Answer

Now look back at the sequence.

The seller receives a valuation from the party competing to represent the business, then another from the party competing to acquire it, then adjustments from teams engaged and paid by the acquirer to verify earnings and identify risk.

Every party has a legitimate role. The broker markets the company. The buyer decides what it is willing to pay. The diligence teams test earnings and look for what might not survive the transition.

In most cases, everybody can perform the job they were hired to perform competently and in good faith.

It is just that none of those jobs is to tell the owner what is true about the business before a transaction depends on the answer.

That is the missing function.

The valuation arrives while the seller is choosing representation. Buyer interest arrives while the seller is choosing exclusivity. The deepest findings arrive after exclusivity, after the legal bills, after employees begin noticing strangers asking questions, and after the owner has started emotionally arranging a life on the other side of closing.

Every major input arrives after at least one commitment it would have been useful to inform.

That is why the problem is not primarily valuation.

It is sequencing.

An examination performed eighteen or twenty-four months earlier cannot tell an owner exactly what the company will sell for two years from now. Markets move. Buyers differ. Financing changes.

But it can tell the owner what a buyer is likely to react to and why. It can identify the parts of the business that depend more heavily on people than the owner realized. It can separate problems that can be changed from conditions that simply have to be understood and priced.

There does not need to be a transaction in progress to answer those questions.

There is a good argument that the best time to ask them is when there is not one.

Coffee With Two People Who Closed

Two years after Marty pulls his listing, he ends up at a table with Curtis and Priya at an association event in Charlotte. He knows both of them a little. Everybody in this trade knows everybody a little.

Marty asks the question anybody in his position would ask.

What made your deals close?

Neither can really answer it.

Priya tells him she had a good firm and a real process. Four parties at the table. Better attention than she expected. Then she tells him the number moved in diligence and she had no way to judge whether the movement was fair.

Her advisor said it was normal. It probably was. She still does not know.

And the last piece of the price, the piece that is not guaranteed, she agreed to because she was ten months in and no longer felt like she had a good way to check anything.

She does not tell the story like a woman who made a mistake. She closed. It was a real outcome. She is glad it is done.

She just cannot tell Marty which of her decisions produced it.

Curtis cannot either. Plenty of prepared businesses fail to sell. He does not claim the eighteen months made the deal close.

What he says is narrower.

He knew enough about his own number before anybody else told him one that when the number moved, he could understand why. That was the one point in the transaction where he was not simply taking somebody else's word for what his company was worth.

Then, mostly making conversation, he tells Marty what the eighteen months actually involved: getting estimating out of his own head and into two other people's, putting two handshake relationships on paper, making work in progress understandable to somebody who did not already know what the spreadsheet meant.

Curtis says he did all of it because he wanted to sell.

Then he shrugs and says he probably should have wanted those things anyway.

He is not talking about Marty. He does not know anything about Marty's company.

But it is the first time in three years that anybody has said the word estimator anywhere near Marty Vosburgh.

What the Sale Process Actually Reveals

Marty is in better shape than some of the others. That deserves to be said.

He still has his fees, his people, and his time. Angela remains tied up in the aftermath of a process that never produced a deal. Dale spent ninety thousand dollars, lost his service manager, and now has a failed transaction attached to his company in a market with a limited number of serious buyers.

Marty avoided all of that.

He also owns essentially the same company he owned three years ago.

The estimating still lives in his head. His knees are still shot. And for three years he has been carrying a conclusion built from a non-event. Eleven inquiries on a website did not establish that buyers rejected his company. It established that eleven people clicked on a listing.

Those are not the same thing.

More important, the conditions that would eventually affect Marty's sale price are not really exit problems.

They never were.

An estimating function that lives inside one man's head is a discount at a closing table, but it is also a continuity problem on an ordinary Tuesday in February when that man needs a hip replaced. A customer relationship built entirely on personal history can become a diligence concern when ownership changes, but it is concentration exposure today. Books designed primarily for the tax return can create a re-trade during a transaction, but they can also make it harder for the current owner to see what is happening in real time.

The sale process does not create any of those conditions.

It is simply one of the few moments when somebody finally assigns a dollar amount to them.

Marty is going to be sixty-five soon. Eventually, he can find out what a buyer reacts to inside a transaction, under someone else's clock, after the next decision depends on the answer.

Or he can find out while nobody is trying to buy anything.

The information will not tell him whether to sell.

It may tell him something more fundamental.

What, exactly, has he built that still works when Marty Vosburgh is no longer the person making it work?

For the beginning of the story: Part 1
For the middle of the story: Part 2