New post on: Harvard Business
You may be surprised to learn that now — even in this economy — could be a great time to sell the company you’ve spent years building. But entrepreneurs hoping for an exit strategy could make costly tactical errors if they don’t understand what’s changed in the last year. In our experience advising companies, entrepreneurs in this environment are vulnerable to making three significant mistakes if they don’t understand the new rules of the game.
Mistake 1: Assuming getting 100% cash-at-closing is the optimal outcome. It used to be that we’d counsel clients to get as much cash as possible at the closing of the sale and to be cautious about earn-outs, i.e. deals where portions of the sale price are contingent on the seller meeting pre-specified objectives in the future. In these types of transactions, exceeding those objectives will often greatly enhance your payout. In addition to the obvious inherent added risk, earn-outs can be tricky to negotiate and even trickier to enforce.
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