Negotiating & Structuring The Deal

Keeping the seller onboard for a reasonable and effective transition period can be the difference between success and failure for a business buyer to be certain the business gets off to a smooth start under their ownership.

There are of course potential issues that can arise depending upon how long the former owner stays on, but the question always comes up as to how long they should stay.

There are no hard rules however, in general, my approach has always been to get them out of there as quickly as possible once their job is done.

So exactly what’s their “job”? First, it’s to be certain you are properly transitioned into the position of ownership. Their training period is to formally walk you through everything they do each day, how processes and procedures are set up, and how they handle specific situations. This ranges from showing you how to unlock the door through to introducing you to key customers or operating equipment, placing vendor orders, preparing for trade shows, and all other key tasks depending upon the nature of the business.

As part of a buyer’s due diligence process, they (the buyer) should be addressing many of these issues before closing the deal.
Additionally, the buyer should be compiling a list throughout the time they are reviewing and researching the business of questions about the daily operations and should avoid leaving these to be answered post-closing.

Obviously, the more complicated the business the longer a buyer may need the seller to stay on board.

However, if a buyer is truly uncomfortable about operating the business without the seller, they probably shouldn’t buy the business altogether.

In situations where there are key customer relationships, a buyer may want to consider keeping the seller onboard in a salesperson capacity to ease the transition and provide comfort to these key customers over a more extended period.

One thing that’s absolutely critical is that the former owner has to be completely removed from all decision making authority as soon as you take over.

It may be hard for them to adjust to this new role, but the last thing you need is employees, customers or vendors continuing their relationship as though no sale transpired or you don’t exist.

Ideally, set a period that you fundamentally believe will allow you to accomplish the training you need from them. This could be as little as a few weeks. Whatever it is, get a free initial period of training. You should also buffer that with an additional training period (preferably at no cost but don’t get greedy) at your option. For example, they agree to provide one month of full time assistance after closing and you have the right to retain them for an additional period at an agreed upon compensation, but again, it’s your option. You can also negotiate a descending period where it’s full time for a set number of weeks, then part time for a certain period of time thereafter.

Once the sale is done it’s YOUR business. You are the new boss, the new Sheriff in town and the quicker you can pick the seller’s brain on all of the important operational items and get them out of the way, the better off you’ll be to truly make the business your own.

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