Sometime over the weekend I noticed the “SOLD” sign had been removed from our front lawn.
The removal of the sign marked the end of eight stressful weeks. It started by interviewing local real estate agents, all of whom wanted to list our home for less than I thought it was worth. We signed with the agent who gave us a price range we could live with and started the process of “staging” our home to make it appear that a happy family of four lived there without really living there: every offending crumb was sucked up, perfectly good furniture removed in favor of more stylish gear. It was of course impossible to live in a house so perfectly manicured which is why it was just dumb luck that our friends were away in Florida for a two-week stretch and allowed us to move into their home.
We agreed to hold back offers for a single date to manufacture a bidding war. The strategy backfired and all we got on the first day of accepting offers was a low ball offer from a couple whose agent, in a failed attempt to reduce our price expectations, presented their offer by telling us his clients saw “some taste issues” with the way my wife had decorated. Needless to say, we didn’t accept the offending agent’s offer.
At this point, the complexion of the process changed for the worse. Artificially trying to manufacture a bidding war had failed. Our friends were back from vacation and we needed to move back into our home. The dance of following around our two kids trying to catch crumbs as they ate, and pick up toys as they played, became old quickly. After seven days of scrambling to evacuate our house for every showing we finally got another offer. This second offer was even lower than the first but we worked with it. After three turns of the paperwork, we agreed to a price. My wife and I had been beaten down by the process and accepted less than we both agreed privately would have been our absolute floor.
Throughout the process, I was reminded of how many similarities (both practical and emotional) there are between selling a home and selling a business. In fact, it inspired me to write a six part series for The Globe & Mail Newspaper, the first three articles ran last week talking about staging, selecting a representative and marketing. This week, the last three parts of the series cover negotiation, accepting offers and surviving diligence.
Today I’m talking to my editor at the Globe about hosting an online discussion challenging real estate agents and M&A professionals to debate who has the tougher job.
What similarities (or differences) do you see between selling a home and selling a business?
John, what a story! So many similarities between selling a home and business. The biggest factor is emotion. A coaching client of mine sold his business two years ago and, like you and your house, had a floor price in mind. The buyer met it….until due diligence kicked in. Then they lowered the price 10% (a million bucks!). And on top of that, one of his partners who owned a minority stake said he would refuse to sell unless he got a certain amount of cash after taxes. So if my client wanted to make up the difference, great. If not, the partner (who had the right to block an acquisition) would walk away. So my client had to eat you-know-what twice. Just like when you have to take a low-ball offer on a house. Getting emotion out of these processes would be a big help.
Mitch: thanks for bringing such a real life story to the conversation. Yes, minority shareholders can be an obstacle!
As you tell the home selling experince so painfully well – selling a business is just as disruptive and uncomfortable to the ‘corporate family’. Sure, same presures of keeping fluffed while still working hard, but with the added complication of you lying to the fellow residents – the same residents who you are secrectly claiming are amomg the planet’s brightest and dedicated people – lying to them about who these strangers opening all our cupboards are and why. Then unlike our kids in the home selling experience, these family members get spooked, threaten and really do leave home – at exactly the wrong time.
Ted:
Great addition to the conversation Ted. Keeping up the appearances on the home front can be exhausting! Thanks for joining the conversation.
The strong personal connection to the item being sold is certainly the same but what strikes me is the fact that, in both cases, the individual is taken out of the sale. For the home, you remove personal items and tastes to appeal to a larger audience. In business, the owner must be removed from the business processes that provide the foundation on which the business is built.
This will provide a greater opportunity to sell and maximize the valuation.
Andy:
Never thought of that additional parallel. Great point!
Great parallel John between selling a home and selling a business. A big difference though is in the amount of work to be done to ‘stage’ your business which can’t be started just a few months earlier. The staging should start at least three years in advance so you have time to, as you say, make a company that is built to sell. In my opinion, a business owner should prepare his/her business to be ready to sell at any time, but start well in advance of the time you might sell because as your house experience showed, it’s good to have the choice to wait for a better market time or sell when you want.
Wayne Vanwyck