Selling a Business? Consider These Valuable Lessons From Baseball Great Yogi Berra

By Pat Jennings

Selling a business is hard work -- and for many entrepreneurs, the process can seem hopelessly complicated.

When you're faced with a daunting task, sometimes the best thing to do is to narrow your focus. Concentrate on just few core ideas and actions. And no American personality has been better at trimming life’s complications down to the essentials than baseball Hall of Famer Yogi Berra.

While the 13-time World Series champion may known for his mangling of the English language, that didn’t stopped him from achieving business success. Despite quitting school after the eighth grade, Yogi has always know how to make money.

His first successful venture was as owner of a bowling alley; after his playing career, he became a vice president of the Yoo-hoo chocolate beverage company. And more recently he has served as a spokesperson for the Aflac insurance company. In one famous commercial, Yogi explained the essence of the company's insurance products saying, “And they give you cash, which is just as good as money.”

Business owners trying to sell their businesses want them to sell sooner rather than later . . . and at the best possible price. With these goals in mind, here are 6 "Yogi-isms" that have practical applications to selling a business:

“Ninety Percent of This Game is Half-Mental”

Buying a business is risky, so naturally buyers will want to lower their risk as much as possible. Throughout the process buyers will be asking themselves, “What could go wrong?” You therefore should be mentally prepared for strangers to criticize you and your business. Sometimes the criticism will be legitimate; sometimes it will just be a ploy to test you, to see if you will offer a better price. Conflicting points of view are a natural part of the buyer-seller interaction. Don’t take it personally.

Also, you should adopt a realistic attitude towards the money involved. Don’t set yourself up for disappointment by expecting to bank 100 percent of your original asking price; that doesn’t happen in the real world. Even if you succeed in selling your business quickly and at your original asking price, you still will have to pay lawyers, accountants, and brokers -- and then you will have to pay the tax man, too.

And finally, realize that most small business sales are financed, at least in part, by the seller. It is likely you will have to wait a few years to get all your money.

Be aware of these facts at the start, and it is less likely you will be disappointed at the finish.

“We Made Too Many Wrong Mistakes”

You will make mistakes; and most of them you can recover from. The one mistake, however, you can never recover from is trying to hide negative facts about your business.

Buyers aren’t stupid. If your business is saddled with serious debt, regulatory challenges, or pending lawsuits, the buyer will find out. There is no problem that will kill your sale more quickly than the loss of trust you will experience if a buyer uncovers something you were trying to hide. A reasonable buyer knows there is no such thing a perfect business -- so don’t try to sell them one.

Yogi has it right; it’s okay to make mistakes. Just don’t make the wrong ones.

“It Ain't Over 'Til It’s Over”

The process of selling a business has a built-in fact finding mechanism: the due diligence phase. No matter how smoothly the deal has gone so far, “it ain’t over” until the buyer and his or her advisers have finished their due diligence.

The term "due diligence" refers to the period during which the buyer has the opportunity to investigate your business completely. Again, their focus will be on what might be wrong with the business.

Are there any legal or regulatory issues hanging over your business? Are you up to date on withholdings and unemployment compensation? Are there any unfunded liabilities? How ancient are your accounts receivables? These are just a sampling of the types of questions the buyer will want answers to.

Throughout the selling process, know upfront that every claim you make will be verified before any money changes hands.

“A Nickel Ain’t Worth a Dime Anymore”

Hard to argue with Yogi’s point here. One amount of money is not worth a different amount of money. When is comes to valuing a business, there are a lot of numbers to consider -- these include sales revenue, net profits, and growth rates.

But the number a buyer will care about more than all the others combined is the “owner’s benefit,” the amount of money the business creates for its owner on an annual basis. The owner's benefit is determined by Annual Pretax Profit + Owner's Salary + Owner's Perks/Benefits + Interest + Depreciation.

People buy businesses to enjoy the monetary benefits that come with ownership. Sales figures, tax returns, and P&L statements never state the exact amount of money and benefits the owner receives while the owner’s benefit figure does. Buyer may not use the term “owner’s benefit,” but it's what they want to know most about your business.

A nickel really isn’t worth a dime, and when it comes to buying your business, buyers will care more about some numbers than others.

“When You Come to a Fork in the Road, Take It!”

If you are lucky, eventually you will get an offer from a qualified buyer. And unfortunately, it will probably be for less money than you had hoped for.

And there may be even more complications. The offer might include earnouts or contingencies. Or there may be seller financing involved which means you will be waiting a few years to get all your money.

So then you will have to make a decision: do you accept an offer that is just “okay” or do you hold out for more?

Of course your decision will be influenced by whether or not you have any other viable prospects. But always remember this: qualified buyers have options. If they are qualified to buy your business, then they are qualified to buy lots of other businesses too. If you reject a buyer’s final offer, chances are you won’t be able to go back to that buyer in a month or two and accept it.

Rejecting a ridiculous offer, however, is justified. If you get a legitimate offer that is still too low, making a counteroffer is justified.

But dragging your feet hoping a better offer will come along is never justified. If a buyer gives you a legitimate offer, give them a legitimate response -- and then move on from there.

“The Future Ain’t What It Used to Be”

Yogi Berra has been famous for living in the moment, for never worrying about the future. But for the person buying your business, the future is all they will think about.

You can, and should, tout your history of growth, profits, and happy customers; but remember, the buyer is interested in the future -- not the past. In order for someone to invest their life savings in your business, they must have a reasonable expectation that they can be as successful running the business as you have.

We talked earlier about risk and how buyers avoid it like the plague. The more your business has depended on your unique abilities and your personal relationships with customers, the more a buyer will doubt your level of success can be sustained once you are gone. For example, if the bulk of your profits come from one or two clients, or from one client who is a friend, you may need to diversify your customer base before putting your business on the market.

Remember, buyers always have the option to do nothing. And if they can’t confidently expect to continue your level of success, then that is what they will do. Nothing.

A great way to lower the buyer’s perceived risk is provide some training after the sale. Even as little as two weeks of on-the-job training can make a big difference to a new owner. You may even want to offer a certain amount of free consultations for a set period of time after the sale closes.

Your business's future will change once you are gone, so do all you can to convince the buyer the future can be just as bright with them at the helm.