The onion method
The onion method is an effective way of determining what you find important when it comes to selling your company. I use the onion method to get to the core of your values and thoughts. It has my preference to work systematically, layer by layer, like peeling an onion. We get to the core and build a framework that will be a guideline for selling your company.
We discuss, at a minimum, the following “layers”:
The entrepreneur
We start by understanding the motivation behind why you want to sell your company. This question will be split into intrinsic and extrinsic motivation. Your reason for selling is the heart of the process, and it gives shape to the structure of the deal. For example, disagreement with other shareholders provides an entirely different framework than declining health, the desire for freedom, or simply the fact that you want to cash out. In most cases, the main reasons can be split up into many sub-reasons. The onion method will help you with these essential questions.
Core values
Unquestionably there are issues where you can’t make a concession, and there are issues where you don’t want to make a concession. I apply various questioning techniques, and together we identify which values are so crucial for you that compromising on them would no longer be ethical. We minimise the chance of you regretting your choices after the deal is done. We discuss by using the onion method, amongst many other subjects, the future of your staff.
Imagine the following: It is for you important that your staff will not lose their jobs after you have sold the company. The issue is that the question of what the buyer is going to do with your people. That question is often asked way too late in the process. You don’t want to find out his plans in the exclusivity phase. The buyer might want to get rid of your staff as quickly as possible. Once you’re in the exclusivity phase, you can’t go back, because you will get a hefty fine if you withdraw.
Consequently, many commercial brokers omit to inform you about these kinds of subjects because it does not have any effect on their success fee. Therefore, as a business and exit coach, I protect you from these and other issues. We make sure that your values are communicated as a given in the deal proposal.
Valuation
A business broker focuses primarily on the deal value, and the components of the deal that affect the deal value. In general, you discuss the maximum and realistic deal value in the first few meetings with your commercial broker. Your minimum deal value is usually not considered. It is of utmost importance that you sort out what is your “regret” deal value. If you have not set such a boundary, your negotiating position is weaker. That’s because you’d maybe also go for a 1,000 euro lower. And then perhaps another 1,000? And another one? You get my point! That is why you need to determine upfront what is your ultimate low figure. You are usually too biased to make such a framework you have received an offer. Therefore we will answer these and many other questions by using the onion method before you start selling the company.
By combining my calculation model with the minimum (emotional) value, we formulate an acceptable low figure, and by doing so, we create a framework within which the deal must take place.
Deal structure
You’ve sold your company. Congrats! Cash in the bank? Not really. The buyer often proposes a deal structure. Therefore the deal structure can consist of a percentage of shares, an earn-out, a performance bonus, a roll-over, or a delayed payment. Unfortunately, these factors often pop up at a later stage of the deal. At that time, you’re fixated on the buyer’s bid, and so there is a higher chance that you will accept the deal structure. Your broker will charge the success fee no matter what the structure. I prefer to set a “zero measurement” and discuss your limits before any bid is received. In short, another framework that gives you guidance due to the onion method.
Other layers of the onion method
During our meetings, we will peel off many different layers via the onion method. Also, we will discuss deal characteristics such as liability, guarantees, and indemnity. I offer you a unique kickstart in an unorthodox, direct, and entrepreneurial way: by bringing structure to the sales process and by structuring your thoughts and values. Together, we make sure that you’re in the lead.
I’ll save and gain you more than I cost you. Are you interested in a free consultation? If so, my contact details are just one click away.
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