Skip to main content

Billionaire investor Warren Buffett plays with a western band at the Justin Brands stage, during the annual Berkshire Hathaway shareholders meeting in Omaha, Neb., Saturday, May 5, 2007.

Nati Harnik

I once went to a Broadway play starring James Belushi. We had good seats, so Mr. Belushi was only a few feet in front of me.

I remember how engaging it was to be that close to someone famous. I became engrossed in the show and felt as though Mr. Belushi was talking directly to me. I lost touch with time and my surroundings. I forgot about all of the work behind the scenes—the lighting, staging, music—and just sat there and enjoyed his performance.

When you sell your company, you should make a choice about who the lead actors are going to be and who will remain backstage, behind the curtain.

Story continues below advertisement

The lawyers should remain offstage until you agree to a set of business terms with the acquirer. It is often tempting to let your lawyer be the "bad cop" in the early stage of negotiations, pounding on the table, demanding better terms. But coming to an agreement on those terms before the lawyers get involved will ensure a positive foundation that will serve you well when the lawyers reach loggerheads on the details of the deal.

Here, in plain English, are a few things to work out with an acquirer before you get lawyers involved:

• The cash on closing (what you get the day the deal closes).

• The earn-out (or vendor take-back) you are agreeing to, along with a clear understanding of what budget and resources you have at your disposal to meet the goals you're signing up for.

• What happens if you decide to leave or the buyer asks you to leave before the earn-out or transition period is over.

• The working capital in the business at closing (how much money needs to be left in the company when you sell).

• Your salary and benefits when you become an employee of the acquirer.

Story continues below advertisement

• The degree of decision-making autonomy you'll have as an employee during the earn-out or transition period. (Do you get to decide what technology platform to use? Do you control decisions around marketing and selling? How about hiring and firing?)

If you find your correspondence with a potential acquirer becoming too technical, read Warren Buffett's annual letter to Berkshire Hathaway shareholders. He is the master of writing about business in plain English. When Mr. Buffett tries to buy a company, he approaches the CEO with a short, plain-spoken letter before any of the deal makers get involved.

Special to the Globe and Mail

John Warrillow is the author of Built To Sell: Turn Your Business Into One You Can Sell . Throughout his career as an entrepreneur, Mr. Warrillow has started and exited four companies. Most recently he transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which he sold to The Corporate Executive Board in 2008. He is the author of Drilling for Gold and in 2008 was recognized by BtoB Magazine's "Who's Who" list as one of America's most influential business-to-business marketers.

Report an error Editorial code of conduct
As of December 20, 2017, we have temporarily removed commenting from our articles. We hope to have this resolved by the end of January 2018. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to