When to Let Go: Keeping vs. Selling a Company - Part 2
May 11, 2011 - 1 min read
A few weeks ago I blogged about a business owner who said he'd prefer to keep his company another 5 years rather than sell it today. Well, it happened again today. Except this time the intermediary (who was on the call and undoubtedly has heard this refrain countless times) had a very logical reply. The conversation went something like this:
Intermediary: Let's play a game. Inside one box is $10,000,000. Inside the other box is $0. You don't know which is which and you get to pick one. The expected value of the choice is $5,000,000. Right? OK, now, let's play the game again. You have a choice of choosing either of the boxes OR you could just ask for the $5,000,000 and the game show host would give it to you. What would you do?
Owner: I'd take the $5,000,000. It has the same expected value and it's a sure thing.
Intermediary: Yes, I agree, that is the logical answer. Keeping your company is the equivalent of playing the game instead of taking the sure thing.
Owner: _Well it might be worth $10,000,000 in five years.
Intermediary: Yes it might. It might also be worth $0. Just look at what happened to lots of business owners in 2008 and 2009.
Post script: See Part III of this series on keeping versus selling a small business.
Scott founded Hadley Capital in 1998 with the idea of bringing a professional approach to the small company market and a passion for working with small company owners. It’s in his blood…he grew up visiting small companies on family vacations with his dad who was also a small company investor.
Scott works with Gillinder Glass, Filter Holdings, Custom Label, GT Schmidt, New Age Cryo, Harris Seeds, ISS, and W.C. Rouse. He was previously the chairman of the board of Packaging Specialists, JRI Industries and Kelatron, all former Hadley companies. Scott currently chairs the Hadley Institute for the Blind Board of Trustees (no affiliation).
He enjoys traveling with his family, flying (instrument rated pilot), rock climbing, golf, paddle tennis, water skiing and unwinds with beekeeping. He holds a BA from Duke University and received his MBA from the Kellogg School of Management at Northwestern University. Scott and his wife Erin have two grown children.