Selling a Small Business

"I'll Just Keep the Company..." Revisited

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.