Rock LaManna04.04.23
Understanding the role and power of the bishop in chess can help you uncover hidden threats during the sale of your business. The bishop is a powerful piece that can move diagonally across the board to capture and control.
One tactic used in chess is to keep the bishop in the shadows for the early stages of the game. Doing so lulls the opponent into forgetting about the threat. Then, when there is an opportunity, the bishop will strike – swiftly and ruthlessly – seemingly out of nowhere.
I like to use my bishops to beat players who underestimate me. Even advanced players can get blindsided in a well-played “Bishop’s Game.” It’s a great feeling to obliterate an arrogant opponent in a surprise move.
It’s a terrible feeling to have it happen to you.
I bring this up because the sale of your business, as discussed in previous columns, is a series of chess moves. Preparation is imperative, as is choosing the right advisor to guide you through the sale process. With your advisor, you will strategize how to protect yourself from a surprise move from the buyer.
When playing against someone ready to strike from the shadows, you need to have all the bases covered.
Foremost, you do not want to be blindsided by anything or anyone during the selling process.
Whether it’s a surprise “attack” from the buyer or unexpected items of your undoing, you need to consider all the places you’re exposed.
Let’s start by listing 10 items we commonly encounter in
selling organizations:
Yet this seller was caught off-guard by unexpected and severe health issues. It was a significant health event after he accepted the buyer’s offer. Suddenly, out of nowhere, he was struggling with the physical and mental demands of the sale process, which are:
You can’t anticipate everything, and we can only manage what life throws our way, but he’s right. The selling process is intense.
My team works closely with clients to prepare for contingencies and plan for the unexpected. We let sellers know the process by writing articles like these for industry platforms. We send books and checklists to owners of graphic arts businesses. We coach our clients and walk them through each step so that when something unexpected happens, they can lean on our experience.
There’s nothing like real-life in-the-trenches experience to prepare you for a process that may be a once-in-a-lifetime event for most private sellers. We have developed a hyper-awareness of threats. We are trained to look carefully.
Knowing that the bishop crisscrosses the board on a diagonal, we ask, “Have we covered all the angles?”
We look at risk and exposure on behalf of our clients because they tend to misjudge the “gamesmanship” element of selling a business.
Here are some examples:
As in chess, a canny buyer may wait until deep into the game to show their hand. They may hoard information that could affect the selling price or terms. Maybe the seller has a rogue employee just inches from a sexual harassment lawsuit. Or equipment that has had safety issues. Perhaps a major customer has threatened to take their business elsewhere. The seller may think it’s their own dirty laundry, and no one needs to know.
The buyer knows. And they and the buying team know much more than you think.
If you think this isn’t a maneuver by experienced buyers, think again. The Bishop’s Game is designed to keep you off kilter. They hope you drop your price and concede to lesser terms while your head is still reeling.
Other buyers desire a straightforward process. They don’t like uncovering issues that could affect their decision to buy. Your lack of preparation or truthful information could be a deal killer.
Strategic buyers, in particular, will avoid a company that could expose them to a lawsuit or financial hit.
Even a good-hearted buyer may walk away if they see your business as risky or too vulnerable.
Many private sellers in our industry begin the selling process three to five years before their desired exit. During that time, we address the items that can blow a deal. We strengthen the seller’s positioning and proactively address areas where buyers will see red flags.
Chess – and selling your business – is complex enough without nasty surprises. My father taught me to look at all the angles. It’s your best defense against the Bishop’s Game.
Rock LaManna is The Deal Flow Guy. He helps qualified buyers and investors find businesses that are ready for acquisition or transition. On the sell side, he helps owners improve their businesses, increase value, and position strategically in anticipation of sale, exit or succession. Sign up for his newsletter at TheDealFlowGuy.com and start the process.
One tactic used in chess is to keep the bishop in the shadows for the early stages of the game. Doing so lulls the opponent into forgetting about the threat. Then, when there is an opportunity, the bishop will strike – swiftly and ruthlessly – seemingly out of nowhere.
I like to use my bishops to beat players who underestimate me. Even advanced players can get blindsided in a well-played “Bishop’s Game.” It’s a great feeling to obliterate an arrogant opponent in a surprise move.
It’s a terrible feeling to have it happen to you.
MENTAL IMPACT OF THE BISHOP’S GAME
A bishop strike causes damage to the opponent’s game. It also slices into their confidence and mental state. Losing a key piece to a bishop is distracting and distressing. I can guarantee your opponent will be replaying everything mentally. The Bishop’s Game is a power play, and it’s a beautiful segue into the end game.I bring this up because the sale of your business, as discussed in previous columns, is a series of chess moves. Preparation is imperative, as is choosing the right advisor to guide you through the sale process. With your advisor, you will strategize how to protect yourself from a surprise move from the buyer.
When playing against someone ready to strike from the shadows, you need to have all the bases covered.
DEFENDING AGAINST THE BISHOP’S GAME
Before every move in chess or the selling game, you must be vigilant. Check and double-check every item under consideration. Flowchart where there could be unintended consequences. Identify where you are at risk.Foremost, you do not want to be blindsided by anything or anyone during the selling process.
Whether it’s a surprise “attack” from the buyer or unexpected items of your undoing, you need to consider all the places you’re exposed.
Let’s start by listing 10 items we commonly encounter in
selling organizations:
- Pending lawsuits, behavior that could lead to a legal case, or unsatisfied legal judgments.
- Disorganized financials, unpaid taxes, and no idea how the company is really doing.
- Workers who are misidentified as independent contractors or have documentation issues.
- Poorly written contracts and customer agreements.
- Successors or managers who are not ready to fill their roles in the post-sale environment.
- A habit of showing financial records and customer lists to tire-kicking buyers.
- Basing the asking price on old information (too low or too high) and clumsy negotiations.
- Unprofessional communication, lack of follow-up, and emotional interactions with the buying team.
- Lack of stamina – mentally and physically.
- Not being prepared and polished before entering negotiations.
MENTALLY PREPARING FOR THE BISHOP’S GAME
Let’s discuss the last item because a recent seller mentioned it. This seller got everything they wanted. The process went smoothly and quickly. From our viewpoint, it was a dream close.Yet this seller was caught off-guard by unexpected and severe health issues. It was a significant health event after he accepted the buyer’s offer. Suddenly, out of nowhere, he was struggling with the physical and mental demands of the sale process, which are:
- Rigorous due diligence.
- The time it takes to go back and forth with counteroffers.
- The gamesmanship of negotiating terms.
You can’t anticipate everything, and we can only manage what life throws our way, but he’s right. The selling process is intense.
My team works closely with clients to prepare for contingencies and plan for the unexpected. We let sellers know the process by writing articles like these for industry platforms. We send books and checklists to owners of graphic arts businesses. We coach our clients and walk them through each step so that when something unexpected happens, they can lean on our experience.
There’s nothing like real-life in-the-trenches experience to prepare you for a process that may be a once-in-a-lifetime event for most private sellers. We have developed a hyper-awareness of threats. We are trained to look carefully.
Knowing that the bishop crisscrosses the board on a diagonal, we ask, “Have we covered all the angles?”
We look at risk and exposure on behalf of our clients because they tend to misjudge the “gamesmanship” element of selling a business.
Here are some examples:
As in chess, a canny buyer may wait until deep into the game to show their hand. They may hoard information that could affect the selling price or terms. Maybe the seller has a rogue employee just inches from a sexual harassment lawsuit. Or equipment that has had safety issues. Perhaps a major customer has threatened to take their business elsewhere. The seller may think it’s their own dirty laundry, and no one needs to know.
The buyer knows. And they and the buying team know much more than you think.
THE BISHOP’S END GAME
Some buyers will let things percolate, so you become over-confident and complacent. And then, when the time is right, they’ll demand concessions and discounts. If you’re not forthcoming with important information or are unprepared when things come to light, you will lose control of the process.If you think this isn’t a maneuver by experienced buyers, think again. The Bishop’s Game is designed to keep you off kilter. They hope you drop your price and concede to lesser terms while your head is still reeling.
Other buyers desire a straightforward process. They don’t like uncovering issues that could affect their decision to buy. Your lack of preparation or truthful information could be a deal killer.
Strategic buyers, in particular, will avoid a company that could expose them to a lawsuit or financial hit.
Even a good-hearted buyer may walk away if they see your business as risky or too vulnerable.
DEALING WITH ALL THE ANGLES
If you recognize any items on my list, including a gap in your personal health, now is the time to act.Many private sellers in our industry begin the selling process three to five years before their desired exit. During that time, we address the items that can blow a deal. We strengthen the seller’s positioning and proactively address areas where buyers will see red flags.
Chess – and selling your business – is complex enough without nasty surprises. My father taught me to look at all the angles. It’s your best defense against the Bishop’s Game.
Rock LaManna is The Deal Flow Guy. He helps qualified buyers and investors find businesses that are ready for acquisition or transition. On the sell side, he helps owners improve their businesses, increase value, and position strategically in anticipation of sale, exit or succession. Sign up for his newsletter at TheDealFlowGuy.com and start the process.