Communication received from the people (their attorney) to whom we sold our business, implies that we cooked the books (so to speak), misrepresented financials to them and as such overstated the value of the business. Well, none of this is true! We exercised due diligence and indeed were conservative declaring the profits actually made. Things like all the cash money taken out of the business were higher than actually taken into account, the donations and things we gave freely to churches and some welfare organizations were never mentioned nor taken into account - we also scaled down our personal expenses. If all of this are taken into account, the profits would even be higher and the company would be evaluated at an even higher value. Despite having been conservative, the company was evaluated more than double what it sold for. I wonder what the company would have been valued at had we declared every last cent on the above mentioned things.
So why would they make claims that the business was over evaluated? Frankly, I don't know the answer for this, but there are a number of possibilities;
- A disingenuous attempt to delay our legal action against themselves for not paying their overdue monthly financial obligation?
- Is it greediness, ignorance, lack of business experience or perhaps plain stupidity?
- Maybe they are not looking at the valuation process in the same way as practiced by business brokers traditionally evaluate companies.
- Perhaps they do not have an understanding of the norms and standards used by professionals who sell businesses.
- Maybe they want to re-invent the wheel how businesses are evaluated.
Instead of talking to the professionals in the highly specialized field of selling businesses, it seems they are listen to attorneys or accountants will probably only look at submitted financial balance sheets. As all business owners in South Africa know and commonly practice, financials reflect the least amount of profits to prevent draconian taxes being paid. Attorneys specialize in law and ligation - it is not their business selling companies which is a completely different specialist expertise.
Their attorney proposed to have the business re-evaluated and the new valuation (higher or lower) will then become the selling price of the company. Under such agreement, the new evaluation will replace the value the business was sold for. If the evaluation is lower than what they paid for the business, we will then settle for a lower sale price. On the one hand, if the business is evaluated higher than the sale agreement, they will be legally obligated to pay the new evaluation amount. We are most receptive to settle the matter in this way as we stand to make several millions more. But I wonder what these people will say and do when the new evaluation shows the company to be more than double the amount stipulated in the company sale agreement? How will this affect them? Where would they get the extra millions from? How will they deal with this huge financial burden?
Despite being wronged by their actions and seeming intentions, we need to remain human and have compassion - we certainly do not wish undue harm or damage to anybody, including them. Since this path will most likely involve a long drawn out process, destroy them financially and most likely also do damage in many other ways, in addition, we proposed an alternative solution which if accepted, will allow everybody to move on with the least amount of damage. However, with this counter offer, we once again bent backwards to accommodate these people.
Our conscience is clear, we sleep peacefully every single night without any ghost/s eating away at our souls for we have never cheated them in any which way or manner. To the contrary, in all our dealings with them, we bent over backwards and did more than our required obligations. Unfortunately and sadly I cannot say the same of them - but so be it. We extended the olive branch with our alternative proposal, a offer which ensures that there are no losers and which also prevents extensive harm coming their way. We are at peace with whichever course they take.