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A boutique M&A advisor who has run deals for professional services firms says the number founders fixate on is the least useful part of the offer.
Founders tend to reduce an exit to a single figure: the price. The member describing this deals in these transactions for a living, and his experience is that price in a small professional services deal is not one number at all. It is three, and value slides between them.
“Price is in 3 buckets, and it’s easy to think about it as the little game with 3 upside-down cups, and you’re moving them around. And those 3 buckets are cash at closing, cash over time, and compensation. And value will move among those buckets, however you and the buyer want it to move. And the best way to think about price is it’s the sum of what’s in all three buckets.”
He was blunt about the implication. If he had to choose between naming the price and setting the terms, he would take the terms every time, because a price can be made to look like almost any number once you decide how and when it gets paid, and how it can be clawed back. In his experience even clean deals get a second look at roughly 90 days and again around 18 months, so when and how the money arrives matters at least as much as the headline figure.
The practical move is to stop asking “did I get the price I wanted” and ask three sharper questions instead: did I get the cash at closing I needed, did I get the money over time at a level of risk I can live with, and if something had to be paid as compensation to close the gap, am I fine with that.
Why it matters to you
Two offers with identical headline prices can be worth wildly different amounts to you, and the difference is invisible until you separate the buckets. A high number weighted toward cash over time is a bet on the buyer’s performance, not a payday. Founders who negotiate only the multiple hand the buyer control of the part that decides what they actually keep. Knowing the three buckets before you sit down is how you avoid celebrating a number you may never fully collect.
Your one thing
Take the exit number in your head and split it three ways: how much do you need at closing, how much can you accept over time, and how much are you willing to take as compensation? If you cannot answer the first one, you are not ready to hear an offer.
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