Tom (Seller):
Alright, Steve. I think we’re close, but I want to make sure we’re on the same page with a few points before we move forward. First off, we’re talking about an inventory transfer of about $1.2 million. However, there are some items that we’ve been phasing out and may be outdated. I’m sure we can agree that the remaining inventory has some solid value—around $900K—but we’ll need to figure out a fair way to address the less valuable stock.
Steve (Buyer):
Right. And, look, Tom, I’m aware of the inventory, but I think we both know that a good portion of that stock is essentially dead weight. Outdated product, expired materials—things I’m not going to resell. I’m not going to pay full value for that. I’m happy to accept a reasonable write-down on the total. Maybe, we cut the valuation of the inventory down to half—call it $500K? I’m sure you can understand that I need to protect myself here.
Tom (Seller):
I can see your point, Steve, but we’ve been working hard to move through those outdated items. I’d say a fair reduction would be closer to 30%, and that’ll reflect the items we’ve been clearing out over the last few months. But if you want to go lower, we can work something out on the back end, maybe in future performance terms or an earnout structure.
Steve (Buyer):
Hmm. I’m not opposed to some flexibility, but let’s not get too far from reality here. Now, about the customers—I’ve looked over your client list. We already have over 90% of those accounts. We’re effectively competing for the same customers, and there’s no way I’ll pay anything for those accounts. No goodwill. No transfer of value. Your customers are already my customers.
Tom (Seller):
But, Steve, my company has a well-established brand, and I’ve spent years building those relationships. Surely that has some value? Even if you already serve many of them, the transition is going to require some level of goodwill. I’d expect something for that.
Steve (Buyer):
Tom, I understand where you’re coming from. But honestly, my team has been handling those customers for years as well. There’s little incremental value in those relationships for me to justify a purchase price. And frankly, many of your clients might just stick with me because we have more competitive terms. There’s no tangible transfer of goodwill here. So, I’m not paying for customers. I’ll only pay for the assets, the inventory that I can actually use, and the employees that add value.
Tom (Seller):
Alright, I can live with that on the customer side, but let’s talk about the employees. I’m hoping that the key personnel will stay on board. I’d expect that there’s some value in them—especially the senior team. You’ll get stability for the transition. What do you think?
Steve (Buyer):
Employees are definitely important, but let’s be honest: not all of them are valuable. We’ll keep the core team, for sure—your sales manager, your operations guy, the lead technician. But I’ve heard there’s some tension, especially with your key manager, Kyle. You know as well as I do that he’s not exactly a fan of mine, or of my company. I’ve dealt with him before in direct competition and it’s been rocky. That’s a concern for me.
Tom (Seller):
Ah, Kyle. Yeah, I can see how that might be a sticking point. He’s been a top performer for years, but he’s definitely got a chip on his shoulder when it comes to you. I’ll have to have a serious conversation with him about the future, and if we’re going to close this deal, we may need to work out some kind of incentive to keep him on board. I’ll talk to him, but I can’t guarantee he’ll play ball with you right off the bat.
Steve (Buyer):
Look, I’m not trying to make this personal. But we’ve been competing for these customers, and now you want me to pay for an environment where the key manager doesn’t even like me? That’s a red flag. If Kyle doesn’t want to work for me, that’s a real problem. His team follows him, and if he’s not on board, then his department could fall apart quickly.
Tom (Seller):
Fair point. I’ll make sure to have a conversation with him. If I can’t convince him to stay, maybe we’ll have to adjust his compensation package or negotiate his exit, but I can’t have him being a thorn in your side, either. I’ll take care of that. But the rest of the team is solid. If we’re going to move forward, I think the employees—most of them—will be happy to join your company. Stability is a big part of what they want.
Steve (Buyer):
Alright, Tom, I appreciate your effort on the manager situation. Let’s circle back to the inventory then. If we agree on a reduction, say down to about $500K, and we’re on the same page with the customers—essentially, no goodwill there—I think we can move on to finalizing the structure of the deal. But I’m still not seeing the full value on the table. I’d need the inventory terms adjusted, some level of flexibility on performance post-sale, and a clean handover of the employees that matter.
Tom (Seller):
I think we can work with that. I’m not going to leave any stone unturned here. I’ll have those conversations with Kyle and the team. And I’ll also get with my accountants to adjust the inventory numbers and work out that reduction. But we’re close, Steve.
Steve (Buyer):
I agree, Tom. Let’s get this done right, and we’ll both be happy in the end.
Tom (Seller):
Sounds fair.
There are countless variations of conversations around buying and selling businesses—and many of them end with the deal quietly slipping into the trash bin. But every so often, a conversation stands out for a different reason. Based on my experience, the more optimistic outcomes tend to come from a deeper understanding of how businesses are actually built—not how we imagine they’re built.
The reality is that most business owners don’t start with a grand design or master plan. More often than not, their companies evolve from a series of small wins—successes that stack on top of each other over time. I’ve heard countless stories from owners who started their businesses out of necessity: they lost a job, needed income, or simply took an opportunity that was right in front of them. What began as a way to make ends meet eventually grew into something far larger than they ever anticipated.
In some cases, the owner essentially creates a job for themselves—just without a traditional boss. Instead, their “boss” becomes their customers, who dictate the flow and nature of the work. In other cases, the business grows beyond the owner’s ability to micromanage, reaching a point where they can no longer know every detail of what their employees are doing day to day.
Regardless of the path, most businesses are built reactively—one customer request at a time. And to be clear, this isn’t inherently a bad strategy. In fact, it’s one of the most natural ways to grow: ask the customer what they want, build it, and sell it back to them. It’s simple, direct, and often effective.
But this approach comes with trade-offs.
Over time, constantly saying “yes” to highly specific customer needs can lead to unintended consequences. Owners may accumulate excess inventory that’s too customized to resell. They may invest ahead of demand, expecting repeat orders that never materialize. What once felt like responsiveness can quietly turn into inefficiency—capital tied up in products or services that don’t translate across a broader market.
In other cases, the business becomes so niche that the pool of potential customers is extremely limited. When that happens, the pool of potential buyers shrinks as well. Often, the only logical acquirer is a direct competitor—someone already serving the same narrow audience.
This leads to a critical truth about business value: owners are only rewarded for what cannot be easily replicated.
Anyone can purchase equipment. Anyone can lease office space. These are not differentiators—they’re commodities. True value comes from the elements that create barriers to entry:
- A team of skilled, loyal employees in an industry where talent is scarce
- A base of customers who are deeply embedded and difficult to win away
- Distribution channels or relationships that take years to build
- Intellectual property or specialized knowledge that cannot be easily copied
At its core, the equation is simple: if a competitor can build what you’ve built faster and cheaper than they can buy it, they will.
That’s why the most valuable businesses aren’t “perfect” in the traditional sense. They’re not flawless, frictionless machines. Instead, they are resilient systems built over time—systems that would require significant effort, cost, or expertise to recreate.
In the end, value isn’t about perfection. It’s about defensibility.
And the businesses that understand that distinction are the ones that don’t end up in the trash bin—they close.
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