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Guest Post: “A Primer on Collecting Late Payments, Part 2"

“A Primer on Collecting Late Payments, Part 2"

The first general rule on collecting late payments was about overall professionalism and communication style. The second point naturally follows from the first one and is a critical elaboration of it.

Second general rule: Payout and delivery, both amounts and due dates are a critical part of the agreement. Make sure they are stated in writing in advance.

Be aware that it is bad practice to make any business agreement otherwise. In many cases it may be appropriate to add provisions to the agreement for late payment, which may even include late payment penalties or collection charges. It is a good idea to tie the price very specifically to the payout, payment terms and deadlines. For example:

* A payment of USD $1,000 will be made by the buyer on 5 March 2012. * This amount represents a 20% discount off the regular price of USD $1,250. * Discount prices are no longer valid for payments made later than 10 working days after the due date.

Selling Socialize to ShareThis: A Description of the Deal process

On DROdio

While I can't speak to the terms of our deal with ShareThis, I'll use the experience to walk you through the general framework of a deal process, so you understand the multiple steps involved. What I'm going to share is not a reflection of how our deal went down -- I'm pulling from various deals I'm personally familiar with or from accounts I've heard from other entrepreneurs who have also sold.

The first thing I want to highlight is the stress that a deal puts on a startup. Uncertainty kills innovation, and for that reason, if you think you want to sell, it's critical that you get the process done super quickly. Thirty days from start to close is an ideal (although likely impossible) goal to shoot for. Ninety days is a reasonable and achievable goal.

It's also likely that the acquiring company won't be in as much of a hurry as you are: Getting the deal done is likely a secondary priority for them as compared to running their main business. For the startup, it defines the future of the company -- or at least, it's one major possible outcome with huge implications for the startup. There are a few exceptions on the acquiring side -- for example, Facebook is known for moving blazingly fast in deals as a part of its strategy to keep startups it's interested in from being scooped by other acquirers. As I assemble best practices for getting deals done, speed is at the very top of my list.

Next, from the startup's perspective, is evaluating alternatives. This is where someone like Ezra is invaluable. As I mentioned in this post, Ezra Roizen is a banker, but he's different from all the others I've met. Ezra is a scrappy "get it done" deal magician with a small team and a huge rolodex. He can get a temperature read from someone (usually either the CEO or a board member) at any potential acquiring company you'd like to speak to. It'll be up to you to decide what companies you want to target, and then Ezra can take it from there.

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