Sell My Business
Tips and Emotional Considerations for Founders Selling Their Business.
As a founder and entrepreneur have you ever pondered the concept of being happy? All too often we hear people say, ‘I will be happy when…’ or ‘If only one day…’ But, is selling your company going to be the ultimate clincher for you? Will this be the catalyst ensuring a life of wealth and stress-free living? It may well be, however, that the emotional intricacies of selling a business can’t be ignored.
Being the owner of a business is a big deal and it’s been a venture you’ve nurtured and tended to over the years. The business may have been in your family and handed down through the generations. Whatever the reason for selling your business, one thing is guaranteed – you will feel a loss when you sell.
Throughout my career as a business owner and Certified Financial Planner ®, I’ve learned that most sellers, as they start reading the purchase agreement documents, tend to be filled with trepidation and doubt. The financial gain is not always the final straw. As is the journey through life, it’s quite rational to feel this way about selling your company, your baby. I am here to assist you by determining your goals in advance and getting answers to the questions that arise as the sale progresses.
Feeling a bit of regret?
Seller’s remorse is when the seller changes their mind about selling the company. There are many factors influencing the decision, but according to the Exit Planning Institute, 76 percent of business owners who sold their businesses profoundly regretted selling within a year. Being emotionally equipped to deal with the realization of the sale is important. You surely don’t want to embark on this entire process only to wish you had not done so in the first place.
What is the plan of action?
If you go ahead with the sale of your business and you don’t have other business ventures, you will inevitably have a lot of time on your hands. It’s the old cliché of whilst working full time and saying, or wishing, when I retire or sell, I’m going to pursue this hobby or that sport. You’ll be surprised at how much you end up not doing at all. Let’s face it, you can only play so many rounds of golf a week and the surf isn’t always up!
It’s no wonder so many entrepreneurs start other ventures – it keeps them busy, focused, and out of their wife’s hair!
Addressing loss
Loss is a void in one’s life that takes many forms. It could be the loss of a pet, a person, or your business. In this instance, the loss of your business is a game changer and your life will be altered. Let’s consider a few options to help you adjust to this new phase in your life.
What are you going to do all day?
Until now, your life has had structure. Your days have been routinely filled with meetings, overseeing the business, and dealing with admin. So, what exactly are you going to do all day, every day? If you thrive on routine and structure, this change will be difficult to master. Finding something consistent to do will most likely provide a lot more satisfaction than just being needed on an ad-hoc basis.
How am I perceived by others?
Your entire identity was shaped by your business and you have met and befriended quite a few people over the years. Will these folks still view you as the dynamo business entrepreneur or will you be forgotten as you enter this new phase of your life? It is important to define that your business is a part of who you are, but not the entirety of who you are.
Ostrich syndrome
- The eternal pessimist and the know-it-all all:
Having your head in the sand and assuming you will transition out of your business successfully is a dangerous tactic. Be aware of the pitfalls when it comes to thinking that nobody can run the business like you do or there’s no market for the business. On the contrary, don’t be too self-assured that your business will sell or one of your children wants the business. This type of thinking and attitude shows no preparation has been done and the selling of the business has been approached haphazardly.
A post-exit role perhaps
- Owner transition is important:
The smaller the business, the more important the transition period. However, what are you going to do when you’re no longer required regularly? What is your role going to be at home or in your community? The importance of your departure should not be discounted, nor the role and entrance to another possible entrepreneurial venture.
Family dynamics
- Your family of employees:
Many entrepreneurs and business owners feel obligated in their need to provide a livelihood for their employees. Many business owners loathe selling for this very reason and want to ensure their staff are taken care of. If you are that business owner, care enough to plan so that your employees are taken care of after your exit from the business.
You are not alone
As a Certified Financial Planner ®financial advisor, and business owner I have helped several business owners prepare for the transition of selling their business. My perspective is unique in that I have worked with business owners at a variety of stages in their business and have worked with them to plan in a way that helps them realize their hopes, dreams & goals while utilizing effective risk management as they transition through business and life. Each situation is different and should be handled in a way that is customized for it. Having seen a variety of different transactions and how people live after an exit has given me a variety of points that I can better help my clients think about and plan for.
It is quite normal for entrepreneurs to have doubts during these times of transition as they tend to be certain about everything they do. It is after all what makes them successful. When a sale arises, and entrepreneurs do not understand or can’t control the process, they become uncomfortable.
It is highly unlikely for a business owner to not be emotionally attached to their business. The business has been nurtured and entrepreneurs/founders have devoted blood, sweat, and tears to their businesses. Understanding the attachment and working through it, is the key to successfully navigating the sale.
Plan your goals
By developing goals for the sale of the business, the doubts and uncertainties are minimized. Know beforehand what it is you want to achieve and know what your plans are during and after the sale. Your financial planner is instrumental in assisting you to attain these goals. Through my many years of experience and working with entrepreneurs/founders, it is surprising to learn many don’t know what their ideal outcome would be after the sale of the business. Answering these questions and establishing what you will do, reduces the stress associated with the sale.
An important factor to consider is experienced buyers are sensitive to sellers’ motivations. As the seller, knowing your goals ensures the buyer is more comfortable with the sale. Buyers spend an inordinate amount of capital and time to bring a deal to fruition and many have been burned by reticent sellers who change their minds at the eleventh hour. Get your buyer comfortable with your motivation and a smooth transaction will ensue.
Remember, be realistic.
While this sounds obvious, many sellers expect buyers to make a significant investment in the business. It is fair then that sellers value their businesses correctly and enable the buyer to effect changes, such as tighter financial controls or more accountability. Whether the buyer is a strategic, corporate acquirer, or a financial buyer, when you are planning, think through who their stakeholders will be and what their needs are, and incorporate these into your goals.
During your entrepreneurial career, you will be faced with many challenges and decisions. Selling your business is undoubtedly one of the most stressful decisions you will make. Not being emotionally prepared during this time is as dangerous as the financial matters. The money you will receive for the business is negligible compared to the emotional component of the sale.
Thank you for reading!
Cheers,
Derek Notman
