Seller Remorse

Seller Remorse: The Emotional Aspect of Selling

Though selling a business is, at its most basic, essentially a financial transaction, there are numerous emotional aspects that are involved as well. A business owner must be prepared emotionally and a business broker must do everything possible to assist in that preparation – or risk the onset of “seller remorse” and the increasing likelihood of a deal falling apart. One of the downsides of working with a seller that is unprepared emotionally is that the seller may get cold feet even as the transaction is reaching its climax. Deals are often scuttled in the early stages when a seller realizes that the proceeds will not fund the lifestyle he wanted. But when the deal is scuttled at the last minute it is often because the seller realizes that his business has been the defining aspect of his life – his identity – and that without it, he may have little reason to get out of bed in the morning.

It Happened to Me

Those of you who have followed this blog know that, before becoming a professional business broker, I sold my own business. And since becoming a broker, I’ve helped many others work their way through the same experience. I know first hand what it can mean to the seller emotionally when the transaction gets close to closing and, more importantly, in the closing’s immediate aftermath. In many instances, the business is a major part – perhaps the most significant part – of an owner’s identity and the owner – soon to be known as the “former” owner – if unprepared will likely find him- or herself flailing about for a good while trying to figure out what to do; trying to find their “new identity”. That’s what happened to me when I sold.

Is There a Plan?

“What to do” might be buying or starting another business; or it might be fishing or gardening or volunteering, or racing Porsches or breeding thoroughbred horses, but most people need a reason to get up in the morning. They need a purpose and that purpose becomes, in many cases, their identity. There are, of course, the more pedestrian aspects of selling – assembling the right team, getting the business appraised, etc. The owner will be concerned not only about his or her family and whether or not the sale will provide the financial resources to support the lifestyle the family has enjoyed during the business’ growth. Most owners are also concerned that their employees, customers and vendors continue to be well-treated when the new owners take over. But it has been our experience that most sellers will feel as if they are giving away their identity – a part of themselves. I certainly did when I sold my business.

Seller Remorse

Seller remorse – a completely understandable seller emotion – is a phenomenon that we, as business brokers, often have to deal with. And it is best to deal with it early in your relationship with the seller. When we meet with sellers for the first time to discuss a possible sale, we always ask what the seller’s plans are for his or her life post-closing. Too often we find that the seller has given little thought to what they will do in the next phase of their life or whether they’ve even considered if the proceeds of the sale will support them in this new phase. Not having a plan is almost certain to result in the owner feeling lost. This feeling generally begins to intensify the closer we get to the closing. And when there is no plan, the closer we get to closing, the higher the risk that the deal falls apart because the seller can’t imagine himself as anything other than the owner of his business. This is an issue we go over in our course, The Basic “How-To” of Becoming a Business Broker and it is important that any broker that works or intends to work in the Middle Market – or even in the Main Street market – knows how this impacts a seller and how to work to overcome it. The lecture on this topic relates my experience in detail and the importance of having a plan – and explaining that importance to sellers – is emphasized. The broker’s objective is to get the deal closed. Seller remorse is something you will have to deal with so you better know how.

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Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.

Become a Professional Business Broker…

The selling process involves several stages. The emotional impact is usually not a significant issue during the early stages but that is the best time to start dealing with it. In order for the owner to make sound business decisions, emotions need to be set aside. And there are ways to make this happen. First, recognize that dealing with the pedestrian issues – running the business, assembling the transition team, getting the business valued, etc. – will occupy the owner’s mind in the beginning of the process. There will be little time at this point for seller remorse to begin to creep in. But once these initial steps are taken and the efforts to find a buyer begin, we’ve seen owners become aware that, once they sell, they’ll no longer be seen in the community as “the owner of [blank] business” or the “sponsor of [blank] team or event”. They begin to realize that a major part of who they are will be gone as soon as the closing documents are signed and the keys turned over. If they have not been prepared for this – if there is no post-closing plan in place – they begin to question their decision to sell.

What Happened to Me.

For those of you that aren’t familiar with the story, my business was not for sale. But a group approached me with an offer that eventually grew to a number that I could not refuse. The problem was that, because the business was not for sale, I had no plan in place; not only for the sale, but for what I’d do after the sale. At first, I felt a sense of relief when the process was over. But that feeling lasted only a few hours. By the time I finished breakfast the next morning, I started to get fidgety. What was I going to do for the rest of the day/week/month/year? Indeed, for the rest of my life? Seller remorse began to creep into my life. Without my business, I no longer had the thing that defined my identity, both to myself and to friends and business associates. Without a plan, I had nothing to jump into. It was a miserable couple of weeks. But fortunately, I enjoyed a unique situation, one that is unlike what most sellers will have. I was single with no responsibilities. So, after a couple of weeks I bought a plane ticket to Paris, leased a car and spent a good amount of time over the next four years traveling around Europe. As soon as I arrived in Paris, I had a new “identity” – to myself, to those I met and to my friends and former business associates. I was now exploring, photographing and writing about battle sites of the World Wars. I had a purpose; a reason to get out of bed in the morning. Sellers need a purpose but very few have the luxury of my option. If they have no plan, there will be a period of unsettlement post-closing. But this unsettlement always starts before closing – sometimes long before – and can derail all the broker’s efforts to get the deal across the finish line. This is the imperative for addressing the emotional aspects of selling a business – and to begin your efforts early in the process.