Selling a Business: Is the OWNER Prepared?
When selling a business, what happens to the business owner when the business is sold?
This is a very serious question for a professional business broker to ask and the broker must listen carefully to the answer.
When I sold my business in the late 1990s, I was not at all prepared. And I had a very difficult time in the immediate aftermath. From this standpoint alone, “selling a business ain’t for sissies.”
If you’ve spent any time on our website – or if you’ve been a subscriber to this blog for a while – you probably know a little bit about that event. And though I’m certainly far from the only business owner to go through a period of despondency and uncertainty in the wake of the sale, I can speak about it from that first hand experience.
Many – possibly most – business owners have not fully prepared themselves for the shock they will experience when they sell their business. Selling a business is almost always a trés, trés affaire sérieuse.
We see this lack of personal preparation all the time. And because I experienced it first hand, preparing our selling clients for the transition is an important aspect of our course, “Learn How to Value and Successfully Sell Businesses”.
My business wasn’t for sale; and that may have been one of the reasons I was so unprepared for the aftermath. But in our experience, many owners – even those that have been thinking about selling for some time and even many that have properly prepared their business for sale – have not prepared themselves.
A Common Experience
My experience was in 1997. A more recent experience comes to us from our colleagues in the U.K. and reported in BusinessCloud, a U.K. business magazine.
It’s the experience of Lorna Davidson who sold her business, Tactical Solutions, a U.K.-based marketing company, in 2011 to St. Ives Group for £15 million – about US$24 million at the time – in a strategic acquisition. The proceeds at sale were more than adequate for her to kick back and not have to worry about paying the grocery bill. But within four hours of the closing she realized that retirement wasn’t for her.
She started the company in 2000 in a potting shed and grew it to hundreds of employees over the next decade. But though her business was ready to be sold, she was not emotionally ready to do so:
“I started getting approaches about selling the business, but I’d never taken them seriously. We appointed advisors and did a beauty parade. The biggest surprise to me was that people saw the value in the business that perhaps I hadn’t seen. We had six offers for the business and sold to St Ives. I went to the pub and had champagne, answered all my messages and walked through the front door of my house and cried. I was so inconsolable my family asked ‘didn’t they sign?’ I never thought I’d get to that point so I thought ‘what do I do now?’ I’d given lots of thought to getting the business to sell but I hadn’t given enough thought to me.”
I have tried to convey to every one of our selling clients – and to advise our brokers to do the same – that this type of emotional reaction is real and all too common. I went through something very similar.
Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches how to value and sell businesses.
Become a Professional Business Broker…
In an even more recent example of second thoughts when selling a business, Rob Sims sold his business, Nexus Telecommunications, in 2017 and tells this story:
“We’d been looking at an exit for the previous two years and we took the business to market. Realizing the maximum financial value was important but so was finding a buyer with the right culture. In the event we sold to Elite Telecom.
“I was 52 and I agreed to stay on to integrate the business. I’d been in the industry for 20 odd years and I fancied a change. (But first) I wanted a rest so I took three months off.”
“By the third month I was thinking ‘I’ll be back at work in three weeks, two weeks, one week from now’. I remember driving to the office on that first day and thinking ‘it’s not for me’. (But) by 11am I … said ‘it’s like a light switch has been flicked on’. I could see lots of opportunities. My idea of stepping away went out the window and I became the group CEO.”
We’ve launched a coaching program specifically tailored to Realtors that want to sell businesses and to novice business brokers.
If you’d like to learn more, email me at joe@WorldwideBusinessBlog.com
Part of What Drove Me
The final two examples both illustrate different aspects of my own story – and what led me to start Worldwide Business Brokers.
Mark Mills sold cash machine business CardPoint in 2007 and now helps other entrepreneurs prepare their business for sale.
“I was 36 when I sold CardPoint and I did think for a while that I’d retire but some of us are built to be in business and that’s what we do.
“It’s a good idea to have something up your sleeve afterwards.”
The most important part of Mark’s statement is the final sentence: “It’s a good idea to have something up your sleeve afterwards.”
Without something to transition into, many business sellers end up aimless and lost, not knowing how to fill their time; how to be productive. It happened to Lorna Davidson. It happened to me. It’s sometimes referred to as “seller remorse“.
This final example perfectly describes what I – and many small business sellers – went through in the aftermath of the sale of my business.
Lee Collins owned a high-end auto dealership and auto marketing company. He sold both in 2014.
“I had a run at selling the business before pulling out of those negotiations. We took the opportunity to spend time preparing to sell the business rather than rushing in before finally selling two years later…
“We finally got the deal across the line just after midnight on May 2nd and almost immediately, it felt like my world had come to an end. I had a large cheque and then it hit me: ‘what am I going to do now?’
“The finality of the sale was an anti-climax. The money was no comparison to the high you actually get from doing the deal. If I had one regret it was only taking 69 days off before I launched myself into a new business.”
In my case, I took more than four years off and traveled. But as more and more time went by, I realized – like Mark Mills and Lee Collins, above – that “some of us are built for business”; and that I was a member of that group.
The Bottom Line
When selling a business, business owners have to prepare themselves as well as their business – and they’ve got to do so well in advance of the sale. This is especially true if the owners are the founders of the business.
A successful business is like a child to the founder and selling that “child” is very likely to be a fairly traumatic event, no matter the size of the check they receive at closing. In our experience, few owners have prepared themselves for “what’s next” and that’s why this topic is covered in several lectures in our course.
As professional business brokers, we have an obligation to advise our selling clients of the potential for the “post-closing blues” – and that they think about what they plan to do when we all walk away from the closing table..
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.