Selling a Business: The Emotional Aspects
What Should We Focus On?Business owners – and, in many cases, the business brokers they engage – focus on how to maximize the business’ transaction value; how to get the most dough at closing – but spend little time determining what is the best personal outcome. Structuring the sale with the best personal outcome in mind often means considering factors other than financial metrics, and can depend greatly on how the owner envisions their life post-closing. For example, if the owner wants to spend some number of years after the sale involved in the business at some level, what level of control – or lack thereof – does he or she expect? Does the owner have family members – productive or otherwise – involved in the business and, if so, is their continued involvement after the sale an important consideration for the owner? In order to answer these questions and to help reduce the potential for “seller remorse” post-closing, non-financial factors must be considered when planning the sale of a business. And a professional business broker should be at least conversant in this aspect of the planning stage.
Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to market and sell businesses.
Become a Professional Business Broker…
The LessonsWhen considering selling a business, the owner must realize that the net proceeds at sale are not the only consideration; and it is incumbent upon those of us that are advising owners to point this out. The business owner must have a plan for life after closing for two reasons. First, the only way the business owner will know if the proceeds of the sale will be adequate to support whatever’s next is to know what’s next. What the seller intends to do post closing? If the seller’s plans are to simply nurse a Scotch on the veranda and watch the grass grow, that’s one thing. On the other hand, if he or she plans to spend the next 10 years traveling around the world or competing with Larry Ellison for the America’s Cup, that suggests that an entirely different financial condition will be required. Having a plan gives the owner a sense of how much money he or she will need for the life they have in mind post-closing (and a reason to get their business valued ahead of time). Knowing what the next step is helps a seller determine what financial resources will be needed post-closing. Knowing what the value of their business is allows them to see if the sale of their business will provide those resources. The second reason for knowing what the next act is, is that the business owner must be emotionally prepared to walk away from his or her business. This is often the most challenging part of a sale because the owner’s identity is usually directly tied to the business. Without a plan for “what’s next”, I can almost guaranty that, within 24 hours after the closing, the seller will start feeling lost. In my experience, most business owners are “doers”. They’ve got to have something going on; they’ve got to be involved, productive or engaged in some activity or pursuit that will give them some level of fulfillment, of meaningful existence. Nursing a Scotch on the veranda generally does not provide that fulfillment. If the next act is to sail around the world, has the boat been picked out? If the plan is to volunteer for some admirable cause, has the organization been identified and contacted? If the owner want to start – or buy – another business, have the plans for that been put in place? If he or she plans to buy a vineyard in Provence, has a property agent been engaged? Have French lessons begun? When my business sold, I was completely unprepared for life after closing. I stumbled around for the first few weeks having no idea what to do and, though I suddenly had some deep pockets, I was pretty miserable. Until I finally came up with a plan.
Our course, The Basic “How-To” of Becoming a Business Broker”, teaches how to become a professional business broker.