Confronting Yourself: The Emotional Journey of Selling Your Business
For many entrepreneurs, the hardest part of selling their business is wrestling with their own emotions. Here are some tips for successfully navigating a sale.
Over the course of my career as a middle market M&A advisor, I’ve learned that the most difficult part of middle market business transactions is caring for the emotional well-being of the business owner. Despite all of the logic and rationality that brought them success throughout their entrepreneurial efforts, when most sellers start reading the purchase agreement documenting the biggest transaction of their lives, their stomachs raise up into their throats and doubts start to arise.
My advice: It’s okay! You probably wouldn’t have been successful in the first place if it didn’t trigger that reaction. The way to get through it is by thinking through your goals in advance and getting answers to the questions that surface as you go through the sale process.
You Aren’t Alone
I recently sat with a business owner to prepare our marketing package for the transaction. He started voicing some doubts about the effort: Would the buyer take good care of the business he’d built? Would his efforts continue to be valued by a buyer after the sale? Would his management team be taken care of?
I heard the sigh of relief when I told him that those were great questions and that almost every single one of my clients had similar questions. My client was visibly reassured by knowing that his concerns weren’t unusual.
There are a couple of reasons for these doubts. First, entrepreneurs tend to be certain of what they do about everything – it’s what makes them successful. Therefore, when situations like a sale arise that they don’t understand and can’t control, business owners get uncomfortable.
Second, no matter how many times business owners tell me that they “aren’t emotionally attached” to their business, it’s never true. Most entrepreneur/founders have devoted their blood, sweat and tears to their businesses. Of course they are attached. Admitting the attachment and confronting it is the key to successfully navigating the deal.
Plan Your Goals Ahead of Your Transaction...
One of the best ways to avoid these sorts of doubts is to develop realistic goals for your transaction well in advance. Know what you want to achieve and know what your plans are afterward.
At the outset of every engagement, I always ask my new client what the ideal outcome would be for him or her. Surprisingly, most haven’t really thought through that question. Do they want to stay with the company after a sale? Do they want to retire? Do they want to have a continuing ownership stake in the business? What are they going to do after the sale? Answering these questions in advance will significantly reduce the stress associated with a transaction.
Michael’s eBook, “The Inner Workings of a Deal: Tips for a Successful Transaction,” is now available for download. Get your free copy here.
Also, experienced buyers are incredibly sensitive to sellers’ motivations; they are usually one of the first things that buyers ask me about when I am representing a company for sale. So, in addition to making you happier that you know exactly what you expect to accomplish, knowing your goals will also make a buyer more comfortable with completing a transaction with you. Buyers spend a tremendous amount of capital (time and money) getting a deal over the finish line, and many have been burned before by reticent sellers changing their minds at the last minute. Getting them comfortable with your motivations is crucial to getting a deal completed.
...But Be Realistic
Unfortunately, not every goal is a realistic one. You won’t be able to monetize the vast majority of your business value and continue running the business without any changes.
While that sounds obvious, I’ve had clients that expected buyers to make a significant outside investment into the business, but not make changes that enabled them to manage their needs (e.g., more professional and rigorous financial controls, more accountability, etc.).
Whether your buyer will be 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 those into your goals.
Get Your Questions Answered
There are many questions that you will have about a transaction. Get answers to them. No matter how important or how trivial they may seem, seek out the answers.
As an example, because of too many media stories of Gordon Gekko-inspired corporate raiders pillaging companies after a sale, one of the common perceptions that many of my clients have is that a buyer will run rampant through the company hacking away trusted and valued employees (and friends) after a sale.
Concerns such as these are understandable, but for the most part, not realistic. In my segment of the market, buyers care deeply that they are able to acquire the people that are vitally important in the success of the acquired business. But, there is no reason for my clients to know this. So, make sure you ask. Don’t assume any preconceived notion about a transaction is accurate. If it worries you, get answers in advance.
Bring Others into Your Circle
Finally, don’t wait until you are getting close to a transaction to seek answers. There are many experienced professionals (e.g., M&A advisors, lawyers, accountants, coaches, therapists, etc.) that can help you get answers well in advance of a transaction. I’ve seen many business owners tie themselves into knots for years trying to decide whether to pursue a transaction based on concerns they couldn’t resolve, but for some reason they didn’t want to bring experienced advisors onto their team. Business owners are used to being self-reliant, but it can be very helpful to bring outside experience into your inner circle early.
Confronting Your Own Emotions
Selling a business will be one of the most emotionally charged periods of your entrepreneurial career. Don’t paralyze yourself with your own emotions. Think through what you are looking to accomplish, get answers to your questions, and seek out the help you need to get there.