I have found seller’s remorse to be the most significant emotional barrier that impedes the life-long goal of selling a business. In handling the sale of over 300 businesses in my career, I have never experienced a situation in which seller remorse was non-existent during what is typically a once-in-a-lifetime event and an entrepreneur’s largest transaction. For some, it is very manageable and dwarfed by the financial and/or lifestyle rewards. For others, it can be debilitating and get in the way of an exciting opportunity to experience life’s next chapter.
The non-scientific definition of seller remorse is being nagged by the question: “Am I doing the right thing?” The most common issues that intensify seller remorse during this emotionally charged time include the following:
“Am I getting enough money for my company?” No matter what valuation is being received for a company, it is human nature for sellers to question whether they are receiving full and fair value. Just like a mother usually thinks her child is the prettiest or most talented, a business owner often feels that his or her business is worth more than it really is. It is advisable to have a third party valuation of the company performed prior to proceeding with the process. This provides a benchmark from which to make informed and objective decisions in evaluating subsequent offers received.
“Do I have enough money – will my money run out?” It is worthwhile to engage the expertise of a financial planning/wealth management specialist. They will analyze your current investments and financial status, factor in the anticipated after-tax yield from selling the business, your current and anticipated life-style, and associated future financial requirements. Armed with this information, you can determine if the sale of your business will make financial sense at current market value, or what alternatives to consider.
“What will I do next?” “I have been doing this my entire professional life – what else do I know how to do”? Often entrepreneurs are consumed with the demands of running their company and do not have current outside interests to focus on after the sale. It is important to think ahead and develop a plan for your time after the transition of the business. In most cases, there is an opportunity to continue working in the company following the sale. As entrepreneurs sell their companies at younger ages than ever before, this becomes an important consideration. It can be a great experience to only focus on the areas of the business that you enjoy most and best utilize your skill sets, without the worry and stress that comes with ownership responsibility and its many tedious distractions.
Feeling fatigued or burnt out from the sale process: The business sale process is one of the most challenging periods most business owners will experience. It can be a time consuming process, yet the focus must remain on continuing to manage and grow the business. The worst thing that you can do is to take your eye off the ball during the sale process and allow the business to decline, as this can have a devastating impact on marketability and the value you will receive for the business. A professional merger and acquisition intermediary will manage all aspects of the sale, thereby enabling you to focus on driving the day-to-day operations while feeling comfortable that the transaction is being handled professionally.
“What about my employees?” In most small businesses, each employee plays a key role in the business. The most important assets in a small company arrive in the morning and leave at the end of each day. It is the employees that account for most of the goodwill of the business given their customer and vendor relationships, technical know-how, and other contributions that make the business tick. Typically, one of the acquirer’s biggest concerns and a focal point during due diligence is the continuity and smooth transition of the employees. It is not unusual for an acquirer to request interviews with key employees and in certain cases provide employment contracts to ensure continuity.
It is natural that you will have concern for those employees that enabled you to realize your success. It is not uncommon for sellers to direct a portion of the proceeds from a transaction toward bonusing certain employees for their loyalty and dedication in helping build the company. You have spent many years feeling and being responsible for everyone in your company and after doing what you can to present their attributes to an acquirer, it will become both the acquirer’s and the employees’ concerns to shoulder this responsibility.
“I have always been my own boss – Can I work for someone else?” Most business owners started out doing what they enjoyed best in the company, usually sales or operationally focused. As the business continues to grow, owners find themselves getting bogged down in areas that are not the best use of their time and that they do not enjoy. There is a lot more focus on financial and cash flow matters (i.e. banking, taxes, and other financial matters). As the business continues to expand, the business owner becomes more entrenched in personnel/HR matters, insurance, and leases. After a mental adjustment period, it can be a “breath of fresh air” to not have to deal with all of the responsibilities of ownership.
“No one can run this business like I can”: It is true that no one will run your business just like you have. Acquirers will negotiate a significant period of time wherein they seek your help to transition the knowhow and relationships that it took you years to develop. By the time you are selling your business, you should have systems, personnel, and processes in place that will enable the business to move forward seamlessly during ownership transition. A strong management team becomes an extension of the seller and also enables the buyer to operate the company in a successful manner following a transaction. A buyer will take the foundation that you have established and then introduce their own ideas and philosophies to take the business to the next level.
Anxiety from having to deal with other family members that are involved in the business: If you have other family members involved in the business, consideration must be given as to how a sale will impact them. This is a very personal matter that will vary significantly in each situation. It is critical to maintain strong communication with other family members before, during, and after the sale process. Understand whether they would like to continue involvement post-transaction, or whether their functions require replacement. Continuity provides a buyer with a greater comfort level during and after the-transaction.
There are a myriad of emotions that an entrepreneur will face when taking on the sale of their company. Being aware of them in advance enables you to evaluate and prepare so that they do not get in the way of the business sale process and a successful closing. Additionally, with the proper professional support team, business owners can generally manage their emotions, work through the key issues and successfully complete a transaction.