The Emotional Impact
When a business owner decides to sell the business there may be a flood of feelings about letting go of something that has been a major part of one’s life. The emotional bond with the business alone may make it difficult to reach the decision to sell. Recall the dedication and energy that was invested over the years to build a solid business to support the family, employees, customers, and suppliers. Emotions are very powerful and can get in the way of a successful sale if not managed ahead of time.
The Exit Strategy
As an entrepreneur, you have begun preparing your business for sale long before actually listing the business for sale. In fact, the success of the sale depends on this preparation. Preparing an exit strategy is essential: it outlines what you expect out of the sale and how these goals will move you forward into the next stage of life or even a new career. It is very important to involve family members in your exit strategy. They may have worked for the business and will undoubtedly know the staff. The loss of the business will also impact your family members so please make everyone confidentially aware once you have made the decision to sell.
Most likely you have become emotionally attached and defensive about your business; that is to be expected and planned for. Negotiating when emotions are running wild will risk a successful arrangement for the same reason that homeowners have real estate agents make the sale! It gets personal too fast. You should create distance between the purchaser and yourself by involving lawyers, accountants and appraisers. Another excellent resource is a group of peers that have actually gone through the process. A confidential peer group can be most helpful to sound out ideas and not let the word out that you are considering a sale. It is also most important to continue with the business at 100% effort during the “due diligence” process. If the sale falls through, and it might, then your momentum carries the business until the next prospect arrives.
The day of the sale could be anti-climactic. The new owner may have decided to make major changes within your businesses. It is no longer your right to interfere. Employees may be replaced with family members of the new owner, and products may be dropped or significantly changed. You need to be both aware of and accepting of change in your exit plan so you are not taken off guard. Once the sale is complete, you will be able to move forward to your next venture.
Moving Forward
Once you have made the decision to sell, you will soon want to decide what you are going to do with the rest of your life. Travel and golf may be your first thoughts but that may wear thin in short order. A more complete plan would include things to do during the various seasons that include some travel, sports and hiking activities that appeal to the new retiree. Remain flexible about working part-time. If you have worked more than sixty hours a week for many years, you may find the “retired” life tiring. The key is to think this change through with your family, as everyone will be impacted. Writing down your exit strategy and sharing your plan will ease everyone’s concerns.
Once you feel you have finalized your exit strategy, your next big step is to consider a timetable to sell the business. Unlike houses that may take 90 days to sell once listed, a business sale could be much different. Everyone needs a place to live but not everyone is looking to buy a business so this sale may take longer.
Your degree of urgency will determine the size of the pool of potential buyers. An immediate sale will limit the number, while a flexible sale in one year will allow time to confidentially contact prospective buyers. The big issue is that when word gets out to employees, customers, suppliers and competitors, it can create unrest for you, the seller.
Consider the possibility of remaining active in the business as an advisor for a set amount of time to help the new owner with the transition.
Finally, you need to determine how important it is for you to receive 100% of your asking price or whether you are willing to provide partial financing to the new owner. By providing financing, with suitable collateral, you can remain involved with the new owner and see the transformation occur.