Selling a business is never easy. It involves millions of dollars, thousands of details, and multiple life-changing decisions.
Many potentially good deals fall apart because the business seller wasn’t mentally prepared for the process. When a seller gets cold feet and cancels the sale of the business in the midst of negotiations, it costs everyone valuable time and money. It can also diminish the odds of getting good offers from future buyers.
If you’re thinking about selling your business, the first thing you need to do is to wrap your head around the concept and come to terms with the process of selling and the reality of what comes next. These are my 5 best tips to prepare yourself mentally and emotionally for the process of selling your business.
1. Clarify your vision for the ideal outcome.
The deal is never be just about how much money you can get for your business. That definitely matters, but it’s also essential to imagine what the optimal outcome would look like for you, your family, and your employees.
Spend some time contemplating the answers to important questions about everything at stake.
Would you like to find a buyer (or investor) who could advance the mission of your company? Do you expect the business to continue to grow and prosper after you leave?
Will your best employees want to stick around to help keep the business going? Or will all employees feel bitter and betrayed by your decision to sell?
What about your family? Will family members feel left out of the decision? If family members currently work for the business, will they be disappointed that you didn’t ask if they would be interested in owning or running the business?
Do you want to walk away from the business entirely? Or do you want to ease out gradually, either as a consultant or employee of the new owner?
Have you and your spouse talked about what your life together will be like after you sold the business? Will your spouse be surprised to discover your vision of the future is much different than hers?
After you jot down what non-monetary aspects matter most to you in a deal, now think about the monetary parts of the deal. Write down a realistic number of how much money you would like to take away from the deal Is it a realistic number? Would it cover the costs of what you plan to do after you sell the business?
Do you need all of the money now? Or would you be willing to wait to take some money later?
In this book, “Selling without Selling Out,” Sunny Vanderbeck suggests writing down that number along with your ideal outcome. Lock them away for later reference. When negotiations get rocky, use those notes to remind yourself of how you envisioned the ideal outcome.
2. Evaluate the pros and cons of various options for selling your business.
Do you really want to sell now? Or do you want to wait five years or until you’re ready to retire?
What type of buyer will you look for? Will you sell the business to a member of your family? Your management team? A competitor? A private equity group? A family office? Your employees? Each of these options has benefits and risks that you should understand before beginning the sales process.
3. Talk candidly to colleagues who have been through the process.
What did they do right? What did they do wrong? If they could do it again, what would they have done differently? What phase of the process caught them most by surprise?
Like any big transaction, we often look back and wonder if the process would have been easier if we had been better prepared to make different decisions along the way. Before you begin the process, it’s best to learn how to avoid painful lessons your peers learned the hard way.
4. Hire experienced advisors you trust.
Don’t even think about trying to go it alone. Keeping your business running in an uncertain economic environment is tough enough. If you try to handle all of the nitty-gritty details of the deal on your own, you and your leadership will have far less time to keep your business running at a high level.
Look for financial, legal, and tax advisors who have been through the business-sales process a few times. If you share your vision of your ideal outcome, they can help you find buyers that can help you achieve that outcome.
If your business isn’t moving forward with strong daily leadership, your business won’t hit the types of numbers and growth trends that potential buyers expect to see.
5. Think about what’s next for your life.
Do you plan to retire? Start another business? Work part-time as a consultant? Write a book? Travel? Serve on volunteer boards?
It’s best if you can start acting on these visions before you sell your company. If you have identified as a CEO of a company for decades, you will want a new identity to keep you going after the deal closes. The abrupt loss of your daily routine, identity, and sense of purpose can cause feelings of regret and depression. Having a well-defined plan for the next chapter of your life can ease the mixed emotions you are likely to feel the day after the sale closes.
Get Ready to Be Ready
Trust me. I know from experience that the process of selling a business can trigger emotional warfare that may catch you totally by surprise.
Because I was fairly young when I sold the two businesses that I owned, I decided to spend my time helping other business owners understand what to expect during a business transition. Business owners typically only hear about the relatively few successful deals. The many potential deals that fail to close are seldom publicized.
The LaManna Consulting Group can share some crucial insights to help you succeed.
To start, we can provide an objective opinion of the value of your business.
During this process, we will request the types of information a potential buyer will ask for and look for any red flags that could cause glitches after you receive a Letter of Intent from a buyer.
We want you to get a realistic sense of what the sales process will entail, while encouraging you to gather all of the financial records that a potential buyer will expect you to be able to immediately produce. Call me at 561-543-2323 for a confidential discussion of the process.
No two businesses or business owners are alike. As we learn about your vision for a successful outcome, we can focus on getting you mentally and emotionally prepared.