It Isn’t Just About Getting the Most Money Possible
When you think about selling your business, what’s the first thing that comes to mind? Is it getting a big fat infusion of cash? Or is it more about the sense of relief, accomplishment, and freedom that will come after you get the money?
If you have never sold a business that you built from scratch, it’s hard to describe the complex mixed emotions you will experience after the sale is finalized. Sure, you will be relieved the process is finally over, excited about the next chapter of your life, and happy to have cashed out.
But don’t be surprised if you are also plagued by doubts, a sense of loss, and apprehension about how the sale will affect your family, your employees, and your legacy as a business founder. And you definitely won’t feel a sense of freedom if you sell your business on Friday and must return to work Monday as a contractor or employee of the company you no longer own.
Before beginning the business-sale process, consider some of the non-monetary aspects of getting a good deal, such as choosing the right buyer and treating your employees fairly. One reason selling a business is such hard work is because it’s not solely a financial transaction.
Money as a Threshold
If your only concern is getting the highest bid from multiple bidders, perhaps an auction is the way to go. But the problem with the auction process is that you never really get the opportunity to get a sense for the buyer’s true intentions for your business.
“Everything in a traditional auction process is designed to get you a good price for your business and to feed the advisors out of the proceeds,” explains serial entrepreneur and investor Sunny Vanderbeck in his book, Selling Without Selling Out. “But price is not something to maximize, it’s a threshold.”
Selling your business is a threshold to the next stage in your life. Will you live long and prosper? Or live with the regret of what you could have or should have done?
For a sales process that will give you peace of mind long after the sale, look for a buyer who shares your core values and will treat your employees with respect.
Ideally, you may find a buyer or investor who can turn your business into something bigger and more successful than the enterprise you started and cultivated.
Money only matters up to a point,” Vanderbeck emphasizes. “There are buyers out there whose strategy is to agree on an asking price but then take back some of that money in the details of the contract. So, if you pick the highest bidder, be prepared for the details of the contract to be different from the type of contract you originally envisioned.”
As you spend time with a potential buyer and get to know them better, try to determine:
- Do you like the buyer?
- Can you trust the buyer?
- Why do they want to buy your business?
- What is their strategy for keeping it going and growing it?
- Will the company have the right mix of operational expertise to execute that strategy?
- What changes will they make first during the post-sale integration process? Will they fire all of your best people? Take away their seniority?
- How have they handled previous acquisitions?
It’s OK to do background checks on both the company as a whole and the individuals involved in the deal. Buyers must not only have the resources to meet your financial expectations, but should also have ethics you can trust and respect.
During the sales process, think carefully about the advice your advisors are giving. Sometimes an advisor will urge you to accept the highest price no matter what. When a sales decision is based purely on the amount of the offer, the advisor that brokers the deal may have a financial incentive to recommend the highest bid.
As the sole decision-maker, it’s fine to accept a lower offer from another bidder who has a more compatible business culture, similar values, and an achievable long-term vision. As long as the selling price meets your threshold price for funding the next stage of your life, you won’t remember whether the accepted bid was marginally smaller than another offer.
If the business you devoted your life to building doesn’t go out of business a few short years after the sale, you will feel much more at peace that you made the right decision for everyone involved.
In my memoir “They Named Your Right,” I explain in detail some of the complex emotions I felt buying a business, selling it, starting another company and selling that company. Call me at 561-543-2323 for a confidential discussion about what to expect from the sales process.