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by Edwin Mysogland on April 1, 2018
As entrepreneurs, we often think we will be happy when we exit our business. But selling a company isn’t a ticket to happiness for the rest of your life. The emotional complexity of selling a business cannot be ignored.
The business has been part of you and maybe your family, and perhaps a fixture in the community for several generations. Or, it just seemed like a good idea at the time when you bought or started it.
Regardless of how long you have been an entrepreneur, you’re charged with caring for this baby known as a business. You fed it, you nurtured it, it brought you joy (hopefully), and it had its disappointments. Perhaps you resent it for the time it took away from your family or the strain it put on your relationships.
Hopefully, you have nothing but fond memories, and this “asset” served you well. My assumption is that, regardless of your feelings about the business, one thing is certain: you will feel a loss when you sell.
Have You Heard of Seller’s Remorse?
Seller’s remorse is when a seller changes their mind about selling. Sometimes it is about motivation, value, or fear of what comes next, among other reasons. What you need to know is that it is real, and you have to make sure you check in with yourself emotionally.
Why? According to the Exit Planning Institute® (EPI), 76 percent of business owners who sold their businesses profoundly regretted selling within a year. Can you imagine going through this whole process only to wish you had not done so?
Have You Thought About What You are Going to Do?
Maybe not with the money, but with your time. So many business owners have been so consumed with their business for so many years that they don’t know what to do with their time after they sell.
When I was in the business brokerage industry, one of the business brokers I hired for our practice came from a call from his wife, who wanted him to find something to do! It is a serious challenge for business owners having nowhere to go after selling a business. It is very tough, and that is why so many sellers unretire to buy another business.
The Mechanics of Loss
Whether it be a pet, person, or business, when it is no longer in your life, there is a void. Some choose to spend their time in healthy ways, such as through hobbies, volunteering, mentoring, and reconnecting with others. However, some turn to unhealthy ways to pass the time. Time doesn’t stop, so how you spend it is integral to this process.
Here are some considerations:
1. How Will You Spend Your Time?
Regardless of how long you have owned and operated your business, there is a structure and routine to your day as well as your weeks and months. Can you imagine not having a schedule or standing meetings?
Imagine the ideal day for you without the business. Some owners say they will golf or play tennis every day. Unfortunately, that is not a lasting solution. That passed the time, but it lacked the emotional connection that you will be seeking to replace. As difficult as the exercise may be, look at the business and consider what source of satisfaction it brings you. For example, if you were the one who loved the routine of going to work (like me), and after you had left the business, you were volunteering or mentoring on an “as needed” basis, this would not be ideal because you valued the structure of your days. Finding something you can do consistently would most likely provide the satisfaction you seek.
2. How Will Others View You?
One of my dearest friends always says, “It is better to be seen than viewed.” However, in this context, it is your identity that was in the business. So, how do you believe others will treat you after you have left? So many business owners who have been in the business for years have grown up with customers, competitors, vendors, etc., and those people are more to you than the roles for which they served the business. Will they remember you if they are staying while you are moving to the next phase of your life?
One of the more interesting articles I've read was What Will You Put on Your Business Card After You Have Exited Your Business? by Larry Gard, PhD. In this whitepaper, Larry spoke with EPI Co-Founder Peter Christman, who noted that if you are concerned people will treat you differently or with less respect, you should consider what reaction you would like to receive. If you want to be identified for more than the business, you have to provide enough information that will start a conversation.
While it seems to be for retirees, it is just as applicable, if not more so, to anyone considering an exit or who has exited a business. Whether it is the business owner who returned to the workforce as a W-2 employee or the entrepreneur running full speed into the next chapter, how you are perceived is material. Despite what you may think, the business is a part of who you are, but it is not who you are.
3. Having Your Head in the Sand
Assuming that you will successfully transition out of your business is dangerous. There are several fallacies and misconceptions that business owners typically have:
The Pessimistic Position
- There is no one who can run it like me.
- There is no buyer for this business.
- There is no market for this business.
Or the opposite
The Know It All
- I know the value of the business.
- I know that all kinds of buyers would want this business. I get letters all of the time.
- One of my kids will want this business.
- I can do an ESOP (Employee Stock Ownership Plan)
Both states of mind are dangerous because they lack knowledge. Likely, no preparation has been done. “We’ll figure it out as we go” is not a strategy and will tend to scuttle the process when reality sets in as the transition execution moves forward and provides tangible evidence of the lack of planning.
4. Is There a Post-Exit Role for You?
In most sales or transitions, the owner transition is important. In fact, the smaller the business, the more important the transition involvement period. However, what I’m referring to is what you are going to do after you’re no longer needed regularly? What is your role going to be at home, your church, or serving your community? Don’t discount the importance of the departure from one role and the entrance into another.
5. Family Considerations?
You might assume that I am referring to your blood family, but I’m referring to the family of employees that you may have. You believe that you have an obligation to continue to provide them a livelihood, and if you aren’t there, who is going to do it?
I know many business owners who are paralyzed about entering this process because they NEED to provide. If you are over sixty, here is a hint … They are wondering what you will do with the business when you retire. Hopefully, you care a great deal for those who work for you. If you are that business owner, care enough to plan so that your employees are taken care of after you transition from the business.
We have all behaved irrationally toward something important and shouldn’t have. The same holds true for this process. As the time grows closer to exiting the business, the level of anxiety will amplify. If it is left to its own devices, it will work at a minimum, slow the process, and at worst, will scuttle the deal.
Seller’s remorse is real, and not being emotionally prepared to transition the business is as dangerous as the value and financial matters. The emotional component of the sale/transition is worth considerably more than the money you will receive for the business.
Ed Mysogland is a Managing Partner of Indiana Business Advisors. The firm is an Indiana-based company that provides exit planning and business valuation services for small and mid-sized privately held business owners who seek to grow and improve their business. Recognizing the tremendous economic impact that owners have, the company is committed to helping its clients through critical decisions and implementing value-enhancing solutions. Ed is also the former President of the Central Indiana Chapter of the Exit Planning Institute.
About the Exit Planning Institute
The Exit Planning Institute® (EPI) is the exit planning market leader, providing education, tools, resources, and the ecosystem to support professional advisors across the globe on all things Value Acceleration. EPI’s offerings include the Certified Exit Planning Advisor (CEPA®) credential, the annual Exit Planning Summit, EPI Academy, an extensive Chapter Network, and more.
