A few years ago, I was attending a conference titled “Exit Strategy for Entrepreneurs” in which a successful Canadian entrepreneur was describing how he sold his business for top dollars. I was expecting the speaker to be full of joy and exhilaration after becoming a multimillionaire in just a few years. However, I was surprised to sense some kind of bitterness in his speech. The entrepreneur was simply describing his experience after the sale. The separation from their businesses causes most business sellers to feel some kind of regret after the sale. Many studies have been done and findings have confirmed that the few months succeeding the sale of their businesses are not the happiest for these business owners.
What should business do to make the “after sale” experience better?
- Know themselves and make sure they have good reasons to sell their business.
- Have a meaningful goal and make a clear plan and start implementing it in the few weeks before the sale.
- Be aware of their feelings and recognize the emotions that might come after the sale.
- Have a coach and discuss with them their motives, plans and advancement.
- Negotiate a smooth transition with the business buyer so the separation from their companies is smooth and less painful.
Business owners consider selling their businesses for many possible reasons:
- Boredom or need for change: This is the most frequent reason (statistically). After starting their businesses from scratch and spending countless hours exploring their ideas and implementing them, business owners simply lose interest in their companies. While this seems hard to believe, most entrepreneurs are more excited in launching a new business than in managing it once it becomes established. Managerial tasks such as accounting, managing people and solving daily problems are not as rewarding as implementing new strategies and growing the business. Many of my clients want to sell their business simply because they want to do something different.
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Succession planning/Retiring: The majority of small businesses are heavily dependent on their owners. If something happens to the owner, in most cases the businesses will not survive. When owners approach their retirement age, they need to find successors. While transferring the business to their children seems like the natural decision, this is not always possible for the following reasons:
- Children have other interests than their parent’s business
- There is no consensus in the family about who among the children should take over the business.
- Children don’t have the qualifications, expertise or the talent to manage the business.
- The business needs capital for a new strategic direction: This happens more frequently in consolidating industries. In some mature industries, huge economies of scale are necessary to keep the business afloat. The business could simply not survive in its current size. Ideally, a larger corporation/business would buy the business, merge it with its current operations, suppress some redundant costs and make it more profitable.
- Partnership disputes: Divorces and business partnership disputes are common and could be the reason for selling a profitable business with a lot of potential.
- The business is unprofitable and the owner is not able to turn it around: This is generally not a good reason to sell a business since most business buyers are looking for an income source and very few will look at unprofitable businesses. However, some business people with solid turnaround skills and management expertise are constantly looking for turnaround opportunities. The seller has to prove that the business has potential to become profitable.
It is very important that business owners contemplating selling their businesses spend some time understanding their own motives. Most buyers will become very suspicious if the business seller cannot clearly explain their reasons. If you are considering selling your business, visit our business brokerage website for more information about the business sale process.
