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Why Selling Your Business Can Be Much Harder Than You Think

Why Selling Your Business Can Be Much Harder than You Think

Maybe you’re getting itchy to do something new and more intellectually stimulating. Or perhaps you’re approaching retirement age and are ready to pass on your company’s reins to the next generation. It’s time to consider selling your business. All you need is set a reasonable price and find a strong outside buyer or internal successor, right?

Not quite so fast. We actually see a lot of business sales fall apart even when the seller seems motivated, the price is right and the buyer is a great fit. Why? The logistical and psychological implications of separating yourself from a business you’ve worked hard to build—and creating a new identity and sense of purpose after you’ve left—are often more challenging than most sellers realize.

The good news, however, is that you can absolutely be one of those owners who closes a business sale and goes on to an extremely fulfilling “Act II” of your life and/or career. However, it may take more self-reflection than you realize, as well as help and support from employees, colleagues and outside professionals.

Here we’ll take a look at some of the major challenges of selling your business. In subsequent blogs, we’ll offer some concrete solutions strategies for dealing with seller’s angst and tips on better understanding your buyer so your transaction goes more smoothly and quickly.

Seller Challenge: Transaction Distraction

Getting your company ready for an outside sale or internal success can be all-consuming. You may get so busy with planning, negotiating and paperwork that you take your eye off the ball (running/growing the business).

Your employees and other stakeholders may become unsure of their role in the new company. Their productivity may suffer or they might start squabbling. You could even lose customers or sales if you’re not careful—and that impacts the value of the business and could ultimately cause the sale to fail.

Seller Challenge: Identity & Respect

We see many business owners who, partway through a sale, begin to seriously question their ongoing purpose—professionally, socially and/or personally. They ask: “Who am I if I’m not the owner of my company anymore?”

In other words, you may have theoretically made peace with the idea of no longer being a business owner, but now it’s really hitting you: How will you introduce yourself at social gatherings when people ask “What do you do?” Will colleagues treat you with the same kind of respect they did when they saw you as a successful professional?

If you’re passing on your company to a family member or internal manager, you may unwittingly become resentful that your successor isn’t treating you as appreciatively as you think you deserve. You may think: “They aren’t grateful enough for the risks I took to build this company from scratch.” “They don’t respect the vision I have for the firm and they’re ready to make changes as soon as I leave.” Or perhaps: “They aren’t thankful enough for the great price I’m giving them on this company.”

These disappointments can cause you to unwittingly sabotage the sale. We’ve even seen some business owners simply stop returning their potential buyer’s phone calls and emails, in a passive hope that the transaction will simply “go away.”

Seller Challenge: Clients’ Reactions

If you have close working relationships with your customers, you may have legitimate worries about whether they’ll continue to do business with your company after you leave. This concern has a lot to do with whether you’ve “institutionalized” your company enough that it can run independently of your hands-on touch.

In a similar vein, some of your customers may have become personal friends over the years. You may worry that the comingled business relationship/friendship may suffer when you change roles.

If your customer relationships face any of these challenges, they may become financial problems, too. Many business sales include a contingency payment that relies on your company maintaining or growing revenues a few years out. If you face a mass customer exodus, you could lose out financially when that contingency payment comes due.

So what’s a seller to do? We’ll offer some specific suggestions in future blogs. However, an important thing to know is that awareness of these potential pitfalls is half the battle.

As a business owner, you may have no idea that you are essentially grieving and going through a major life transition when you put up your company for sale. In your haze, you can’t see that you’re creating major obstacles for yourself and your potential buyer. Once you acknowledge that walking away from your business is really difficult, you can normalize what’s happening and perhaps make clearer decisions.

We also recommend talking with your wealth advisor, attorney, accountant and perhaps a business transition coach–well in advance of a potential business sale. As wealth planners, we can help you evaluate the personal financial implications of a sale. For instance, how much do you need to net after-taxes from a sale to maintain your desired lifestyle throughout retirement? Have you accounted for your true level of expenses since so many costs run through the business? Will you start another business, perhaps more of a hobby business or will you adapt to a traditional retirement?

Knowing the answers to some of these questions can go a long way toward helping you deal with the other challenges that go along with a business sale. You might even decide that you’re not as quite ready to sell your company as you thought.

If you’re planning to sell your business in the near future, talk with your wealth planner as soon as possible. We’ve helped a lot of clients transition to the next phase of their lives. We might be able to make it a bit easier for you.

 

Important Disclosure Information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable. Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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