By Scott Bushkie / Guest Column
After selling businesses for 18 years, there’s still one stumbling block that takes me by surprise and hits hard, and that’s seller remorse.
On average, I see it every two or three years – a seller goes through the whole process and then ultimately can’t pull the trigger. The last time it happened was April 2015.
We were working with two brothers in their 70s and had benchmarked their business around $23.5 million. That was the goal we were all shooting for. And because the business had a lot of things going for it, including a strong seller’s market, we had multiple offers on the table.
The top four bidders all came in around the $24 million-$26 million range. In other words, not only did we hit the goal, we exceeded it. But then the sellers changed their minds and told us the deal “just didn’t make sense.”
When something like this happens, we talk to the seller’s other advisors (e.g. lawyers, accountants) to find out what went wrong. And 9.9 times out of 10, they tell us what it really came down to was emotions and that they just couldn’t let go of their “baby.”
Here are a few tips to make sure you don’t put yourself through that same gut-wrenching and costly process:
Know what you need. Figure out your goals and plan your business sale on that. You want to know where the finish line is so you can sprint across.
Get an estimate of value on your business, then sit down with a tax accountant and figure out what you’ll net after taxes and fees. Next, meet with a financial advisor and talk about your ideal lifestyle and all the things you want to do for your family and community. If the numbers match up, it’s time to sell.
According to the latest Market Pulse survey report from the International Business Brokers Association (IBBA) and M&A Source, retirement is still the number one reason business owners sell. But consistently, burnout is the second leading driver. That’s a tough, emotional position to be in, and it can affect your sale price negatively by anywhere from 20-40 percent.
Don’t wait for some kind of trigger. Plan ahead and work toward an identified goal. Do that and you’ll be able to make an objective decision from a place of confidence, rather than gut feel.
Know what’s next. When it’s time to sell, will you be running away or running to something? Selling your business can be a particularly scary time when you don’t know what you want to do next. The good news is you have a blank slate you can fill with all kinds of dreams and goals, but you need to be the one filling that slate. You have to be excited about what’s next.
When we bring on a new client, we ask them to fill out a bucket list. Often they tell us they want to start a new business, travel, spend time with family or volunteer at church.
One seller goal really hit home for me – he wanted to take care of his ailing father. Personally, I got to spend one uninterrupted week with my father before he died. That was one week without business calls and emails, and I certainly would have treasured weeks or months more.
Find your own identity. Here in the Midwest, we take a lot of pride in our work, our businesses and our employees, but you need to be able to separate what you’ve accomplished from who you are. I know that someday I’ll need to be okay being just “Scott,” not “Scott the business owner.” We all need to understand we’re more than our businesses. For many people, that ties back to their goals and core values like family, faith and community.
So prepare in advance, set new goals, and develop a sense of identity and self-worth that’s separate from your role as a business owner. (That last one’s easier said than done, I know.)
You’ve put in years of labor and now it’s time to do the emotionally hard work of preparing to let go, whether you’re selling tomorrow or even a few years from now. Prepare so you can move confidently into the next chapter of your life.
You don’t want to be at the closing table wondering, “Who am I? Where am I going? And is this the right decision?” And frankly, even if you do sell, I don’t want you thinking that either.
Scott Bushkie is the founder of Cornerstone Business Services, a national M&A firm with offices in Wisconsin and Iowa that specializes in the lower/middle market sale of privately held and family-owned businesses. He is a fellow and past chairman of the International Business Brokers Association (IBBA) and a Certified Business Intermediary (CBI).