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Are You Prepared to Sell Your Business?

By Generational Equity

Prepared to Sell a Business

So, you have reached a point in your life where you realize it is time to move on from the business you have nurtured to success. You have also come to the painful realization that for a variety of reasons, the kids and your key employees are not going to be able to take over your business.

Finding a third party to acquire your business is the logical alternative to ensure you receive the financial ROI you deserve and that the legacy of your company will continue.

But are you really ready to exit?

We spend a great deal of time in these articles discussing how to create a “buyer ready” business. In many cases, that is the easiest part. You simply take steps to ensure that the risks associated with buying your company are reduced so that buyers are more comfortable investing. The less risk, the more they will pay and the better the deal structure when you exit (all things being equal).

The more difficult part of this scenario is preparing yourself to sell your business, and come to terms with the knowledge that you will no longer be responsible for the day-to-day running of your company.

How do you ensure that you are personally buyer ready?

More often than not, getting a deal across the goal line requires our dealmakers understand the psychology of their clients (and client’s families and key advisors) just as much as they know the business. A seasoned dealmaker once told me that his primary role was to act as a marriage and family counselor for the clients he worked for!

Having worked with entrepreneurs for decades now, we recognize from our vast experience that exiting a family-owned business can be one of the most difficult and emotional processes anyone can ever go through. In fact, many deals get to the 11th hour, in touching distance of the close, and the deal falls apart because the seller gets cold feet for a myriad of reasons.

Here are some reasons that we have heard:

  • “I’m just not ready to exit.”
  • “What will I do with the rest of my life?”
  • “I don’t like the personality of the buyer.”
  • “I will miss my employees.”
  • “I have no hobbies or interests outside of the business.”
  • “I am worried about the legacy I am leaving behind.”
  • “No one can run the business as well as I do.”

We’ve heard dozens of other reasons, all of which have nothing to do with the business or the deal structure itself, but everything to do with owners not being psychologically prepared to sell their businesses.

Understanding Business Owner Psychology

Recently Dr. Allie Taylor, the cofounder of advisory firm Orange Kiwi, was interviewed by Axial about her work with entrepreneurs to get them psychologically prepared to exit.

Dr. Taylor is a renowned expert in owner psychology, achieving a PhD in business psychology and devoting years of experience to researching the topic. This is how she described the challenge of working with business owners to prepare them for an exit event when she was asked: Do you get pushback from owners who are skeptical of your psychological approach?

A typical owner who is going to have a negative reaction is one whose identity is highly or very highly fused with his business and/or one who is not open to change. Even if they say they want to achieve a successful transition, below the surface they are experiencing a psychological threat. They will have to wait for a trigger event. In that case, we’ll be the ambulance at the bottom of the hill; we’re not going to chase them.

The Two Kinds of Business Owners

As we have said before, there are two kinds of business owners:

  • Those that PLAN to sell
  • Those that HAVE to sell

We often look at these two options through the lens of the business planning (getting the financials in order, etc.). I would suggest that the reason our deal teams have been so successful over the years is that they also look at these two options in the context of the psychology of the typical business owner.

So, ask yourself: Are you psychologically prepared to sell your company?

It is wise to address this question early in your exit journey, because the worst thing you can do is go through 90 days of due diligence with a buyer and then pull out of the deal because you are not personally prepared. We work closely with our clients to make sure that they are ready, and that the family and key employees are ready as well.

The great news is that quite often the owner feels a huge sense of relief after the deal closes, is financially liquid, and now has time to spend on enjoyment. Have a listen to a few of our clients:

To learn more about how we can help both you and your business become buyer ready, call us at 972-232-1121 or visit our website, provide us with your contact info, and we will be in touch. And if you want to read the entire informative Axial interview with Dr. Taylor, you can do so here:

By Carl Doerksen, Director of Corporate Development at Generational Equity.

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