Riding the Emotional Rollercoaster of a Business Sale
How to prepare for the first and final days from a personal and business perspective
In recent years, merger and acquisition market activity has exceeded historical norms. PricewaterhouseCoopers says that 2022 was one of the strongest years for M&A outside of 2021, which was a record-breaking year with more than 62,000 deals globally. The message is clear: Successful dealmakers will find opportunities no matter the economic or geopolitical uncertainty. But if you’re considering a sale for your own business, it’s important to understand the challenges and opportunities that lie ahead. Selling your business isn’t something you should rush into. Preparation is key and part of that is working with a trusted advisor who can help you understand the unique value of your business, identify company weaknesses, and most of all – help you navigate the emotional toll of going through a sale.
Your business is an extension of yourself – it’s something you’ve cared for, lost a lot of sleep over, and nurtured for years. The emotions a business owner will experience throughout the sale process aren’t discussed as much as they should be – but it is a significant milestone in a person’s life and it’s important to discuss it with your family, your business advisor (RVR in many cases) and a trusted professional financial advisor. It only makes sense that separating from your company could cause some emotional strife and anxiety. I’ve experienced it firsthand as a business owner who has sold multiple businesses over the years, and as an advisor who has helped numerous business owners through every step of their sale process. It’s important to work with people that you can trust and have the successful experience to provide sound guidance all the way through the process.
Before Selling: Preparation is key and weaknesses must be addressed
Before you embark on the sale of your business, you need to ask yourself some hard questions: Am I personally ready to sell? Is my family? My business? What will I do if I’m not working every day? This might sound overwhelming – but it doesn’t need to be. To help answer these questions, you’ll need a good business advisor, financial advisor, tax accountant, estate planning attorney, and an M&A attorney to help answer these questions.
It’s critical to understand the overall financial picture of your business, the cost of a sale transaction, and your personal financial needs. The most important aspect to understand is the net dollar amount that you need from your business after paying any bonuses to key individuals, transaction costs, balance sheet clean up, tax payments, etc. Getting these questions answered takes input from all of the advisors listed above. RVR plays the role of quarterback in this process to ensure you are best able to make an informed decision.
The remaining amount of money from all of this is the actual number that you will have left over that goes into your pocket. Is that enough money for your next phase in life? Are you planning to retire, take some time off, travel, or start a new business? Make sure that you have worked thoroughly with a financial planner to ensure the transaction will meet your and your family’s needs (Note: RVR is not a financial planner but can provide a list of trusted contacts on request).
Moving past personal financial planning and when you’re trying to understand if your business value will meet this key number, it’s a great time to get with your team at RVR and let us conduct an exit readiness assessment. Our assessment reviews over 35 critical components of your business that could positively or negatively impact the value of your business through a sale. We provide meaningful recommendations to improve the weaknesses and have a deep bench capable of helping with the execution. RVR provides insight around a range of what likely buyers will be willing to pay in purchase price from a sale. This assessment will provide you with meaningful information to make smart business decisions regardless of whether you decide to sell or not.
During the Deal: Communicate with your team
During the sale advisory process, your trusted business advisor will walk you through every step along the way, making sure you are prepared and execute effectively. The more prepared you are, the quicker you will get through a successful transaction. The most important part of a good communication plan is the timing. You’ll want to communicate early with your leadership team and include them in the process. As part of the final closing process, you’ll want to communicate to your entire company about the pending sale. Your business advisor will help you communicate the right messages at the right time.
Depending on whether you stay with the company after the transaction, the message to the company employees will vary. Carefully crafting and delivering the proper message is crucial to getting buy-in and support from your team. If you stay on for a while and maintain some equity, your message may go from: “I’m selling the company and you all will have great opportunities with the new ownership team” to something more like “I’m bringing investors on board to take this company to the next level,” both options can provide your employees and vendors with greater opportunities and earning potential.
Riding the Emotional Rollercoaster
You’ll experience many emotional ups and downs throughout this process. At times it might feel like your prospective buyer is trying to pull one over on you, but your trusted advisor will be able to explain to you what’s actually going on and let you see the deal for what it truly is – an agreement between two parties. The seller who wants to sell the business at a maximized value and the buyer who is determined to acquire the business at a fair price with the intention to be able to grow it significantly and in turn make a significant return on their investment. It’s critical that there’s give and take throughout this process.
The buyer will want to interview you and your team, but it’s necessary that you also interview the buyer to understand if they’ll be a good fit for your company, if they’ll give you the right value in the purchase price, the appropriate structure of the deal and if you would want to work with them in the short or long-term. Having a strong advisory team that removes the emotion and solves challenges that arise is crucial for successfully reaching the finish line. Understand that this is a complex process but ultimately one where you need to build the buyer’s confidence by demonstrating the growth potential of the company and demonstrate true ability to scale to meet that potential.
Timing is key, the longer you stretch out this negotiation process, the more problems will arise, and the deal will lose its luster, the buyer will lose their excitement, and they might walk away from the opportunity or renegotiate the deal at a lower price.
In that last week before the sale is final, you and your team will be very anxious and excited. You’ll be waiting on pins and needles to hear that the ink has dried – but this is an important time to stay focused on your business. Stay engaged with your advisory team and make sure they have everything under control and avoid any surprises (large clients leaving, key employee turnover, vendor issues, etc.).
After the Deal
As an entrepreneur, when the deal has been finalized and the check is in the bank, you will experience mixed emotions of happiness and sadness. At RVR, we prepare our clients for this moment and coach them through the realities. It’s a mixed bag of excitement, relief – and oftentimes, elements of depression creep in because you didn’t realize how much of your self-worth was attached to your business.
When I sold my first business, it was a steep learning curve. The post-sale reality of the situation that you are no longer the owner is a humbling experience. Your life truly does change and there is no way to be prepared for all of it. So make sure you think long and hard about what is next and make sure you have someone who has been there to help you navigate through it. This realization and subsequent sadness are completely normal, but that mindset can shift – because you just sold your business, and now it’s time to celebrate and embrace new personal opportunities!
Buy Yourself Something
Seriously – you earned it. Now is the time to buy yourself a boat, a car, or that Rolex! You’ve worked hard and you deserve to commemorate the occasion with a big gift, a nice vacation and a feeling of achievement. You’ll remember that dinner, that trip and you’ll remember that gift, and it’s important that you recognize your accomplishment and commemorate the milestone with the people you care about.
Life After the Sale
If you’ve been working with a trusted business advisor, you’ll have a plan for all of your newly found free time. At RVR, we coach our clients to think about how they’ll use their time if they aren’t staying on with their company. The three most important things we instruct our clients to do, regardless of age, are to stay physically active, socially engaged, and continue to stay cognitively challenged.
When you sell your business and your schedule abruptly changes, it can be easy to fall into bad habits. By maintaining these three habits, our clients are set up for success in the next chapter of their lives – but those activities only account for some of their time, so how do you fill the rest of it? Consider volunteering in charities or on board committees or working as a business consultant in your area of expertise. Even if you think you’re going to spend all of your new time “traveling the world” – I can tell you from first-hand experience, that even traveling gets old. And if you’re still young, your friends aren’t going to be around to golf with you every afternoon, either, because they will be working. With guidance and support we can help you figure out the right path.
The bottom line is this: During a sale of your company there will be challenges and changes, but you don’t have to experience them alone. Our team has real experience in every step of the journey, including the emotional, real-life aspects that impact you and your family. With our guidance and support, we can help you through the process and guide you through to a successful sale.
By: Joe Raymond, Managing Partner of RVR Consulting Group
RVR Consulting Group provides your company with resources to support your vision and generate faster returns. By operating from both a strategic and tactical position, we protect clients during critical periods of uncertainty. Our services include advising, talent acquisition, sourcing fractional employees, exit planning, and selling your business. Regardless of your challenges, our firm’s experience is structured to make the road to your objectives faster, simpler, and more profitable. Our goal is simple: help you maximize the value of your business.
We are motivated to foster growth and develop opportunities for companies and their internal staff. Those economic impacts transcend into communities when our clients succeed and have invaluable, lasting effects.
For more information, visit https://rvrteam.com/contact/