It’s not easy stepping back from a business you’ve spent your whole life building. Not only is the company a source of income, for many entrepreneurs, it’s a part of how they define themselves: innovator, leader, employer. Even a sale to a family member can be emotionally charged.
Many business owners are able to keep their feelings in check from the initial purchase offer and through the due diligence process.
“When the final moment of the sales process arrives, many business owners often feel a sense of overwhelming loss,” said Barry Brundage, managing director for Private Wealth Management of U.S. Bank. “There’s no getting around the fact that this is an emotionally charged experience – at the end of the road, the business will belong to someone else.”
There are circumstances that can further exacerbate the emotions a person may feel when selling a business. A few examples would include:
Depending on the nature of the business, the most likely buyer might be a lifelong competitor (think Jay Pritchett and his nemesis Closets, Closets, Closets, Closets in the television show Modern Family).
Concern that a family member is too young or lacks the skills to make the business work, putting in jeopardy the company, potential residual payments, and the parent/child relationship.
A deterioration of the business’s market position over time, or the entry of a deep-pocketed competitor, leading to a forced sale.
Even in the most pleasant of circumstances, emotions can intrude on the process and may cause the savviest negotiator to leave money on the table. To avoid this, planning ahead may help. To start, admit to yourself that while the decision to sell may be a purely rational one, the selling process can be anything but. You may find yourself questioned on earlier business decisions, and second guessed on everything from your hiring policy to marketing and communications. This can further surface emotions. With a full business-selling plan in place, you’ll be better prepared for the negotiation table, and with better preparation comes a better feeling about the overall experience.
“What many people don’t recognize is that emotions can continue to linger long after the ink is dry on the contract,” Brundage said. “After years of solving problems, and managing mission critical decisions, you will have to look outside of work for a sense of purpose and belonging. Think about the first day after you close the sale. What do you envision yourself doing? Volunteering? Traveling? Spending more time with your family?”
Another step to take prior to entering the selling market is to make sure you have a financial plan in place. Whether you expect a one-time windfall or a buyout over an extended period, you need to prepare for the time when the business will no longer provide you with income (and potential tax benefits). This, more than anything, may help you maintain peace of mind.
The one feeling no one wants to have is regret when they complete a business transition – regret at having sold at a discount, picked the wrong buyer, or failed to financially prepare. Keeping your emotions in check throughout the sale process may go a long way toward avoiding this, and putting you on the road to a happy and productive post-sale life.
U.S. Bank and its representatives do not provide tax or legal advice. Each individual's tax and financial situation is unique. Individuals should consult their tax and/or legal advisor for advice and information concerning their particular situation.