As we get ready to welcome ghosts and goblins to our front door this Halloween, now seems like a good time to name some of the nagging fears associated with selling a business. Following are four fears that can get in the way of a successful sale:
1. Loss of Identity & Purpose
If there’s one universal fear in life, it is fear of the unknown. It can be hard to imagine what life will be like when you no longer own your business. What will motivate you to get out of bed in the morning? Will you lose your standing in the local community? What if you get bored after three months and regret that you sold? And so goes the internal dialogue as fear feeds on itself and the decision to sell gets put off until next year — or maybe the year after.
Selling your business comes with two inevitable feelings: resistance and loss. The degree to which you experience these emotions will depend on your own situation, but assume that you will feel them nonetheless. Selling a business is easier when you plan well in advance. Figuring out what you will do with your life post-sale should be part of your overall exit plan. Don’t be afraid to lean on members of your support system, or even spend a few hours with a therapist to help you transition from business owner to your next act.
2. Making a Mistake
Many business owners correctly sense that the process of selling a business is complex, difficult, and loaded with landmines and booby traps. From poor deal structure, to missing a legal nuance to paying too much in taxes, there are countless details that need to be addressed when selling your business. I am haunted to this day by one number involving the sale of my business: It is the exact amount that we ceded to the buyer by failing to fully understand purchase price allocation.
The best way to allay this fear is to hire good advisors to assist you with the process. At a minimum these typically include an accountant, attorney and business broker or M&A advisor. Others whose advice you may need to seek are your financial advisor, estate-planning attorney, banker, or a management consultant (for internal transfers or acquisition integration in particular).
I don’t blame myself for the mistake I made. As with most sellers, my husband and I were in uncharted territory when we went through the process of selling our business. It could have been avoided entirely, however, if our business broker had told us to call our accountant and ask the right questions at the right time.
Good advisors pay for themselves by helping you avoid costly mistakes.
3. Getting Taken Advantage Of
I’ve met a number of sellers who seem to slip into a state of paranoia as the closing table looms larger on the horizon. One seller became convinced that everyone was working against him — his attorney, his CPA, my firm, the buyer, even his own family members — and went into hiding for about a week. When he resurfaced he was ready to cooperate, but still seemed to be second guessing everyone.
Ultimately I came to realize that the person he didn’t trust was himself. Sadly, he was being forced to sell most of his assets — including the business — prior to declaring personal bankruptcy. There’s a big difference between the person who is selling a business because they have chosen to sell, and someone who has waited for a trigger event to decide for them.
The best way to allay the fear that others are out to get you is to take control of deciding how and when you will exit your business. This allows you to move forward with confidence in your own decision-making, and have faith in both the process and the people surrounding you.
4. The Buyer Will Stop Paying
If you don’t think you’ll be asked to hold back a portion of the purchase price, think again. Regardless of who buys your business, it is almost a given that you will need to offer some sort of seller financing to get the deal closed. Your willingness to delay payments also serves as a sign to the buyer that you have confidence in the ongoing viability of your business.
This fear should melt away after you’ve completed your due diligence on the buyer and become comfortable with them running your business. The ideal buyer should bring fresh resources to the table that you may have lacked, like management expertise, financial acumen or access to additional growth capital. Regardless of how much you hold back make sure it is secured by something, like a personal guaranty from the buyer. As a friend of mine likes to say, “if you’re being asked to be the bank, then act like a bank.”
While there are many reasonable fears that go along with selling your business, there are also ways to mitigate or banish them altogether. Just don’t let fear take hold to the point that it prevents you from moving forward with plans for both your life and your business.
Can you name any other fears associated with selling your business?
Author: Barbara Taylor
Barbara is co-founder of Allan Taylor & Co. and a former New York Times blogger. She has been a small-business owner since 2003. Barbara lives with her husband, Chris, and their two sons in Northwest Arkansas.