How to Sell When It's Not "Just Business"
Creating and executing against a plan is the most important aspect of an effective business transition
“It’s not personal” is a phrase we often hear in business. However, for men and women who have built a company from scratch, that’s exactly what it is. And when the time comes to consider transitioning ownership, the blood, sweat and tears can make it extremely difficult – from both an emotional and execution standpoint.
According to a recent Washington Post article, a record number of small business owners are selling their companies. When faced with the reality of selling a life’s work – as almost 28.8 million people in the U.S. will during the next 10 to 15 years – outside perspective is critical. Working with a financial advisor who is skilled in business succession and exit planning can help owners execute a strategic, phased approach, without being derailed by emotions.
GO BACK TO THE BUSINESS PLAN
First, owners should revisit – or if necessary, create – the business’ goals, vision and values. What are the business objectives five, 10 and even 15 years out? What are other key stakeholders’ views and aspirations? Is there a clear succession plan in place? Owners must be clear on these items to think through a plan that supports them. Successfully creating and executing against the plan is the most important aspect of an effective business transition.
BE MENTALLY READY FOR BIG DECISIONS
While working through the business succession plan, there will be some irrevocable decisions that must be made. It can be tough for owners to make large, permanent decisions for the business and the people that those decisions will impact. Referring to the plan and making guided decisions will result in the best outcome for everyone involved.
REMEMBER, IT REALLY ISN’T PERSONAL
There will be many moments, when it may feel like a buyer is picking the business apart; and it will be challenging for owners who view their business as their baby to not take this as a personal affront. Perspective is very important here.
This is commonly seen during the business evaluation phase. In most cases, this includes an initial offer, accepting a letter of intent and then due diligence. At the close of this step, inevitably the buyer will come back and try to obtain a discount; and while it feels personal, it’s not. In fact, most owners will admit they would maneuver the process in the same way on a different deal if they were the buyer. Managing through the various emotions in situations like this along the way is critical to ensuring the best outcome for the transaction.
TRUST YOUR FINANCIAL PROFESSIONAL
From a personal investment standpoint, money and emotion go hand-in-hand. It is critical to have someone who can take some of the emotion out of investing, to avoid rash or poor decisions. Not only can a financial advisor help with this, they can also take a holistic, 360-view of the entire transaction to help ensure it supports the business owner’s vision and values. An investment or finance professional can work with owners through the lifecycle of their business – from the initial planning phase to identifying the best time to sell – and ultimately help facilitate that transition.
CELEBRATE + PLAN THE NEXT PHASE
Planning for and executing a business sale is a very time-consuming, complicated and emotionally draining process. When it’s completed, owners should take some time to celebrate the next life phase. They will also need to create a new plan, including how to manage cash flow, investments and how to maintain their new plan going forward. As a newly retired business owner, they will have to become comfortable with their new reality, and an investment or finance professional can ease that transition by helping them ensure they are prepared for the future.
When evaluating when and how to sell a business, there are many emotions and unknowns tied to the process. Taking a phased approach, with the help of an investment or finance professional, can help ensure short- and long-term business goals are identified and accomplished and that the business owner’s legacy successfully lives on.
Dana Abraham is the president of personal banking at UMB Bank.