The decision to exit your business can be a big life change, especially if you’ve built your enterprise from the ground up or you’re planning on retirement. And while most business owners expect the move to be somewhat tricky to achieve, with accounts, legalities and handovers to be managed, many are unaware of just how emotional exiting your business can be, writes commercial law expert and author of Buy, Grow, Exit, Joanna Oakey.
Proper preparation is the most critical component of an exit. Sellers who understand the sales process, who have done their due diligence, who have run the business in a sale-ready state, and who have become independent of the business will experience fewer speed bumps along the way.
However, there is a hidden element many don’t anticipate: emotion.
Most business owners who sell to retire don’t understand what life will look like when their identity is no longer linked to the business. This realisation can occur long after the sale, at the point they are about to commit to the deal, or when exchange is imminent. The latter can impact the sale process and make negotiations harder.
So, what are the emotional challenges in a sale?
‘Emotional rollercoaster’ buyers
It is unlikely that experienced buyers will be impacted by emotion in a deal, but inexperienced buyers are often caught up in an emotional journey at some point. The trick is to know when emotion has crept into the decision-making process and to work with it, while maintaining strong momentum in the deal.
Identity crisis of the seller
The biggest emotional challenge for a seller is a crisis of meaning and identity. This is the point where they suddenly wonder what it might mean not to have this business that has taken up chunks of their life. They start to wonder what they will do and who they will be if they are no longer the captain of their business ship.
This is unlikely to ever be a topic that a seller consciously considers, but it can show up in their behaviour in the form of obstinacy, stubbornness and resistance to the process.
An unclear seller
Not being clear on why you are exiting can be a major catalyst in a lack of satisfaction when the deal is done.
Many sellers get cold feet towards the end of a sale process and decide to hang on to the business. They suddenly decide they could get a better price or a better deal (partly because they simply can’t see themselves in a life outside of the business). Or they go through with the sale only to suffer from vendor’s remorse and kick around for months after, not knowing what to do with themselves.
How to combat the emotional undercurrent
In reality, sellers don’t understand that there is an emotional undercurrent at play and that this, ultimately, manifests as problems along the way. There is a mental process involved when navigating this emotional journey, so sellers need strategies to combat these issues.
You must prepare yourself emotionally. Recognise that the process can be exhausting at times, and that it can evoke emotions that are unlike most other business transactions. Be aware that emotions might come up.
Part of this preparation is getting clear on your end goal. Before going to market, understand your reason for selling and decide on the kind of life you envisage for yourself post-sale. Identify your motivations, as they will carry you through the emotional ups and downs of the deal.
And don’t forget to get the right advisors on board. Surround yourself with people you trust and who share the same values.
The caring role
Advisors hold an indispensable role in caring for the emotional wellbeing of business owners throughout the sale process. Emotions are inevitable when dealing with human beings and your advisor has a duty to prepare you for the emotional hurdles that are waiting up ahead.
This isn’t just another commercial transaction; it is your business sale, so acknowledgement of emotional undercurrents behind every decision made is essential.
Understanding and pre-empting your emotions and having a clear post-exit plan will assist in ensuring you can progress through a deal despite them. It is important to prepare yourself emotionally for exiting your business so you can maintain momentum, commit to the deal when the time comes, and move on to the next stage in your life.
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