So many times I have been asked when a shareholder should start preparing for a sale, this question is often followed up with what will I do with the money anyway. In this blog we look at what founders and business owners should consider in the period before selling part or all of their businesses.
We asked Peter Burke, who after many years as a Wealth Manager at Coutts recently established Meonbridge to give us his insights. They offer a different angle based on his dealing with countless exiting shareholders. Peter does not offer regulated financial advice which leaves him free to offer entirely unbiased guidance to help shareholders objectively evaluate their existing advisers and plans, I set out below his thoughts on the preparation needed before selling and what to consider after selling a business from a shareholder’s personal and family perspective, rather than from our corporate finance world view.
Navigating the Emotional Landscape of Selling Your Business: A Guide for Successful Entrepreneurs
Selling a business is one of the most significant milestones in an entrepreneur’s life. For many, it’s the culmination of years of hard work, sacrifice, and dedication. It’s a time of excitement as you consider the financial rewards and new opportunities that await. However, it’s also a time fraught with emotional challenges. The process of selling a business can stir up feelings of loss, anxiety and uncertainty, even for the most seasoned and uncompromising business owners.
This article aims to guide you through the emotional aspects of selling your business and help you anticipate the journey ahead. By understanding and preparing for this personal journey, you can make more informed decisions, ensure a smoother transition, and ultimately find peace with your choice. Additionally, we’ll outline the key issues you’ll need to consider as you embark on this significant life event.
Understanding the Emotional Journey
The decision to sell your business is never just about the numbers. For many entrepreneurs, their business is much more than a source of income—it’s a part of their identity. The emotional journey of selling your business can be complex and multi-faceted, often catching even the most prepared business owners off guard.
1. Letting Go of Your Identity
Your business likely represents more than just a financial asset; it’s an extension of who you are. You’ve poured your energy, creativity, and vision into it. Letting go of something so deeply intertwined with your identity can lead to feelings of loss and emptiness. This is especially true if you don’t have a clear plan for what comes next.
2. Facing the Reality of Change
Change is inherently uncomfortable. Selling your business represents a significant life change, and with that comes uncertainty. The fear of the unknown—how your life will change after the sale—can be daunting. You might wonder how you will fill your time, or if you will miss the daily challenges and interactions that running your business provided.
3. The Emotional Rollercoaster of Negotiations
The negotiation process can be emotionally exhausting. There will be moments of excitement when an offer comes in and times of frustration when negotiations stall. The stakes are high, and it’s natural to feel a mix of anxiety, hope, and doubt as you work through the details.
4. Concerns About the Future of Your Business
As a business owner, you likely care deeply about your employees, customers, and the legacy you’ve built. The thought of handing over control to someone else can raise concerns about how they will manage what you’ve created. Will they maintain the same standards? Will they take care of your employees? These concerns can weigh heavily on your mind.
5. Anticipating Post-Sale Emotions
Even after the deal is done, the emotional journey isn’t over. Many business owners experience a period of mourning after the sale, similar to grief. There’s often a void left by the absence of the business in their lives. This can be compounded by the sudden lack of structure and purpose, leading to feelings of regret or even depression.
Key Considerations for Business Owners Selling Their Business
To navigate this emotional journey successfully, it’s crucial to anticipate and plan for these feelings, as well as the practical aspects of selling your business. Here are the key issues you should consider:
Stage I – Up to 3 years pre sale
1. Reflect on Your Reasons for Selling
- Why are you selling?
Understanding your motivations is crucial. Are you selling because you’re ready to retire, want to pursue other interests, or because the market conditions are favourable? Being clear about your reasons can help you stay grounded during the process.
- What are your long-term goals?
Consider how selling fits into your broader life plans. This will help ensure that the sale aligns with your future aspirations and gives you a sense of direction post-sale.
- Who should own the proceeds?
This is a good time to consider whether any changes to the shareholders are needed; if the likely proceeds are going to be well beyond your personal needs then you should consider the creation of Business Property Relief Trusts or charitable trusts as part of a well formed succession plan.
- When, how and what should we tell our children?
This will depend entirely on your family situation. In this digital age news travels fast and messages become easily distorted so it’s important to have a communication plan for all stakeholders. How many generations are you planning for? If you envisage a long endowment how will the fifth generation know who you were and the sacrifices you made in building the business? Having a guide who is sensitive to these issues and has experience of it being handled well (and badly) can be invaluable.
2. Prepare for the Emotional Impact
- Acknowledge the emotional rollercoaster
Recognise that selling your business will be an emotional experience. Don’t shy away from these feelings; instead, acknowledge it and address them head-on. Talk to a number of other entrepreneurs who have sold their businesses to gain insight into what you might experience.
- Consider the non-financial value
Beyond the financials, think about the legacy, culture and relationships you’ve built. How important are these to you, and how might they influence your decision on who to sell to? Where are your ‘red lines’ and how and when should they move?
- Seek support
Surround yourself with a strong support network, including family, friends, and professionals who understand what you’re going through. In addition to a Corporate Finance team, consider working with an independent business coach or financial guide who can help you process your emotions and create a robust plan.
3. Plan Your Next Chapter
- What’s next for you?
Before selling, think about what you’ll do afterward. Whether it’s starting a new venture, focusing on hobbies, or spending more time with family, having a plan can ease the transition and give you something to look forward to.
- Consider a gradual transition
If possible, arrange for a gradual handover of responsibilities. This can help you adjust to your new reality more smoothly and give you time to mentally and emotionally prepare for the next phase of your life.
- Lay the foundations of a financial plan
Having provided for the inevitable expenses and tax liabilities which will arise, many people choose to divide their proceeds into categories such as:
- Family money – the capital that will support the owners, children and grandchildren.
- Passion assets – art, property, boats and cars.
- Philanthropy – as well as a means of supporting causes that are close to your heart, a family charitable trust can often be a very useful vehicle to introduce subsequent generations to the responsibility of managing capital.
- Private investments – using your knowledge and experience to help other entrepreneurs on their journey whilst generating a return on capital.
4. Do you need a good financial adviser, and how will you find one?
- Have an awareness of what you don’t know and what you might want to know – some business owners want to stay in control and only employ specialists for specific input whilst others want to hand everything over to a one stop shop. An experienced financial coach can help you decide what’s right for you.
- Hands on or hands off?
Do you want the management of money to also be an occupation? Would you prefer to hand it over to professional managers and sit on the beach / boat / golf course? Will you be able to trust someone else with your money, and how will you know if that trust is misplaced?
- Don’t be afraid to seek training if you need it
The world of money management is diverse and complex. Even if you decide to hand everything over to professionals you still need to know how to choose a good adviser and to know when they are or are not doing a good job. We can help by assembling a beauty parade and asking the questions you might not think of.
- Most fund managers will tell you that ‘their charges are reasonable and performance has been good considering the market’. Often this is true but how would you know? We can provide an objective assessment of what you are getting for the costs you incur.
5. Create the support structures that will see you through the next 10 years
- Wealth should be a privilege not a burden
Work with professionals to ensure that the information you receive is what you need to monitor progress and trigger alarms without becoming a slave to your spreadsheets.
- Decide when and how to review the structures you have in place.
Ensure that your Wills are updated to reflect changing family circumstances.
- People rarely get the best experience holding advisers at arm’s length and continually re-tendering so create a review process that creates healthy respect rather than strained or complacent relationships.
Stage II – Completion
Your Corporate Finance team have found a buyer you are comfortable with who is prepared to pay a good price; your accountants have structured an efficient deal and calculated the tax that will be payable; your legal team have drafted the sale and purchase agreement and the champagne is on ice – how do you feel now?
6. Be prepared for an emotional storm
- After what can sometimes feel like an ultra-marathon, the last few days and hours can be gruelling. You will need fuel in the tank for the last push when it could all fall apart and the red lines are stretched to breaking point.
- The first 1 / 10 / 100 days
- Decide where the money will land, make sure it is safe, earning a reasonable return and visible.
- Set funds aside for immediate payments and other liabilities including taxes that may not be due for many months.
- Take time to decompress and reflect; this is often a time when clearly laid plans suddenly take on a different hue
- Have a strategy for the flurry of job offers, charity requests and the army of financial advisers that will suddenly fill your Inbox so you can remain open to interesting opportunities without burning bridges.
7. Settling into Life After the Sale
- Reinventing your identity
Start thinking about how you’ll redefine your identity outside of your business. This could involve taking up new hobbies, volunteering, or pursuing passions that you may have set aside during your entrepreneurial journey.
- Expect a period of adjustment
It’s normal to experience a range of emotions after the sale, from relief and excitement to sadness and regret. Give yourself time to adjust and don’t rush into new commitments until you feel ready.
- Celebrate your achievements
Take time to celebrate what you’ve accomplished. Reflect on your journey and the impact you’ve made. This can help bring closure and provide a sense of satisfaction as you move forward.
Conclusion
Selling your business is not just a transaction; it’s a profound personal journey. As a successful business owner, you’ve already navigated countless challenges and made tough decisions, but this one is different. It’s about letting go of something deeply personal, something that has defined a significant part of your life.
By understanding the emotional landscape and preparing for it, you can approach the sale of your business with a clearer mind and a more grounded perspective. The considerations outlined above are not just practical steps; they are essential components to ensure that you emerge from this process not only with financial success but also with emotional resilience and a sense of fulfilment.
This is a time to reflect, to seek advice, and to create a structured but flexible plan for the future.
We are specialists in helping families navigate these unfamiliar waters and can help you to appoint your new ‘board’ of family advisers, carefully chosen to fit dovetail with your new circumstances. Remember, selling your business is not the end of your entrepreneurial journey—it’s the beginning of a new chapter. And with the right preparation and mindset, it can be a chapter filled with renewed purpose, growth, and satisfaction.
– Peter Burke Chartered FCSI, Managing Director
