How to handle your emotions when selling your business
Emotions come into play in most things in life. However, selling your business is likely to generate more emotions than most other experiences. This is because you usually have spent a lot of time working in your company and have a lot invested financially and psychologically. The sale of your company may represent the largest single transaction in your life.
Having helped business sellers for over 17 years, we will offer some insight into the emotional aspects of selling your business and provide some tips to help you avoid letting your emotions ruin a deal. We have found that educating our clients about the process and what they can expect helps them maintain some emotional stability. Then often, they can enjoy the business sale process and have a better outcome. The more they know about the process, the more comfortable they feel.
Deciding to sell your company
The first step in any business sale process is deciding to sell. We regularly get calls from business owners that are considering the sale of their business. We understand that it’s not an easy decision for many people. You have an emotional attachment to your company, and rightfully so.
A key is if you have reasons for selling, which outweigh the reluctance to make a change that we all have. Often people’s motivation to sell is not just for financial reasons. Either they want to retire, relocate, have health issues, partner problems, or have other interests or business opportunities.
Weighing these factors out alongside the financial considerations can help you to make the right decision as to whether to sell your company. We will give you an idea of what you can get for your business. This allows you to make an informed decision.
And you can take your time to figure out whether your desire to sell is greater than your motivation to keep the business. We can help you talk through this and also give you options to stay on after the sale to support the new buyer with training and a transition period. Knowing that you will be staying on after the sale usually is helpful. This way, you can ease into retirement or the next chapter of your life. It also helps the buyer get off on the right foot and take care of your customers and employees properly.
Confidentiality is often a concern When Selling Your Business
Business owners usually have strong feelings about keeping the sale of the business confidential. This makes sense. You don’t want your employees, customers, competition, or suppliers to know that your company is for sale. We help sellers overcome this concern by letting them know that we won’t advertise the name of their company. And we’ll require potential buyers to sign a confidentiality agreement and provide information on their qualifications before we release the details and name of their business. If necessary, you can also give us the names of competitors or customers that you don’t want to get any information on your company.
Who is the Right Buyer for my business
Business owners may have opinions on who the right buyer is for your business. And we welcome these ideas. We’ll also share our views and discuss some possibilities. We encourage people to keep an open mind about certain aspects. For instance, the best buyer may or may not come from your industry. It may be another company, a wealthy entrepreneur, or a private equity group. We look for someone who has the financial wherewithal and good skills and experience to take over your business.
An emotional aspect of selling your business, which we feel is important, is to have a good relationship with the buyer. If the buyer is someone that you can’t see working with, then we will fully support you in not moving forward with that particular buyer. Chemistry is essential, especially if you will be working with the buyer on a transition of your business. You also want to feel comfortable that they will treat your employees and customers well.
Also, the deal is more likely to fall through if the buyer and seller don’t get along well. We encourage both the buyer and seller to establish a good relationship and have an attitude of give and take during the negotiation process.
Emotions & Negotiating while selling your business
Emotions definitely come into play during negotiations while you are selling your business. This is where having an experienced business broker can help. You want to be solution-oriented in overcoming obstacles. There are many items to negotiate.
Most sellers want as much money as they can get, and that’s understandable. However, it’s not just about the price of the business. The terms can be important too.
Such as how much money the buyer is offering at the closing and how much they want to pay over time after the closing. How long will the transition be, and what salary and incentives will be paid to the seller, if anything. What is included in the sale is also important. Sometimes the accounts receivable stay with the seller, and sometimes the buyer gets these as part of the deal—the same thing for the accounts payables. The inventory may or may not be part of the purchase price.
Not getting emotionally tied to wanting to get one specific thing can be to your advantage in getting a better deal overall. We work with both the buyer and seller to determine what is most important to each party and try to work out something that both buyer and seller can be comfortable with.
It also helps the seller’s emotions to know that we have multiple potential buyers while selling their business. This provides the maximum leverage and can be used to our advantage. In fact, when a buyer knows that a company is a hot commodity, their fear of missing out on the deal may cause them to move more quickly.
Emotions & Getting the best price when selling your business
We like to help our clients get the best price and terms that we can. It helps to manage your emotions and keep an even keel to maximize your price. Usually, companies are valued based on a multiple of your earnings. We can tell you what companies like yours typically sell for. This helps us to know that our goals are within a given price range. It also helps to manage expectations so they are in line with what is realistic. This knowledge helps you to react more rationally when we get offers for your company. In addition, you want to be clear on what is included in any offers so there are no surprises and your interests are protected.
Buyers, of course, are going to want to get the best price they can while still making a deal happen. So if each party knows what similar businesses sell for, then we can determine whether a buyer or seller is unrealistic in their emotions to get a specific price during the sale of the company.
Another thing that helps business owners with their emotions on pricing expectations is to understand that the process of selling their business unfolds in a range of time frames depending on where you price the company. So typically, we introduce the first qualified and interested buyers within 1 to 8 weeks after we start selling your company. And on average, it takes 6 to 9 months to sell the business. However, in some cases, it can be sold in a couple of months, and it may not sell at all if you price the business too high. A company that is priced too high tends to get ignored or only draw low ball offers.
It also helps our clients to understand that we have 30,000 potential buyers. Of course, we’ll narrow this down to the right buyers for your company. But a large number of potential buyers will give us a good idea of what the market is willing to pay for your business. We usually get multiple offers, which helps to provide you with the maximum price for your company.
After an offer is negotiated and accepted, then you move into the due diligence phase of the sale process. Buyer’s often want to do as much due diligence as possible to make sure that everything is above board. Sellers usually wish to move through due diligence as quickly as possible so that the deal can be closed, and they can move on with the next phase of their life. This can create some tension.
To assist in this process, we advise both buyer and seller on what is considered normal due diligence for a deal of their size. This allows the buyer and seller to ease up on their emotions and come to a resolution of a time frame and amount of information that can fit the needs of both parties.
A good business broker will know when to step in and when to let things move along between the buyer, seller, and their accountants. This is where excellent communication between all parties helps ease any emotional unrest that may occur and avoid any misconceptions during due diligence.
Emotions & Attorneys
Not only is it essential for the buyer and seller to maintain emotional stability, but it is also vital for the attorneys that are involved in the sale of your business. Both buyer and seller should choose an attorney that can communicate and negotiate effectively without blowing up a deal based on unnecessary emotions.
Attorneys will negotiate the purchase and sale agreement and help with the legal aspects of due diligence. Attorney’s that are good communicators are an asset in these processes. It is helpful to remember that attorneys on both sides will often talk about worse case scenarios to protect their clients in the event that something bad will happen.
At the end of the day, there isn’t anything in business that is risk-free. So rather than reacting fearfully, you should assess the actual risk of something occurring and then make a decision based on sound advice rather than a fear of a worst-case scenario that is very unlikely to happen.
Having said that, there are times when it’s wise to walk away from something too risky, and getting good advice can help you to understand the difference. That way, you can prevent your emotions from keeping a good deal on the right track.
Closing the sale of your business
Emotions can run high when it gets close to the closing date. Of course, there is uncertainty with any change. It is advisable to remember why you wanted to sell in the first place and look forward to those things that you want to do after your business is sold. There will always be some mixed feelings, and that’s understandable. With your transition period, you will be able to ease into retirement or the next phase of your life.
You also may have uncertainty about whether the sale will close or not. We tell our clients that once we have a signed contract and a closing date, the chances are 95% that the deal will close. So while nothing is certain, you can feel comfortable that things are looking good to move on to the next chapter of your life.
Synergy Business Brokers
We have over 18 years of experience helping buyers and sellers manage their emotions during the business sale process. It’s part of our job. The more we educate and communicate about the process, the better our clients can manage their emotions, and the more businesses we sell.
We have successfully sold many companies in construction, technology, distribution, manufacturing, healthcare, services, engineering, education, and transportation. If you own a profitable company in one of these industries with annual revenues of $700,000 to $70 Million, we provide a confidential consultation. We’ll discuss your needs and desires and let you know if we think your price expectations are achievable. If so, we provide you with a confidential marketing program designed to sell your company for the maximum price with no fee unless your company is sold.
We look forward to working with you to create a positive experience during the sale of your business. To hear from some of our clients and Brokers, please watch our brief video.
If you are ready for your initial conversation, please complete our short form or call (888) 750-5950.
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