While most of us don’t dwell too long on the conflicting emotions of selling a business, if left unchecked, those feelings can bubble up in the most surprising ways.
When it comes to selling a business that you’ve sweated blood to create, most people only talk about the money.
Yes, money is important. It may be your prime motivator. Yet the idea you don’t really care about the business, people and future you are leaving behind seems to ignore human nature. And if you are merely selling a stake while expecting to stay on for a few years, the human dimension becomes even more important, since you’ll be doubly keen to work with (and hand over to) trusted, pleasant people.
In every case, selling a business or de-risking your exposure entails an emotional wrench. What should you do to manage those emotions?
Managing emotions during a business sale
What you cannot do is ignore how you feel. Far too many transactions fail because head and heart are in different places.
Ignoring emotion, though, is still the default position in too many deals. Yes, someone may ask how you’re feeling at some point, but the likelihood is this will turn into a slap on the back at the thought of how you’re feeling about all the increased wealth and time awaiting you. There is very little understanding of your real emotions.
Instead, the underlying assumption is that you are a hard-headed business operative, who considers emotion to be the rather embarrassing flipside of smart rational thinking.
At CapEQ we think differently to most M&A advisors. We know that all the logic in the world cannot hide gut feelings and deep emotions – and that even if these are not stated, expressed or understood, they can act like submerged icebergs, holing a deal.
We have had clients turn to us in boardrooms, minutes before completing a transaction, saying they cannot sign. After 12 months of hard grind this made no sense in rational terms, but it did reflect real emotional turmoil rather than a case of the jitters.
We have had people conduct due diligence on their business (in preparation for a sale) then fall back in love with what they do as a consequence. They barely realised what was happening, but as a result of the sale process, their rationale for selling the company disappeared.
Equally we have seen people bulldoze their way to a business sale through desperation to get out of the business and conclude the stressful divestment process. They took punches and made compromises that should never have been contemplated. Because they were unwilling to consider any alternative to their adamantine view of the future, they failed to adapt, take a measured approach, or get what they deserved.
Each of these examples reflects a misunderstanding about how important feelings are in a business sale. The EQ in our name CapEQ does not stand for equity: it stands for emotional quotient – an understanding that managing emotions is fundamental to success.
Our clients are people first and business professionals second, so are as prone to self-sabotage as the next person.
That man or woman could be you – so what might be bothering you about a possible business sale?
Who am I?
You might fear a loss of identity.
With so much of your self-worth and activity tied into the business, it is not uncommon for those selling an organisation to ask themselves: ‘Who Am I?’. Once they are no longer defined by what they do or did, it can be hard to know who you are and what you are here for.
We are not psychologists at CapEQ, but we have spent many years recognising behaviour and thought patterns of which our clients were barely aware. For people who may not have dedicated hours to assessing their emotions, a rising tide of doubt or panic can be hard to understand, acknowledge or express.
Such doubts are not just understandable, but also natural. If you have spent your waking hours consumed by business, a lifetime on the golf course may not be enough to meet your future needs. The prospect of more leisure may seem alluring at first, but as the deal moves closer, for many clients it becomes less and less appealing.
Unfortunately, a lot of business owners don’t address this directly, preferring to bury their heads in the sand. They don’t want to consult their emotions or imagine the future. They leave a sale unplanned, initiating business needs and processes at the last moment (or when forced to do so), without addressing their emotional state at all.
At least one of our clients found himself hospitalised by the stress involved in not managing (and not letting us help manage) his emotions during a business sale.
A managed business exit
This is one reason why a managed business exit over time is a good idea, either retaining a stake and role in the business, or moving one’s energies across to other business challenges. This form of managed exit strategy is a way to de-risk the transaction, release funds and free up time, without going all-in.
If you are staying in the business, you cannot afford to fall out with your new business partners. This makes it doubly important to establish emotional engagement with any acquiring party or parties who expect you to stay on for months or years.
Whatever the terms, some form of gradual removal from a business you built or own amounts to a sensible compromise. Moving from 100mph to an instant standstill is less wise – and bound to test your brakes.
However, if you do want a clean break, it’s crucial to take your time – and read How long does it take to sell a business?
If you avoid speeding towards a sale you will give yourself vital time to adjust your perspective and remain confidently in control, as you plan your future.
Clients who have managed their exits carefully tend to revel in their new lives. We can think of only one or two exceptions to the rule that an orderly exit strategy leaves clients delighted with their new realities. Most fill their newfound time with a mixture of hobbies, sports, advisory positions and voluntary roles. The usual refrain is that they are just as busy, but happier than ever.
A pause is not a full stop
The reason why there are so few exceptions to this rose-tinted picture is that this is the cohort that was prepared to move on. The group who were not … did not sell! Emotionally they were not ready.
This is why emotional intelligence is so important. It allows us to detect and define the true position early on, preventing a lot of wasted time, energy and money being spent.
Many business owners and shareholders who pull out of a sale revisit the idea after a year or two, when they are emotionally ready.
Others come to the conclusion that they would rather work until they drop or can no longer function within the business. This can lead to a lack of innovation and renewal, or an unwanted exit if other shareholders push for change. In some instances, however, the expertise and dedication of the business founder can impel continued success.
Therefore, in the absence of a definitive formula on when and how to sell a company, the way forward is necessarily subjective and open to multiple factors. The key point is to recognise that it should be guided by emotion as much as reason.
But how should one best manage this emotional element?
Life after a business sale
If you are in the happy position of having a business shareholding to sell, don’t start by guessing its value.
Begin with your emotions and the question: do you really want an alternative to your current life?
If the answer is yes, consider the outcome you want. Map out your destination in terms of the business and your personal situation – both financial and social.
Don’t be over-detailed – circumstances will always change and the deity will laugh at your attempts to plan precisely. Just work out what you’d like to do next, who you’d like to do it with, where this will be – and whether you can afford it.
Then determine timing. Is now really the right time to move on?
Having done all this, keep checking that your destination conforms to your values and goals.
Tip: Read When should I sell my business?
It’s good to talk
Moving on should never be a solo journey. You’re not alone. Nor are your feelings unique or unusual.
So talk about them.
Chat to your family. Consult your friends and colleagues. Be open with any fellow shareholders. Treat leaving your business as a beginning of something exciting, not the end of the road.
Then, when you know what you want and how you’re feeling – but not yet how to get things done – talk to us (or someone like us).
Hire an M&A advisor with empathy
We’ll ask you the right questions and talk things through, addressing the emotions involved as well as the processes and pitfalls inherent in the transaction.
We can also put you in touch with people like you – entrepreneurs and business owners who have sold or diluted their stake in an entity they founded and built. Such third party experience can be as invaluable as it is reassuring.
At CapEQ we understand every stage and element of a business sale, but crucially, we factor in what really matters – people. We have seen where the icebergs are. When clients ring up in an emotional state, asking ‘Is this normal?’ or excitable after a setback, we know how to stay level-headed and calm, easing them through situations we know can be resolved. We know what to focus on and what to push to the side. That’s because we understand the human dimension.
As the person conducting your eventual business exit, you are the most important individual on the journey. Our job is to understand your destination, recognise your emotions in pursuing it, then create the road map to get you there.
In short, we’ll navigate you from where you are today – to where you really want to be tomorrow.