While business sale planning is essential for any business owner, the early stages of deciding what that looks like can vary considerably depending on goals and circumstances. Let’s start with two different business owner scenarios.
Scenario 1: Sam owns a niche electrical component manufacturing company, which has grown steadily over its more than 30 years of being in business. Sam has eclipsed 60 years old and wants to spend more time outside the business – with the family, taking trips, riding motorcycles. After 30+ years, Sam wants to sell 100% of the company but is willing to stick around for an additional 3-6 months to ensure the transition is smooth. Above all, maintaining legacy is essential for Sam.
Scenario 2: Mary owns a specialized communications firm, which has been in business for over 10 years. She has built an incredible team around her, but many of the key relationships reside with her, and she feels future growth for her team is limited to her business development efforts. She has worked in communications for 10 years prior to founding the company, so she’s closer to retirement than not, but isn’t yet ready to step aside, rather wants to find an experienced partner and then consider retirement in the next 3 to 5 years after operations have transitioned.
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While the scenarios may be different, both business owners share a common trait – this is their first and only business they’ve ever sold (and will likely ever sell), creating a mix of thoughts and emotions (which is totally normal). The specific life situation and motivations will vary, but each business owner will need to address Personal, Business, and Financial considerations as part of the sale process.
Personal Considerations
Usually the first consideration, this is the “what do I want to do” part of a sale. Sam wants to spend more time with his family, travel, and ride motorcycles, while Mary is open to working another 3 to 5 years. For business owners, common questions and thoughts here include:
- Am I looking to fully exit, or just scale back my role?
- How much longer can I do this?
- Am I the impetus to growth for my team?
- I’m tired, but maybe a sale will reinvigorate me.
- I’d love to spend more time with my kids while they’re young.
- How do I want the business (and myself) to be remembered?
Business Considerations
Oftentimes business and personal can be blurred, because business owners have such a strong emotional connection to what they’ve built. When you’ve developed a team over 10, 20, 30+ years, you want to see them thrive and be happy, even after you’ve exited the business. While you want to make sure your personal goals are achieved, you don’t want to see the business falter. For business owners, common questions and thoughts here include:
- What will my role be after closing?
- How would this sale affect the team and culture I’ve worked so hard to build?
- Would these new owners really know what they’re doing?
- How do I transition relationships over?
- Is there anyone currently on the team who can step into the CEO role?
- How do I communicate a possible sale to my team?
Financial Considerations
While money isn’t everything, it’s an important component of selling your business. Aside from just the “headline” number, terms are equally (if not more) important. Understanding your financial needs upfront are essential to avoiding seller’s remorse. It isn’t about being greedy, rather both sides need to feel a fair deal was struck. For business owners, common questions and thoughts here include:
- How much money do I really need?
- What are the tax implications of selling my business?
- Do I want to retain some ownership so I can share in the future growth?
- Are there certain financial thresholds (“earn-outs”) I need to hit to receive money?
- Will my team get to share in future growth?
- What if I could get more money if I just waited?
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While these aren’t all the questions one might ask, they’re the common heavy hitters. Selling will be a combination of personal, business, and financial considerations, and the weighting towards each will vary from business owner to business owner. Just because a firm throws the largest number at you, doesn’t mean it is the best fit for your business and team (and you). All factors need to be considered.
