Lord Dark Helmet: “When will then be now?”
Colonel Sandurz: “SOON!”
Spaceballs by Mel Brooks
I often think of this hilarious scene from Spaceballs when I have a discussion with an established entrepreneur regarding the potential sale of his or her business. This scenario is even more relevant if a sale is being contemplated and there is no other pressing issue impacting the decision.
In many cases, an entrepreneur faces circumstances which create a “burning platform” around the decision to sell. Situations such as a significant disagreement with another partner or a financing source, or a major illness are just a couple of the circumstances an entrepreneur may face where a sale is the most likely course of action. However, I am not referring to these scenarios as, believe it or not, a very difficult decision to sell is really forced upon the entrepreneur so they at least avoid the agony of this process. The more relevant scenario is when there is no burning platform but the time might be right to sell and move on. When not forced to make the decision to sell, most entrepreneurs are never sure about timing, and procrastination is often a very comfortable state. “Business will get better and we can wait until then” is what we often hear. But, the real question is… When will then be now; when is it time to start the process?
I have always been concerned about the concept of seller’s remorse. I experienced it first-hand early in my career when one sale did not close solely because the owner feared what life would be like after the deal. There were no gating factors and the purchase price was more than acceptable but the entrepreneur had not really thought through what it would be like not having a business to run. He realized all of the stressful daily events he longed to get away from were also exciting and, in a way, brought purpose to his life. Being respected by peers and looked up to by employees also created a great deal of emotional satisfaction. He simply had not come to grips with this potential life changing event.
In reading about the contents of a transaction advisors’ seminar a couple of years ago, I saw the phrase “emotional due diligence.” The seminar premise was to advise transaction professionals to delve deeply into the reasons behind the planned sale and in addition to economic due diligence, it suggested they perform emotional due diligence on sellers. So, for those contemplating the sale of the business where there is no burning platform, I offer the following advice:
- Start thinking about it today (yes, then is now.) Consider what life will be like not going to the office early every morning or staying late at night. Determine if you can live in a world without your “baby”
- Revisit any decision to sell. How do you feel today about that decision you made a month or two ago? Do you still feel good about it?
- Talk to a close friend like your spouse. Are they convinced that you are ready to sell?
- Keep your expectations in check. Shooting for too high a price or believing that you can sell your business and still stay in control are really non starters.
- Don’t do it yourself. Selling your business is not like selling your product and much like you probably wouldn’t sell your house on your own, the right advisor and team are paramount to execution.
Keep in mind that the decision to sell will involve time, money and substantial distraction from your business. So, try not to get started in this process if you do not think you are ready.