Selling your business: This time it’s personal – Why the emotional side of selling a business matters more than you think.
The world of mergers and acquisitions is technical, so when it comes to selling your business, the focus has tended to fall purely on the “how”. Yet the most effective business conversations start with the “whys” or the “what ifs” – the personal motivations that drive a sale carry their own value and are not to be downplayed.
While there are wider financial and economic considerations to be made when considering the sale of a business, the lasting impact of a business sale will be on the people involved – not only the owners themselves, but also the employees and their dependants.
With this in mind, there are a number of critical questions to ask yourself on the path to selling your company:
1.What kind of business sale is best for me?
As an owner, you need to consider the human ramifications of a especially during and after the Covid-19 pandemic. Having strong emotional ties to your company and its people isn’t inherently a negative thing, however you may be hesitant to divest outright ownership to a rival or larger acquirer who may not regard safeguarding the company’s brand or employees as a top priority.
There are a number of alternatives to consider if you wish to counteract this eventuality. One such alternative is selling a portion of your company to a private equity fund, or even pursuing an Employee Ownership Trust (EOT) that relinquishes ownership to a firm’s employees over a gradual period of time.
Other deal structures may allow you to retain an interest in the business to ensure that certain conditions, such as the retention of the existing management team, are met. Again, the answer very much depends on the connection you have to the business, its staff, and your emotional investment in your company’s long-term future.
2. When is the right time for me to sell my business?
As a business owner, selling your business is an incredibly daunting experience, and choosing the right exit point can be an enormous dilemma for many people. You need to weigh up your own post-sale plans and financial needs with those of the business and the people who work for it.
Unfortunately, the two don’t always align. Changing market trends and technological developments mean that companies failing to adapt to the shifting demands of the marketplace risk being left behind by their competitors.
As you near the end of your tenure, it’s worth asking yourself whether you still possess the appetite and drive to lead the company to its next phase of growth, or whether it’s time for a new pair of hands to take the reins. You may find yourself relinquishing ownership sooner than you’d originally planned, however a strong negotiator will be able to influence the timing of a deal to meet the needs of all parties.
3. What should my exit strategy be?
Exiting a business is often a significant life transition. For some, it represents the accumulation of a lifetime’s endeavours and the final chapter in a lengthy professional career. For others, it is merely a stepping stone on the path to becoming a serial entrepreneur or angel investor.
The relationship with the company and its employees don’t always end with the divestment of ownership, and some vendors will choose to stay on in a managerial or advisory capacity to help manage the succession and lead the next phase of growth.
Whatever your ambitions, having a clear idea of what’s to follow can take much of the stress and uncertainty out of the sale and allow you to move forward with the project from a place of confidence. This can significantly strengthen your negotiation position with potential buyers.
With so much at stake on a human level, the sale of your business is ultimately a highly personal process. And, while the technicalities of M&A transactions are important, it’s essential to use specialists that can also guide you through the ‘non-tangibles’ behind the sale and support your understanding of the emotional side of things. A rounded approach that considers the people involved – and not just the numbers – will deliver the best overall outcome for your project.
If you would like more advice on selling your business, take the first step today by contacting us here for a confidential conversation with one of our expert advisors.