Thinking about selling your business? You’re probably feeling a mix of emotions — everything from elation over a possible big payday to anxiety over how you’ll define yourself, once you’re not in charge anymore. Experts say the top reason many sales fall apart is that the seller isn’t really emotionally ready to let go.
Selling your business is one of the biggest life changes you’ll ever go through. And the sale process often revolves entirely around money — how much you can get for your business.
Meanwhile, the emotional issues raised by departing your business are often neglected. How can you tell if you’re truly ready to go through this major transition?
We asked three experts to share questions sellers should ask themselves to assess their emotional readiness:
- M&A advisor Robert Waring, a managing director at the investment bank Strategic Exit Advisors
- Denise Logan, a former owner who now coaches brokers and is the author of The Seller’s Journey: How Smart Sellers Navigate the Obstacles to Exiting Their Business
- Jon Hainstock, a founder who sold his business and struggled to find a new direction professionally; he now works as an M&A advisor at Quiet Light.
Here’s what they suggested.
1. Why do you want to sell your business?
Too few owners dig into their “why,: said Hainstock. Maybe you’re dazzled by what seems like a great offer, but haven’t thought through all the emotional ramifications of transitioning out of ownership. Just because you’ve received an intriguing offer doesn’t mean your business is at the best point for a sale, or that you’re emotionally ready to let it go.
Write down what you’re hoping for from your exit, he advised, including what you want the transition to look like. Do you want to stay on in some advisory role for a year or three, or just walk away? Knowing why you’re selling and what you want post-close will help you create an exit that feels right.
2. How much of your self-worth is wrapped up in your business?
Being a business owner has likely been your identity for a long time. It’s important to ask what you’ll do post-sale that will give you that same sense of purpose, said Waring.
Many owners imagine they’ll travel or relax, only to find that retirement doesn’t suit them. Then they’re adrift, trying to find another business project or startup they can build.
3. What does work provide for you, other than money?
Many sellers achieve financial security in their sale. But your business probably means more to you than just a way to support your family, said Logan. Power, status and the ability to share your wisdom may be emotional pieces you’ll have to find elsewhere.
In her own exit, Logan said, she didn’t prepare well emotionally. She’d built a successful law practice and sold it to another firm.
As the trucks with her firm’s files rolled away from her now-empty office suite, she found herself with tears rolling down her face.
Examining how you’ll feel when your business changes hands can help you figure out how to be productive and useful in future. Putting a plan in place will help you make a more positive transition, and make it more likely that you’ll complete a successful exit.
“What kills deals is unprocessed emotions,” Logan said. “And those emotional needs don’t go away because you’re getting a big sack of cash.”
4. Are you in a codependent relationship with your business?
Sometimes, longtime owners don’t really have to work in their business anymore, but they still faithfully show up to the office daily. That’s a red flag that you seem to still want to play the role of owner in your community, said Waring. You may be addicted to work, which doesn’t bode well if you’re about to sell and your plan is to simply retire.
When your sale is final and you can’t show up to the office anymore, how will you find a sense of purpose and feel you’re making a contribution? It could be anything from mentoring others to serving on a nonprofit’s board, but make sure the role is meaty enough to truly meet your needs to contribute.
As Jodie Cook found after selling her social media agency, there’s “loss as well as gain.” You can’t predict exactly how you’ll feel, she said, so get comfortable with not knowing.
5. Do you have “one more year” syndrome when it comes to selling your business?
Do you know in your gut that the time to sell has arrived, but keeping saying you’ll sell next year? That’s a warning sign that you need to confront the emotional side of exiting the business, said Logan. Endlessly postponing your sale can end badly — if you overstay the point at which you can be productive, sales might start to decline.
Consider the emotions that are causing you to put off the inevitable, she said. Figuring out where you’ll get your emotional needs met after the sale can free you to move forward with selling.
“Ask yourself if you think dying at your desk is noble or tragic,” suggested Logan. If you feel that the best way to go out would be working until you drop, you have some emotional work to do before you’re ready to sell.
6. Do you want to be done, or keep a hand in after selling your business?
Sellers face a choice: Take your payday and walk away, or perhaps retain a small equity stake and continue to advise the new owners. For owners struggling to let go, the latter can be a positive way forward, said Waring.
“You could stay involved, maybe on the board, stay in the industry and help the business keep growing,” he said. “Then, when the new owner exits, you get another payout. But for now, you take some of your chips off the table.”
Hainstock took this route with the sale of his startup, Zoomshift, to a private-equity firm in 2020. He retains a minority stake in the business, which allows him to stay in the loop of the company’s progress under its new owners.
“It’s really fun,” he said. “I get email updates and still get a little check every month. It’s cool to see it live on, this thing you invested a good chunk of your life into. Having skin in the game keeps me interested.”
It took a while to find the right fit, but Hainstock said the consulting work he does with Quiet Light, guiding other founders through sales, has helped him find the professional second act he wanted to feel he’s still making an important contribution in the business world.
7. Is it hard for you to be vulnerable?
Business owners are some of the toughest cookies in the jar, said Logan. The sale process forces them into an unfamiliar position, as they relinquish control over the business they’ve built.
“It’s a very vulnerable thing for owners to step into, a world owners don’t understand,” she said. If you know it’s hard for you to be in this sort of role, think through how you’ll manage the emotions you’ll experience as you go through the hard months of due diligence, fielding endless questions from buyers, and seeing your business picked apart.
8. What do you want to do next?
Many owners get approached about an acquisition before they’ve done the emotional work of preparing to sell, noted Hainstock. That’s what happened with his startup Zoomshift.
Suddenly, Hainstock was adrift, without a plan for what he’d do next in his career. He tried working with a startup that fizzled, then did some consulting. But he felt like a dabbler who lacked direction. It took him a while to figure out where to put his focus.
9. Is your retirement plan realistic?
It’s all too common to see business owners spend a year in retirement, and then buy another business. When you’ve been the captain of your own ship, it’s hard to get the same level of satisfaction from sitting on your porch all day, noted Logan.
Often, retirement plans are vague, or only extend out a few months, leaving owners with feelings of uncertainty that may cause them to spike their deal. Logan worked with one owner who, weeks before the end of his negotiation, suddenly asked for a much larger sum of money, putting the deal in jeopardy.
What was going on behind the scenes? This owner had planned to buy a sailboat and sail around the world — but two weeks before closing, his wife rebelled. She didn’t want to sail off and never see her grandkids! With his plan falling apart, the executive didn’t know if he wanted to sell anymore, so he began making unreasonable demands.
The solution? A negotiation between the couple created a new plan: they’d sail six weeks and visit grandkids onshore for two. Then repeat the cycle. With a more solid retirement plan, the deal moved ahead and closed at its original price, Logan said.
Other owners may find the idea of being completely retired doesn’t appeal to them. In that case, try to line up meaningful work before you sell.
Hainstock likens this planning to being Tarzan swinging through the jungle. Before letting go of the vine that is your current business, have the next vine in your hand, to make sure you don’t fall.
Take time to emotionally prepare before you sell your business
As you’ve seen, there is an important emotional side to preparing to sell your business. As you choose advisors or a business broker to work with, be sure to assess how sensitive they are to the emotional impact this major transition will have on you, Logan said.
“Brokers have a duty to shepherd sellers carefully through the sale process and to the other shore,” she said. “They shouldn’t treat your sale like a cookie-cutter transaction that’s all about the deal terms.”