Emotional Preparedness

The Key Role It Plays When It Comes Time to Transition Ownership.

by Dave Driscoll

Owners face a number of issues in the sale of their businesses. One of the biggest obstacles is emotional.

What will I do? How will I be perceived by my peers and friends? My business is my measure of self-worth – if I don’t have a business, I won’t have value to my family or my community! I like being the boss – everyone listens to me and follows my instructions. If I sell, I will lose that influence.

Often these emotions cause overwhelmed owners to avoid, delay, or suppress planning their exit until there is a business crisis, health scare or similar trigger that causes them to take action. Too often, both the business and the owner are past their prime by that point and the transition is not what the owner envisioned – a sad end to a life’s work.

I don’t believe this should happen to people who have worked hard to build a company. With the proper resources, owners can make informed decisions regarding selling their businesses rather than being paralyzed by fear.

There are three main components to the transition out of a business: emotional, business valuation and financial/lifestyle.

The first step is to define the dream: Who? When? How much (what are the seller’s lifetime after-tax income needs)? Next, determining what the business is worth (business valuation) impacts many of the answers to those three questions and helps determine whether a gap exists between what is needed and what the business is worth. If a gap does exist, can it be minimized or closed?

Beginning the process by addressing the owner’s emotional readiness to sell is essential. Owners should identify the dream, determine the value of the business and then pause to evaluate. Without the discovery of these first two steps, an owner may not be confident he/she is making the correct decision regarding selling the business in support of the desired Life Beyond Business.

Frequently, the emotional aspect is completely overlooked until after the transaction has occurred and the former owner is left feeling unfulfilled. Gauging emotional preparedness in advance identifies various strengths and weaknesses related to the transition, such as ego needs, hobbies, community involvement, other outlets for leadership and personality predispositions. In a generational business transfer, it is also important to analyze the presumed successor’s emotional suitability to perform a leadership role, muting the emotional attachment of a family or longtime employer/employee relationship.

Improve your chances of a quality Life Beyond Business by taking the time to understand that selling your business is a very emotional event. Meeting issues head-on and making informed decisions bolsters your confidence, prepares you for the reality that you will transition from your business someday, and positions you to be ready when opportunity knocks.

Dave Driscoll is president of Metro Business Advisors, a mergers and acquisitions, valuation, and exit/succession planning firm helping owners of companies with revenue from $2 million to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or 314-303-5600. For more information, visit www.MetroBusinessAdvisors.com.