By Mark Tepper, the president of Strategic Wealth Partners and an EO Cleveland member
You’ve probably heard your share of cautionary tales about buyer’s remorse. But in the business of exit planning, seller’s remorse can be just as real and just as expensive.
In my book, Walk Away Wealthy, I share a story of a business owner who thought he was ready to sell his small company. He and his exit planner put the company on the market for $4 million. Over nine days of bidding, the bids went from $4 million to $11 million—a seller’s dream come true, right? When it came time to choose a buyer and close the deal, however, the seller completely disappeared. His family nearly called the FBI! Once he turned up, the business owner told the exit planner to call off the deal, explaining that he wouldn’t know what to do with himself without his business. Needless to say, the sale collapsed.
Avoid this kind of debacle by asking yourself the three questions below well before deciding it’s definitely time to sell.
Is this the best time to sell? You don’t want to sell on the spur of the moment and then kick yourself later for not adequately planning. Are you at a place, both personally and professionally, where the sale of your business will benefit you in the long run? Will the company bring in enough money to support you through your retirement? Is your company even saleable? To get the best answers to these questions, you’ll need to consult professionals. Start by hiring a CFP with exit-planning experience. You need to know if the time is right—both for you and for your business.
When was your last big idea? The answer to this question will give you a peek into how passionate you still are about your business. Many entrepreneurs fall into a daily routine and may not even realize that the drive that made them found the company has long since fizzled out. On his blog, entrepreneur Derek Sivers explains that he knew it was time to sell once he realized he’d taken the business far beyond his goals and simply didn’t have any more big ideas for the company. He writes, “My lack of enthusiastic vision was doing a disservice to my clients. It’d be better for them if I put the company in more motivated hands that could help them all grow.” Do you feel the same way?
What’s next? Having a clear idea of your goals after you leave your business is imperative to a successful sale. Without a game plan for your life after the sale of your business, you may find yourself in the same situation as many other “retired” entrepreneurs—investing their hard-earned money in a risky endeavor, starting a brand-new business from scratch, or simply wallowing in boredom. If you do plan on staying involved with your company or field, answering this question can also help you avoid signing a stringent non-compete clause at the time of your sale.
Hopefully these three questions have cleared up some of your uncertainty about selling your business. Try asking them of yourself again in a month. Try again in six months or a year. If your answers consistently point to selling, it’s time to hire your team of exit-planning professionals.