You may expect a newsletter from M&A advisors to encourage you to sell your business. After all, that is how we make most of our money.
Having sold two small manufacturing companies of my own, I know the feeling that follows the sale can be incredibly liberating. Whether you are selling for a liquidity event, to escape the day to day pressures of ownership, or for a capital infusion that the company needs to reach its full potential, there is an enormous feeling of relief once the papers are signed and the funds are transferred.
But I encourage you to look beyond closing day, and answer several key questions:
- If you are stepping away from the business, will you need to replace the income you have been receiving? Say you expect to work fifteen more years – will you walk away with enough cash to replace 15 years of income? Or will you need to find a new source of income? How likely is it that you will be able to find a new source?
- Can you adapt to your new status? You have been “the man” (or “the woman”), the person everyone turns to, the key decision maker, for a long time. How much of your self-identity was tied into being that person at the top? Soon you will be either outside of the business and not consulted, or inside the business and possibly ignored entirely. Can your ego handle that?
- Can you watch an outsider completely transform the business that you nurtured? We all think we built the perfect business given our specific circumstances, but every buyer will want to put their stamp on their new business. Systems, processes, and policies that you may be most proud of could be completely re-written by someone with only peripheral knowledge of the business. Are you willing to let that happen?
My main point is that we want to eliminate seller’s remorse. No matter how inviting the golf course looks, or no matter how much “synergy” you think you have with the new buyer, you must consider the worst case scenarios. Maybe the earn-out won’t materialize. Maybe you’ll be completely marginalized in your new role. Or maybe everything will go completely as planned.
If you have considered all of the downsides, and the benefits of the sale still outweigh the risks, then we are here to help.