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If you were offered the “right amount” of money today, would you sell and walk away from your business? Most of us would probably say yes. But if we haven’t been mentally preparing for retirement after the business sale, then we run the risk of self-destruction. Unless you’re engaged in activities today that will be part of your life after you sell your business, you may walk away from the sales offer of a lifetime. As we discussed in the previous episode, all business owners will leave the business. Let’s make sure we’re ready to leave on our terms and make lots of money. Let’s not become a self-destructive, failed business statistic.
Business Owners Can Self-Destruct
Do you remember watching the 1980’s cartoon series Inspector Gadget? I do! On the show, Inspector Gadget was a bumbling, bionic police detective who fought against the evil Dr. Claw. At the beginning of each episode, Inspector Gadget received instructions for a secret mission. Inevitably, the piece of paper on which the assignment was written would self-destruct. To me, the funniest part of the cartoon was that Gadget would nonchalantly wad up the paper and throw it over his shoulder blowing up whoever was there at the time. The show was great for a giggle.
But I want us to think about that imagery in a different light today. Like Inspector Gadget’s written assignment, we business owners who are building a business to sell it have a tendency to self-destruct. We spend most, if not all, of our careers working toward our “retirement.” Whether our ultimate goal is to spend our golden years fishing or with family, we work ourselves nearly to death to get to it. We work 60-80 hours a week, dreaming of a liberated life. But when the dream becomes a potential reality, we back out because we’ve not mentally prepared for retirement after the business sale.
The Thriving Business Owner versus the Self-Destructive Business Owner
As a Certified Exit Planning Advisor® one of the most amazing things I see during the business sale is owners walking away from a buyer’s dream offer. If we’ve spent all of these years building a business to sell it, why would we back out? What makes some business owners take the money and run, so to speak? And what causes others to turn down millions of dollars to keep working their fingers to the bone?
Ultimately, I find that some business owners are scared of their lives after leaving. All they’ve known is business, and they don’t know what else to do. That makes their future-after-business-ownership extremely precarious.
3 Decisions Business Owners Make at Sale Time
Essentially, we owners will do one of three things when we get to the business sale’s table. Two decisions we make can lead to life and prosperity after the business sale. However, one decision could lead us down a path of self-destruction before the business sale or in life after the business sale.
Here are three decisions we owners typically make when it comes time to sell our business:
- Take the money and run! At the sale of the business, we can sign the contract, walk out the door, and never look back. Our next hobbies, adventures, and ventures are waiting on the other side of that door. So, we run toward hope. We’ve mentally prepared for retirement, and we look forward to relaxation, travel, leisure, or any number of things that we find rewarding.
- Receive an offer but make a calculated decision not to sell at that time. This decision has the potential to be rewarding. Maybe we invest the time and energy into preparing our business for sale, and it becomes so highly efficient that we don’t have to be in the office every day. With a highly functioning business, we find time to relax AND run the company. Or maybe we want more time to save for our ideal retirement goals. Sometimes, we want to spend more time building the business’s value to get a better offer later. Either way we go, we can still get to a sale’s table at another point in our business’s life and take more time to prepare ourselves to leave the business.
- Walk away from the offer. This is a dangerous decision we business owners often make. We build value in our company and get the offer we want. But when it is time to sign on the dotted line, we change our minds. It seems unlikely, but so many of us make this mistake that the Exit Planning Institute has done studies with the results that 80% of companies making below 50 million dollars in revenue never sell. Why would we do this?
Questions That Determine an Owner’s Behavior at Time of Sale
Why do owners walk away from the sale they’ve planned for months, years, or decades? What makes them hesitate just long enough to back out?
Well, in my business, I typically find that my clients who walk away from a business sale haven’t mentally prepared for retirement. They’re still too attached to the company, or they don’t have anything to do after the business sale.
Ultimately, though, our answers to two questions tend to determine whether we business owners accept or walk away from a buyer’s offer.
How Much Money Will I Get?
Money can fix a lot of problems, but it can’t fix everything. I’ve witnessed companies with lots of money self-destruct before they ever get to the sale of the business just as quickly as businesses with little money. When it comes time to sell the business, though, money will be a deciding factor or the deciding factor.
Almost without exception, we business owners know how much we want for our business and how much we actually need to earn from the sale of our company. If we’ve planned our business sale for years and worked with professionals to come up with a realistic company valuation, we’ll balk if a buyer offers us significantly less. For instance, we’ll walk away if we’ve valued our company at 5 million dollars, but an outsider only offers us 1 million dollars. Alternatively, if we think our company is worth 1 million dollars, and someone offers us 5 million dollars, we’d likely take that money and run before he changes his mind!
What Does Life Look Like After the Sale?
Never planning the emotional toll we’ll endure when we sell this company we’ve poured our blood, sweat, and tears into could cost us valuable opportunities. If we plan the sale of our business, but we don’t mentally prepare for our physical exit from it, our emotions may prevent us from walking away with a check in hand. Not planning the retirement and life we’ve dreamed of before the business sale happens could make us reticent to sell.
What happens, then, if we never get another offer? Would we rather accept a huge cash pay-out for our company now or have to watch it dissolve for no money later? A lack of mental preparation can derail any sale and keep us from realizing any profit from the company if we’re not careful.
Are You Mentally Preparing for Retirement?
So what will we business owners do when we get to the sale’s table? Did we make AND follow a good enough Owner’s Exit Plan to cash in on our company’s top dollar value? Or will we be too frightened about what comes next in our lives? Did we have enough of a life outside our business while we worked that we’re mentally prepared for retirement after the business sale now? Or if we worked 24-7, do we at least have a life of relaxation and adventure awaiting us?
Selling our business doesn’t mean death. Start a new hobby, go on a cruise, hunt, fish, golf, volunteer, coach, or do anything that we enjoy. We’ve “earned” it. Selling doesn’t even mean retirement, folks. If we find that we can’t sit still, let’s use the funds we made from the sale to start a new business! What if we can make that company more valuable than this one?!?
Next Steps? We discuss the minimum sell price your business needs to bring so that you can have your goal post-work life.
So friends, like I always say, life is hard. Business can be complicated. Money doesn’t have to be. Let’s continue to make our lives, at least, financially simple.
