How NOT to leave your business (Part 2)

Part 2

In the first part of this blog, we discussed why it was so important to exit your business successfully. We looked at the characteristics of a successful transition, and started looking at some of the factors, which can prevent a successful transition. In this final part of the blog, we will look at some more traps leading to unsuccessful transitions, and conclude by outlining what’s required for a successful business transition.

Making a limited or incorrect decision

A business owner may have a fixed idea about what they wish to do with their business when they retire. For example, they may wish to leave it to their children, or find another buyer without having explored all of their options. However, this option might not always be the best possible option. If this seller has agreed to vendor finance (which is common particularly in family scenarios) and that buyer is not capable of taking over that business, the seller risks their retirement fund being jeopardised by the failure of their business in the hands of the wrong person. A business owner should explore multiple options before deciding who they trust to take over the business after they retire.

Many long time business owners have developed friendships with customers and suppliers. Thus, if they take the time to plan, they may decide to find a buyer who they feel will look after their customers and suppliers. This can take time, and requires planning.

Doing it alone

A business owner is busy enough running a business and is probably already stretched far too thin to also manage and negotiate the sale of the business. Small business owners are often fiercely independent and don’t like to put big decisions in the hands of advisors. However, without a team of professional advisors to assist with the sale of their business, it is unlikely they will be successful in that sale.

Essentially, those who don’t properly plan for their business exit and retirement far in advance of the actual sale of their business are likely to have trouble when the moment finally arrives. The business owner needs to commit fully to the sale of their business, engage and listen to advisors and be emotionally and financially prepared to take the plunge.

Business owners too heavily involved in the sale process can take their eye off the ball when running the business, to the significant detriment of the business. This can affect the value they may receive for the business, particularly if the transaction they have been focusing on falls over. The message is clear – engage a team of professional advisers to help with the business exit process.

Working with conflicting advisors

This owner seeks the advice of professional advisers, but the advisors give the owner conflicting advice. The owner becomes confused and frustrated, and may decide not to proceed. At best, the transaction is not a satisfying one.

Ideally, the owner would have assembled a team of advisers experienced in the transition process, working collaboratively and in the best interests of the client (and not their egos!).

Inadequate value

Because the owner didn’t plan adequately, didn’t take the time to improve the value of their business or didn’t work with a team of advisers experienced in the transition process and in maximising the owner’s outcome, the owner didn’t get as much for the sale of their business as they could have. This could have been overcome with some forethought and proper planning.

Exit decision remorse

In this scenario, an owner makes a quick decision that they want to leave their business. They don’t take the time to look at all their options, and don’t have a clear idea of what they want to do with their life after they leave their business. After they have left, they begin to have second thoughts – “did I make the correct decision? Maybe I should have stayed working longer. Maybe I should have tried to get more money for my business?”

Instead of enjoying their new life, they’re obsessed by the thought that maybe they have made the wrong decision.

Retirement remorse

The business owner may have successfully sold their business or retired from their profession. However if they didn’t have a plan for a meaningful new life, they won’t know what to do with all of their free time. They may become bored, and miss their old lives as professionals – at least that gave them something interesting and meaningful to do. They think “I shouldn’t have left. I don’t know what to do with my life now”. Boredom leads to depression which leads to illness – and it’s a slippery slope from there. One of our recent blogs titled “how to become an alcoholic in six months” tells the sad story of a business owner who sold their business for a lot of money, but had not taken any time to plan a life after business. As the title suggests, it only took six months…

Business owners who take the time to plan new activities in their lives after their business or profession, will enjoy a healthy and fulfilling retirement.

Retirement rut

Owners who have moved on, may not have planned what to do with their new lives. Because they were busy all the time, they now find ways to become constantly busy, but with activities which fill in their time without giving them any real sense of satisfaction. They may have thought they had planned their retirement, but hadn’t really put any time or energy into that – golf, tennis and playing with the grandchildren is not a realistic retirement plan!

They have dug themselves into a hole of meaningless activity – hamsters on the wheel. This will lead to boredom, depression and – well, you know the rest.

What you need to do to sell your business successfully

In summary, here are some of the things you need to do to successfully sell your business and transition to a happy and healthy life after business –

  1. be informed about what to expect and about your options during the succession and transition process;
  2. be aware of and transform your unresolved emotions and fears;
  3. expand your thinking about future possibilities;
  4. create a clear vision of the future you want to achieve;
  5. create clear goals for your personal and business future;
  6. develop a plan for achieving your personal, business and financial goals; and
  7. work with a team of experienced advisors.

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