Things to avoid when the times comes to exit
Talk with anyone directly involved with buying and selling small to mid-sized privately held businesses and you will hear real life situations where sellers had second thoughts about selling their company in the final weeks of the event happening. When this occurs, it adds stress and expense to the deal and can take what was supposed to be a wonderful, potentially life changing event, and turn it in to a nightmare…a nightmare that can be fully avoided with proper planning.
Here are some real-world situations that have given business owners second thoughts - ask yourself, could any of these happen to me?
- Just weeks before the transaction was to close, the reality set in for the seller that they had nothing to do starting the following week of the deal closing. Forty years of going to their business and suddenly no schedule, no meetings or trips on the calendar and stress set in. The seller was so mentally invested in the business that they didn’t think through their life post deal closing. The deal collapsed as the seller changed their mind about wanting to exit and led to a lawsuit by the acquirer to reclaim the expenses they incurred pursuing the transaction.
- A seller who realized too late that something as simple as how they would introduce themselves to new people they met in the future was now creating mental uncertainty. For years they introduced themselves with great pride as the owner of XYZ company as they met people at industry or social events and upon selling their business, were suddenly worried about how they would present themselves. This situation didn’t kill the deal but it did delay it and caused entirely unnecessary stress for all parties involved.
- The seller that certainly knew personal cash flow would be important but hadn’t really planned for this, including how they would be paying for healthcare coverage post transaction. So as the transaction closing date approached, the urgency of thinking and planning for this accelerated and although it didn’t kill the deal, it added an unnecessary layer of anxiety and stress for the seller and her family as they scrambled to figure things out.
Talk with any business broker or investment banker and they can share many stories like this. What they all have in common is that with proper exit preparation, you can avoid them. And know that although your lawyer and CPA will play a critical role in your business sale process, they are NOT the ones that will help you take a holistic exit preparation approach inclusive of the mental preparations. Get holistic exit preparation guidance from those that have been down this path and can help you get your business and yourself mentally prepared for the event.