If you are a business owner chances are you occasionally look forward to the day when you can sell up, indeed you may spend quite a bit of time dreaming of this day and what you may do with the wealth that is likely to be crystallised. You may dream about purchasing a yacht, a much bigger house, indulging in a round-the-world cruise and possibly even driving an Aston Martin down the motorway! But ask someone who has sold their business already and the reality can be different.
There are many complications involved in the sale of one’s business; the method of the sale (be it MBO, MBI, trade sale), the amount of consideration (are you getting good value?), finding the right buyer. Once you have found the right buyer that is often when most people think the ‘real hard work’ begins. You will be answering query after query from your advising solicitors, tax advisers, accountants and any other professional adviser. You will be rushed off your feet basically throughout the period from when the idea of selling your business is a mere possibility to when it actually becomes a reality. However, do not underestimate the emotional impact. We at Reeves have noticed that often this is ignored until it is perhaps a tad too late. We further believe that if you can at least consider the likely emotional effect early on then at least you can be more prepared to deal with it. This applies to both entrepreneurs and long-term business owners. Even if your exit strategy has always been clear in your mind, and you feel like you are prepared to hand over the running of your business, the emotional effects may only be felt after the sale.
A number of us at Reeves have had tremendous experience of helping people sell their business and have noticed time and again this often overlooked area. On one occasion an owner realised on the day of the sale that he’d have nothing to get up for the next day, and thought about pulling out on that basis!
Whether you like it or not, your business has probably become inextricably part of who you are. You may have built up your business from scratch, and watched it grow into a dynamic and efficient organisation. In this sense, it is like building a family. To extend the metaphor further, selling your business may be similar to watching your children leave home.
Emotions are rarely considered in business, but do not underestimate them. So how can one prepare for the impact of selling your business?
- A clear exit strategy should be in place long before you actually decide to sell. Succession planning should also be considered, arguably when you first start up your business. Leaving your business to a family member may lessen the emotional tear, but you may nevertheless still find it hard to” let go”.
- You should discuss the sale with those closest to you. Is your business part of who you are? Can you imagine yourself not being involved with the running of the business? Friends and family will be able to help answer these questions.
- You should ensure you are clear what you are going to do post-sale. How are you going to use the money realised? Is this business your pension, or are you aiming for bigger and better opportunities in your career? Either way, your plan should be clear in your mind to give you some emotional clarity.
Selling up could be your one opportunity to realise significant personal wealth. However, this should not be allowed to cloud your judgement. Remember that you have put your heart and soul into this business, so it will be worth more than just a number or a pile of money in the bank. The moment of selling your own business is often one that you are actually not equipped to deal with, so the impact of letting your business go is one that requires more thought than you might expect.
So if you are thinking about selling your business at some point, talk to your advisers or your nearest and dearest about these issues. The more prepared you are to face them head-on the smoother and easier the transition will be to go from full time entrepreneur/ business owner to part time “something else”.
Should you wish to have an informal chat about some of these issues please contact Margaret Connolly Corporate Finance Tax Partner or any other member of the Corporate Finance team at Reeves.
