Seller's remorse is a common emotional reaction that can occur prior to or after the sale of a business. It is a frequent reason transactions fail to close and can cause significant seller anxiety post-closing. After decades of hard work, many business owners find selling and walking away from their business to be a difficult and emotionally charged decision regardless of the monetary consideration received. This article presents the leading causes of seller's remorse and what a business owner can do to deal with them.
Still Having Passion for Their Business
It's human nature to want to continue doing what you enjoy. As a merger and acquisition advisor, a red flag goes up when I hear a potential seller say he or she still has a passion for the business. It raises the question of whether the potential seller is seriously committed to letting go of the business. While passion is an essential element to building a successful business, it may interfere with a seller achieving the important personal and financial goals the sale of a business would accomplish.
Perceived Loss of Identity and Self-Worth
Many owners' key relationships have been developed as a result of running their company and their self-worth is often largely based on being recognized in the community as the owner/CEO of a successful company. Several sellers I know have dealt with this concern by getting more involved with the local Chamber of Commerce, joining a board of directors, becoming a mentor or advisor, or assuming a leadership position with a local/regional industry trade association.
Concern Regarding Leaving Money on the Table
This is a frequent concern, especially to owners trying to sell the business themselves or who have been approached by one buyer. The last thing they want do is to repeatedly wonder or wake up in the middle of the night thinking that they could have sold their business for a significantly higher valuation! To prevent this anxiety, sellers would be wise to hire an advisor to take the business through a controlled, proven sale process. This process will establish the business' fair market value, enabling an owner to rest assured that their business was sold for the proper value. Owners would be prudent not to trust their country club former business owner buddies as qualified to determine their business' value. Their buddies are typically not knowledgeable regarding the business' strengths, weaknesses or attractiveness to the buying community and often inflate the valuation multiple they received when their business was sold.
Worry About What to Do with Their Life After Selling
This can be a significant issue. There is more pain associated with the fear of the unknown (life after selling) than with the known - continuing to run the business with its structure and schedule and how it presently impacts your life. Human nature will typically avoid the pain of the unknown. This is a major reason why acquisition transactions fall apart before closing or avoided until no other sale alternative is available. In order to prevent this, sellers should carve-out sufficient time to ponder their "future life." While the possibilities are limited only by their imagination, the following are some of the paths I have seen sellers pursue: spending quality time with family; hobbies; travel; volunteering; getting physically fit; taking educational courses; starting a foundation; becoming an angel investor; starting a new venture; becoming a mentor; and running for public office.
When confronted with how to address the above causes of distress, potential sellers need to reflect back on the specific reasons that inspired them to consider selling the business in the first place. These reasons, especially if spelled out in a written Exit Plan, should help the potential seller to overcome negative emotions as they arise.
A smart way for owners to develop their reasons for considering a sale and a blueprint for selling their business (i.e., the "Exit Plan") is to engage an advisor versed in exit/succession planning and mergers & acquisitions in advance of entering into the business sale process. This professional in conjunction with a seller's other advisors will help the owner to be ready to enjoy a memorable closing day and a future life full of exciting new possibilities.