A letter just landed on my desk. “Everything you need to know about selling your business”, it reads; “Exclusive offer on this 2-day training course”. The letter sits alongside a “definitive” guide to selling a business, something which most M&A houses and professional services firms produce. Some of which, might I add, are excellent, detailing every part of the process from valuation to closing. But, they fail to consider the fact that there is more to a business than numbers on a spreadsheet. Your business is your baby that you have nurtured for years, often built from scratch and dedicated much of your life to.
It is the job of your corporate advisors to execute the sale of your business to the right buyer at the right price, but before you engage them, there are considerations you should make as an individual, rather than a corporate entity. Entrepreneurs owe it to themselves to reflect on the following five points:
The first is succession. A highly competent senior management team is a key component of the exit process and this takes time to implement. Even once you have found the right executives, internally, externally, or amongst family members, they will need to spend time understanding the business inside out and demonstrate they can run it well. Ending the company’s reliance on you is the goal here, and yet goes against your human instinct. Formalising your management team and removing yourself from day-to-day operations is the first step towards exit, and you should factor this into your plans and timeframes. It takes time.
The second is having a boss. Acquirors will often ask you to stay involved with the business for a certain period of time after the sale, in whichever capacity they decide: full-time Chairman, part-time Consultant, or otherwise. For the first time, you will not be responsible for the strategic direction of the business and employees will not see you as their leader. This can lead to tension and resentment, emotions which are not usually considered during negotiations with a buyer. Emotionally separating yourself and accepting this is an essential step in the process.
The third is considering life after the sale. An extended period of travel and relaxation is undoubtedly well deserved, but what next? Ultimately, this business gave you purpose and a sense of identity, occupying your time and motivating you. This void in your life will need to be filled by other endeavours, otherwise boredom and unhappiness potentially await. Entrepreneurs seldom plan new goals, hobbies, philanthropic pursuits, investments or non-executive roles ahead of time. It is worth taking the time to formulate new aspirations before you achieve the existing ones.
Next is your strategy around personal wealth. It is likely that much of your wealth is tied up in a small handful of private operating companies, and whether you decide to start crystalising this or not, it is important to consider your financial goals, tax considerations and multi-generational plans. If you do decide to sell your business, it is important to have concluded on a personal wealth strategy before you do so, rather than afterwards.
Finally, consider your legacy. What do you want to be known for and by whom? Is this business your legacy, or are you yet to create one? This will help you to decide if and when to exit, and to which type of buyer. Sometimes it is easier to build a legacy whilst still running a business, and as an individual, you can afford to have long-term horizons which revolve around your own objectives and priorities. Don’t be guided away from these, and use the wisdom of other entrepreneurs to steer you down the right path.