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Walking away from your life’s work is
a big step that doesn’t come without its obstacles. Determining your readiness
to sell your business largely comes down to two main factors. Are you
financially ready to sell your company? And are you emotionally ready to sell
your company?
Your financial situation may be the
easier of the two factors to consider but surprisingly, it is oftentimes the
one most overlooked by sellers. The key question is whether the proceeds you
receive from selling your business will give you the financial means to
actually leave the business. For most people, the value of their business makes
up a large chunk of their net worth. That means getting the right price is
critical to reaching their post-sale goals. You’d be one of the lucky few if
the proceeds from your sale are not essential for your retirement or future
plans.
But selling also means cutting off the
revenue source you’ve been drawing out of every year. So how much do you need
to go forward? What sale price will allow you to meet that need? And can your
business currently command that price on the open market? If the answer is no,
now may not be the right time to sell.
The best way to assess your financial
readiness to sell a company is to find a wealth manger, an individual who can
analyze your entire portfolio and calculate your post-sale needs. But the first
step is finding an experienced, knowledgeable third party to put a value on
your business. Once the valuation is completed, your wealth manager will be
able to determine if a sale will yield enough money to fund your future plans.
If the proceeds won’t be enough, you may have to spend the next few years
working to build up the businesses’ value before you sell. Otherwise you must
consider lowering your expected spending after the sale or finding a way to
supplement your income and bridge the gap.
The more elusive part of evaluating
your readiness to sell is your emotional readiness. Can you really walk away
from the business you built for so many years?
While there will be a transition
period where you stay in touch for some period of time, there will still be
that moment when your services are no longer needed. What are your plans when
that day arrives? It’s best if you can detail exactly how you are going to
spend our time. More time with the kids/grandkids? More time for a hobby? Even
starting another business? If you cannot describe post-sale life, you should
question your sale decision.
The example of a niche manufacture
illustrates the importance of emotional readiness. The seller’s business
attracted multiple buyers with significant offers but a deal was never made.
Why? It really came down to the fact that the owner was not emotionally ready
to walk away unless he received an unrealistically high offer. When the moment
arrived to sell, he simply couldn’t disengage from the business. The net result
was time, energy and capital wasted.
So truly ask yourself the tough
questions before pursuing the difficult and long task of marketing your
business for sale. Will you have the necessary funds for your desired post-sale
life and are you emotionally ready to pursue a life after business ownership?
If the answer is no, keep the business running – assuming you have the will and
drive to remain competitive and relevant.
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