Selling Your Business? Here's How to Balance Emotion and Logic

If you’ve ever considered selling your business, what were the first things that came to mind? Long-term financial security? More time with friends and family? Pursuing personal goals or a new business venture? Growing your business through outside investment? Whatever your dreams might be, making them a reality requires a healthy dose of rationality.

You wouldn’t have a successful business without honing your critical thinking skills. Yet, personal attachment can become an obstacle to reaching your goal of selling. Pressure from others, such as family or business partners, can also lead to suboptimal outcomes.

Here are some common emotional challenges business owners face when contemplating a sale, along with recommended solutions.

Concern for those who have helped build your business

As a business owner, you have close relationships with the people you work with. These might be your business partners, relatives who work for the company, or employees who once were strangers but now feel like family. You care deeply about how any deal will impact them.

Your empathy is not a weakness: Potential buyers will be attracted to a firm that cares about its employees and culture. Suitors may see the same value in your team’s business contributions as you do. But they won’t be attached to the people who aren’t the right fit for the company’s next phase, and they’ll want to see that your company is right-sized and financially efficient.

Solution: Avoid surprises and treat your people with dignity

The sooner you start planning for a sale, the more humane you can be in your decisions. Notify your employees about the potential sale early in the process and support them throughout it.

Some might conclude that it’s time to leave — which may be an ideal outcome or a big problem, depending on how you view their future with the company. You might need to offer additional compensation to get key employees to stay. You might also need to provide generous severance packages to people who don’t want to leave.

These additional expenses will impact your company’s finances, but they may be the right decision for your employees and the company’s future.

The further you plan ahead, the more time your team has to adjust and the more time your income statement has to recover.

Taking a low valuation personally

When you own a business, it’s hard not to take a low valuation personally. You might equate the dollar amount with your achievement. You might get offended or angry at the person who delivers the news of a lower-than-expected offer. You might turn your disappointment inward and question your leadership or business acumen.

Solution: Be a student of your business and your industry

It’s natural to be biased toward thinking your business is worth more than someone else is willing to pay for it — especially if a seemingly comparable business has sold for a sum that’s now stuck in your head. The sooner you start eliminating your bias, the better.

The best way to do this is to work with two key advisors: an investment banker who specializes in your industry and a CFO who has completed transactions in your space. These two people will have the relationships and experience to help you get an accurate sense of your firm’s current and future value.

Pressure from others to sell

While deadlines can help us reach our goals, they can sometimes be counterproductive. Deciding that you must sell your business by a specific date can put you in a less-than-ideal position to negotiate or find the right buyer.

Strict deadlines can also strain essential relationships — for example, with a spouse or kids you’ve promised to be more available once the business sells. Overall, you’re less likely to be happy with the outcome of the sale.

Solution: Play the long game

Honor your stakeholders’ needs and viewpoints without setting a firm sale deadline. For example, if another owner wants liquidity now, consider buying that person out so they can move on. A decision like this can reduce your firm’s value in the short term and extend your timeline for a sale, but it can preserve the relationship and remove the pressure.

Giving up control over the long-term outcome

It’s rarely easy to finish a chapter of your life and move on. You might wonder if you’re being short-sighted in the months leading up to the sale. You have an interested buyer who sees your company’s potential. Are they seeing something you don’t?

Doubts may rule your thoughts: What if I’m selling too soon and too low? Am I leaving money on the table? Am I being taken advantage of? Or, conversely, what if the new owner ruins what I built?

Solution: Focus on meeting your needs

The best way to be at peace with any post-sale outcome is to understand how you want to live your life after the transaction. Work with a wealth advisor who can help you explore the transaction’s potential outcome on your lifestyle and values and someone who can calculate the dollar amount it will take to get there.

If the sale brings you the sum you need to start your next chapter, it matters less how much the business grows (or doesn’t) after you sell. Conversely, if you don’t have a plan to find fulfillment afterward, no amount of money will bring you happiness.

Selling your business can be exciting, but it also requires deep introspection and some difficult decisions. Developing an awareness of the emotional challenges of selling, giving yourself a long runway to prepare, and assembling a team of trusted professionals with specific expertise can help you balance your feelings and logic to achieve the desired result.