7 Questions to Ask Yourself Before Selling Your Business
Ask yourself these questions to make sure you're ready to move on.
As someone who has sold a business and worked with numerous companies, leaders, and CEOs on business growth challenges, I understand the complexity and emotional weight of the process. It's a financial transaction and a significant life event that can impact your professional trajectory and personal life. Here are seven crucial factors you should consider before making this critical decision.
1. Why are you selling the business?
Before anything else, understand your motivations for selling. Are you looking to retire, pursue a new venture, or alleviate stress? Clarifying your reasons will guide your decision-making and help you focus on your goals. For example, if retirement is your goal, you might prioritize a buyer who can maintain the company's legacy, whereas, for a new venture, maximizing the sale price might be more critical.
2. What are non-negotiable terms?
Identify your deal-breakers early on. Whether it's the sale price, keeping certain employees, or maintaining company culture, knowing your non-negotiables helps in negotiations and ensures you don't compromise on your core values. For instance, if preserving the company culture is paramount, you may prefer a buyer who promises to keep the existing management team in place.
3. How much money do you really need?
Assess your financial needs versus wants. Calculate the amount required to achieve your post-sale goals, secure your financial future, and maintain your lifestyle. This clarity will inform your pricing and deal structure. For example, if your goal is financial security for retirement, determine your "number" that covers all expenses and leaves a cushion for unexpected costs.
4. How will this affect your employees?
Consider the impact on your team. Communicate transparently and ensure their job security, benefits, and morale are addressed. A smooth transition benefits both the buyer and your employees. For instance, providing severance packages or job placement assistance can mitigate employee anxiety and demonstrate your commitment to their well-being.
5. How will it affect your family?
Discuss the sale with your family. Understand their concerns and expectations. The decision will impact their lives, too, so ensure they are supportive and aligned with your plans. For example, if selling the business means relocating, it's crucial to address how this change will affect your family's daily life and future plans.
6. What are you going to do afterward?
Plan your post-sale life. Whether starting a new business, traveling, or spending time with family, having a clear vision for the future prevents post-sale regret and motivates the sale process. For instance, business owners who sell their company to travel the world are likely to find that having a well-defined travel plan can help them transition smoothly and enjoy their newfound freedom.
7. What type of deal are you willing to consider?
Determine your preferred deal structure. Options include all-cash, roll-over equity, earn-out agreements, or an executive position in the new company. Each has different implications for your involvement and financial outcome. For instance, an earn-out deal might provide higher overall value but requires you to stay involved in the business for a certain period, which could be a benefit or a burden, depending on your plans.
Selling your business is a complex process that involves more than just financial considerations. It's a major professional and personal decision that will impact many aspects of your life and those around you. These factors will help you make a well-informed decision and ensure a successful transition.
