April 24, 2023

This paid piece is sponsored by Eide Bailly LLP.

A version of this article first appeared on EideBailly.com.

Transitioning your business is much more than a financial transaction. It’s a major life change that can bring up a range of emotions, from excitement and joy to anxiety and even grief. And while it may be the right decision for you, it’s important to be prepared for the inevitable hurdles and obstacles that will come.

Emotional, psychological impacts of selling your business

According to a 2019 study published in the Journal of Business Venturing, entrepreneurs are attached to their businesses the same way that parents are attached to their children. It’s no wonder then that letting go of a business can be so challenging.

While your experience will be unique, common feelings include:

• Guilt

A major source of seller’s guilt stems from the fear of letting down your employees. You may worry about how they will react to your departure, the security of their jobs or their loyalty to the company once you’re gone. Additionally, you may feel guilty about leaving behind something that you have worked so hard to build.

• Worry

Worry is often tied to the fate of the business after the sale. You may begin to question: Will your employees like the new owner? Will your customers continue to get the same level of service? Will the corporate culture you worked so hard to build endure?

In addition to these concerns about the future, the process of the sale also can cause worry. It is a complex experience that requires you to divulge a great deal of information about your business and make difficult decisions about its future.

• Fear

Your business may have become a central part of your identity, and stepping away from it can feel like a loss of purpose or identity. Moreover, the process of selling your business can be intimidating. It can involve complex negotiations, legal procedures and due diligence, which can be overwhelming to navigate. The fear of making a mistake or not getting a fair deal can be a significant source of stress and anxiety.

• Regret

During the process of selling your business, it’s natural to reflect on all the effort and sacrifices that went into building it. You might start to wonder, “Am I making the right decision?” It’s important to remember that regret is a normal emotional response to change. However, it’s crucial to keep in mind the reasons why you decided to sell in the first place. Perhaps you want to retire, or maybe you saw an opportunity to pursue a new venture. Whatever your reasons, it’s important to stay focused on the future and the opportunities that await you.

Impact of your emotions before, during, after sale

While there’s no magic solution for avoiding these emotions during the process of selling your business, you must learn to work through them. If not managed, emotional and psychological experiences during the sale process can lead to:

• Decreased business valuation

If you find yourself getting wrapped up in your emotions during the sale process, it is likely your preoccupation will lead to consequences. You may begin to neglect your core responsibilities of running the business. In turn, your company may suffer. And if performance suffers, so can the business valuation, which ultimately leads to even greater stress – creating a vicious cycle.

• Deal fatigue

Deal fatigue is an almost inevitable aspect of the transaction process. This is a condition in which the seller or buyer begins to feel frustrated or irritated about the transaction. The pace of the deal, the overwhelming amount of detail involved with a sale, misalignment of the buyer and seller or simply just the fact that the seller was not emotionally prepared for the sale can all lead to deal fatigue.

• Seller’s remorse

According to the Exit Planning Institute, 76 percent of business owners who sold their businesses profoundly regretted selling within a year. Seller’s remorse describes the regret that a business owner may feel after selling. This feeling can manifest in various ways, such as feeling like they sold the business for too little or feeling like they made a mistake in selling it at all.

How to ensure smooth, successful ownership transition

While emotions are inevitable during this process, you can take action to prepare:

1. Identify why you are selling your business and your expectations for the sale.

The first crucial step to ensuring a smooth and successful transition – and one you should do well before starting the transition process – is to establish a clear understanding of why you are selling your business. Are you selling it for financial reasons? Health? Are you ready to retire?

Additionally, it’s important to be honest with yourself about your goals and expectations for the sale. Are you looking for a quick exit or are you willing to be patient to get the best deal? Are you open to negotiating with potential buyers, or do you have specific terms that must be met? What is your biggest priority of the transaction?

2. Seek professional help from trusted advisers.

Seeking professional help can provide valuable insight and expertise to guide you through the complex process of selling a business. For example, selling your company to a family member or employee requires a very different strategy from selling to a third party.

Moreover, professional advisers can help you maximize the value of your business, ensuring that you receive the best possible return on your investment. They can assist you in determining the valuation of your business, assessing the marketability of your business and strategizing a financial plan for after the sale.

3. Develop a plan for the six months following the sale.

You do not want to wake up the day after selling your business thinking, “OK, now what?” Instead, throughout the process of transitioning, consider how you want to spend your time once the deal is closed. Examples include:

• Creating a comprehensive wealth plan that considers your new financial situation and goals.
• Exploring investment opportunities that align with your values and long-term financial objectives.
• Working with a team of advisers to develop a personalized retirement plan.

There’s life after the sale

It’s important to recognize that any emotions that arise throughout the sale process are normal. However, you must not let these emotions hold you back from making a decision that is ultimately in the best interest of yourself and your business. Remember that selling your business can be a positive step toward new opportunities and growth, both for yourself and your employees.

At Eide Bailly, we believe that preparation is the key to executing a successful sale process. While every individual journey will be unique, there are four key stages we encourage you to focus on as you plan for a successful exit. Download our Key Considerations in Exit Planning e-book to learn more.