The 5 Emotional Stages of Selling Your Business
SCOTT CARRICO, AUDIT SHAREHOLDER & DIRECTOR OF MARKETING AND BUSINESS DEVELOPMENT
Less than one-third of family-owned businesses survive the transition of ownership from the first generation to the second. Selling your business is an emotional process not all owners are prepared for. Our mergers and acquisitions team outlines the common stages business owners go through in the process of selling their company.
The first stage, denial, has a lot to do with ego. Your ego allows you to believe the things you wish to see. It tells you that your business is running great and you could stick around for years, despite alternative suggestions from employees or family members. At this phase, you haven’t fully accepted there will come a time where you won’t be around to run the operations. You continue to see it as a distant future when in reality it’s arriving sooner than you think.
At this point, it’s also common that business owners haven’t implemented, or even thought about a succession plan. Because they haven’t fully come to terms with the inevitable sale or transition, they most likely haven’t included family members in important business decisions, operations training, or begun the search for future management. Once these aspects are brought to the forefront, the second phase begins to take place.
In the second phase, business owners recognize the option or requests for a sale or transition but are reluctant to indulge. They tend to see the consideration of selling their business or participating in transition planning as a sign of weakness or a loss of control. These are difficult emotions for an owner to accept and therefore they usually choose to ignore them.
They might also feel they are the only person equipped to run the company. Fear of allowing new management to take charge with the risk of them making mistakes that could negatively impact the business deters most owners from this important task. However, with insight and time comes the third emotional stage.
The consideration stage is a significant stepping stone in the M&A process. In this phase, business owners typically come to some breaking point, such as a family member or key employee threatening to leave the business. This triggers the owner to recognize their desire for the business to continue. They become aware of all the time, money, and labor they devoted to fueling the success of their company that would go to waste without a succession plan. This is the point in which they begin to seek the help of advisors to provide more insight into the transition process.
With consideration, comes acceptance. The business owner has come to terms with reality and no longer sees selling their business as a sign of weakness or loss of control. In fact, they now understand this is an essential truth they must face in order for their legacy to continue. At this point, they begin consulting with an Exit Planning or M&A advisor to get a succession plan in place as they prepare for the sale of their business.
Once a succession plan has been implemented, and the business is ready, their advisor helps them find the best solutions for selling or transitioning their company. Options could include a transition from one generation to the next or a sale through an acquisition or merger or even an ESOP. However the advisor and business owner see fit, in this final stage the owner is prepared to sell and relinquish their controlling role.
Overall, the sale or transition of a business is a lengthy process that involves many stages of emotion for the business owner. Understanding these common emotional stages can better prepare those involved in the process to recognize each phase to help guide a smoother transition.
ABOUT THE AUTHOR
SCOTT CARRICO + AUDIT SHAREHOLDER & DIRECTOR OF MARKETING AND BUSINESS DEVELOPMENT
Scott Carrico is an Audit Shareholder at Lutz with over 20 years of audit, tax, and consulting experience. He specializes in audits, reviews and compilations as well as consulting for monthly financial statement preparation and analysis, budget preparation and analysis, general business consulting, tax preparation and consulting.
Scott also serves as the Director of Marketing and Business Development where he oversees and implements the firms marketing and sales efforts.
AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
- Nebraska Society of Certified Public Accountants, Member
- Exit Planning Institute, Member
- Association for Accounting Marketing, Member
- Certified Public Accountant
- Certified Exit Planning Advisor
- BSBA, University of Kansas, Lawrence, KS
- Ronald McDonald House, Past Board Member
- Marian High School, Fundraising
- YPO, Strategic Partner
- Vistage, Trusted Advisor Board
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