Much has been written about the financial aspects and considerations of an exit from your business, and there are plenty of pundits who will provide their various do’s and don’ts. However, a critical element of an exit that is often underestimated, if not totally overlooked, is the emotional energy that is expended on an exit transaction.
One would never minimize the importance of financial, tax, and legal considerations in an exit strategy, but equally, if not more, important is awareness of the emotional toll that an exit transaction may have on the owner. Even with proper planning, a successful exit, which comprises negotiating a letter of intent, performing due diligence procedures, and closing, may take at least three to six months and likely much longer. Consequently, during this period, there may be a wide range of emotions the owner will experience, from excitement, frustration, disappointment, anxiety, and sadness to satisfaction, joy, and relief. Do not fret; these are emotions that commonly occur in an exit.
Transitioning the owner’s business to the next generation or a third party is only part of a successful exit plan. An important component of an exit planning strategy is the owner’s emotional readiness. A survey by the Exit Planning Institute reported that 75 percent of business owners who successfully sold their business experienced “profound regret” within one year of exit. As the business is often intertwined with the owner’s life, the owner’s exit from the business can have a dramatic impact on their life. Seller remorse is real and preparing for life after business is a critical part of any exit planning strategy. The ability to deal with detachment from running the business is a complex issue and impacts everyone differently.
Carefully and thoughtfully considering the questions below may provide insight into an owner’s emotional readiness to exit.
- How will I occupy my days when I’m not running a business? Are there activities or hobbies that will occupy my time?
- Am I ready to permanently step away from a business that has been a major part of my life?
- Is my spouse or family prepared for my change?
- Are there charitable organizations or boards that I would like to be more involved with?
- How will I view myself and how will others view me once I am no longer leading the business?
Selling a business does not guarantee happiness. Understanding your emotional readiness and post-transition goals can help ensure that you are part of the 25 percent who discover their path to satisfaction after an exit.