When we were in the process of selling our health- care business back in the 1990s, our attorney did a wonderful job of preparing us for much of what was ahead of us. One of the things he mentioned more than once was that we should be prepared for seller's remorse.
Seller's remorse is a feeling of second thoughts about selling a business. It can strike the entrepreneur at any time during the selling process — before the sale, during the sale and especially after the sale.
At first we think, "This is going to be great. I'll get all of this money and I no longer have to deal with all of the headaches of running this business."
But then we start to think about the finality of selling a business, and doubt starts to creep into our mind. We realize all of the emotional ties that we have for our business, our employees and our customers.
There are two types of seller's remorse.
The first kind of seller's remorse is the sudden emotional feeling that you are doing the wrong thing. It is not really rational. It is more a case of fear, insecurity or uncertainty playing tricks on your mind.
Think Brett Favre. I would bet that rationally he knows it is time to move on from playing football. But all he knows is football and he probably has not spent that much time planning for what comes after his career in the NFL.
I can empathize with him. I had a lot of the same kind of pangs of doubt when we sold our company. Are we selling it too soon? Could we have gotten a better price? And what will I do with myself after I sell the business?
Any one of these questions can lead us to have second thoughts about the wisdom of selling.
Should you stay on?The second kind of seller's remorse is one that can happen when the entrepreneur is asked to stay on with the business after its sale. It is not unusual to have a buyer who wants the entrepreneur to continue on as a consultant or even as an employee.
In this scenario you are still in the company you created, but you no longer own it. Now you work for a boss. Many entrepreneurs are just not ready for this adjustment. They find it hard to adapt to a new role and to the loss of power once they are no longer the owner of the business.
The best way to avoid seller's remorse is to develop a clear exit plan.
Part of an exit plan is to determine a goal for how much you want to get from the sale of your business. Determine a realistic value for your business as it is today. Then develop a clear plan on how to reach your goal. You may need to grow the business or find ways to make it more profitable.
Remember that the sales price is not what you will ultimately receive from the sale. Business loans will have to be paid off. You will owe taxes on the proceeds and there will be transaction costs (legal and accounting fees) associated with a sale.
But equally important to knowing your financial goal is to develop a life plan for what comes next. Know what you will do with yourself once you are freed of the day-to-day ties of owning a business.
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