It’s frequently the largest transaction anyone will make in their lifetime. Get it right, and you take a huge leap forward with your financial freedom and sense of accomplishment. Get it wrong, and spend a lifetime of regret and suffer sleepless nights playing the would’ve, should’ve and could’ve game.
We asked business owners if they had any regrets about selling their business, here is what they said.
I Regret…Not Having Multiple Buyers
Sometimes, buyers present themselves. Maybe it’s a long-time customer or competitor you have known for decades. It seems natural because it may be a strategic fit and you know them well. You like the people, and trust what they tell you.
“There certainly isn’t anything wrong with this,” says Bianca Evans, a business broker with Transworld Advisors. “Lots of owners say the same thing. I like to respond with these questions, ‘What was it that attracted them to your business?” Are they the only ones that would find value in it?”
The answer is almost always no. So, the question becomes, why wouldn’t you open your sale opportunity to others? A competitive situation with multiple suitors would help you command a better price and with better terms. “This is the only way to discover the true value of what your business is worth,” remarked Evans.
Almost all sellers wonder if they got the best deal they could, however, if you had multiple buyers and professional representation, you can rest easy knowing you extracted as much value as possible.
Conversely, if you go it alone and only with one interested buyer, the regret may cause you some sleepless nights.
I Regret…Not Taking the First Offer
It’s important to note that there could be some negotiation that happens when selling a business. After the financials are analyzed and the bank shares what they are willing to lend, there will be a sale figure that the buyer and seller will expect. However, there are other factors that affect the selling or asking price that may not reflect on the business’s financials. It could be market potential, business location, or general goodwill. Such subjective things are hard to quantify and as a result, a buyer may submit an offer with some expectation of negotiating. Be prepared to negotiate, but also do everything you can to make the first buyer work. Although it may seem counter-intuitive, this process is not like buying a house. Buyers can be hard to come by. The next one may not come around for months, years or ever. Anytime you get an offer, you should absolutely take it seriously and be prepared to proceed with the sale. It’s not as easy as comparing price per square foot like in a residential sale. Business worth is determined by the money someone else is willing to offer you. Nothing more, nothing less.
If you do counter offer, it’s not advisable to suggest a higher number because you “feel” it’s worth it. Be ready to back up your reasonable counter with data, figures, and proof that can justify your revised number. Remember, the actual funds transfer is only one component of the deal. If your buyer won’t budge anymore on price, you still can negotiate other terms like revising your earn-out time or pulling some assets out of the deal like a company truck.
I Regret…Not Having my Next Move Planned Out
Selling a business is stressful and time-consuming. You owe it to yourself to sit with your significant other and imagine what life without your business will look like. Once you get past the golfing, fishing and travel, you’ll have to decide what gives your life purpose.
Be sure to sit with your financial advisor to plan how your major change in income generation affects the rest of your financial goals. Early planning early means freedom and flexibility. Depending on the size of the transaction, it can literally increase your net worth by millions.
Wells Fargo financial advisor, Daniel Gilham advises clients, have some fun! Reward yourself with that cruise or European vacation but do so within your means and carefully budget what your financial future looks like. Stay busy and give yourself a “back to work” date even if you are retired. Entrepreneurs don’t do well without making goals. Back to work doesn’t have to be income producing, but it does have to be working toward something other than lowering your golf handicap.
“I’ve seen many times where sellers are itching to get back in the game,” says Evans. “I love to see it but my advice is to make a list of the professional non-negotiables. For example, hated working weekends in your former life? Don’t put yourself in that position again! Also, push the boundaries of what you thought possible, with more experience, and cash you can be in business on another level.
I Regret…Selling Before My Business Makes REAL Money
Don’t torture yourself with these thoughts. You likely had good reasons for selling your business in the first place. Remind yourself of these reasons.
Also, nobody would buy your business if they thought that in the future the business would have less potential. You needed to leave some “meat on the bone” for the next owner.
Hey, at least you’re not Ronald Wayne. He was the third founder of Apple. He regrettably sold his 10% interest in Apple for $800 soon after it was started. Oops! Today, that stock would be worth more than 80 billion.
I Regret…Not Asking More Questions About My Buyers Financing
Sellers navigating a transaction on their own almost always make this mistake. Not all buyers are created equal. Not understanding where the buyer funds are coming from is a large part of the business broker job. Qualifying buyers can be difficult to do without using an impartial third party, shared Evans. It can be awkward for the seller to ask the buyer personal questions about who the lender is and how much available credit they have. However, failure to do so could result in a mountain of lost time in due diligence for a buyer that doesn’t have the financial horsepower to follow through with the transaction. It can set you back a year or longer.
Larry Dodd, one former business owner we spoke with was surprised we asked if he had any regrets about selling his printing business. “Not in the least bit. I felt confident that it was the right move at the right time. I had peace of mind knowing I was working with the right broker (Bianca Evans) and we had everything accounted for.” Says Dodd.
Can’t you just do it alone (without a broker)? We asked. He responded “I guess I could have tried, but the thought never even occurred to me. Why would you take a chance with a transaction so important? Being my second sale, I know this is a complicated process with lots of moving parts and emotions. In my opinion, you absolutely need a 3rd party (broker). I spent years making the best decisions I could, I wasn’t about to screw it up by making my last one regrettable.”