Too many first-time entrepreneurs find themselves ill prepared for the sale of their business. What should be a happy and fulfilling event often turns out to be frustrating or underwhelming. After interviewing entrepreneurs in several countries over a three-year period, the author has identified three pieces of advice for those who might be planning a sale: 1) Seek clarity on your life’s purpose. Ultimately the biggest cause of seller’s remorse is when the entrepreneur’s life feels directionless after the sale. 2) Work on your business, not in your business. The quotidian minutiae of running a business can often distract entrepreneurs from the important work they need to be doing. 3) Plan for a sale ahead of time — even if you’re not sure you want to. It will ensure your business stays on a healthy trajectory and that you and your team are focused and accountable.
In 2012, Barry Chandler felt his dream had finally come true: He’d sold his marketing company to a publicly listed firm. His peers and family celebrated with him. He relocated from the Midwest to sunny San Diego. He was now the chief marketing officer for the company that had acquired his startup. He felt he “was at the top of the world.” Yet, within months he found himself wondering: If this was what every entrepreneur hoped for, why wasn’t he happier?
Barry is by no means alone. Most first-time entrepreneurs are ill prepared when it comes to selling their business. And a sale doesn’t always result in unmitigated happiness, even for experienced entrepreneurs who plan well ahead. Meanwhile others may find themselves extremely happy despite being saddled with personal debt and obligations after selling a business.
So, what should an entrepreneur do to make the sale of their business a happy and fulfilling event? Over the last several years I’ve researched this question and interviewed entrepreneurs from several countries who have sold their businesses over a two-decade period. In this article, I share three lessons from what I’ve learned.
Seek Clarity on Your Life’s Purpose
“I always enjoyed solving a problem, putting together a solution that customers want, and landing those first customers,” says Rich Langdale, a serial entrepreneur who has founded eight companies. “What I don’t enjoy is then building out a team, scaling the business and doing all that entails.”
Such self-awareness, starting with your personal purpose — what animates you, why you started your business, what you want now and in the future — is a critical first step to happiness. Your purpose could be as simple as “I want to spend more time with family,” or “I’d like to give back to society.” (These are amongst the two most common purposes I hear.)
Identifying your purpose will take time, so it is best begun well before you’re considering a sale. Ask yourself questions, such as: What excites you and gets you jumping out of bed each morning? What would you do if you had no constraints whatsoever? If you had only one year to live, what would you change and why? What do you visualize yourself doing after the sale of your business?
Ultimately, in my research I’ve found that the biggest cause of seller’s remorse is when the entrepreneur’s life feels directionless after the sale. After all, there’s only so much golfing or boating one can do.
Work On Your Business, Not In Your Business
Kevin Pohmer cofounded his first startup Financial Guard, an online portfolio advisory, in 2012 and led it through its acquisition in 2016. “Unfortunately, as a CEO I never got out of that [operational] mode,” he recalls. Despite having raised $5 million, Kevin found himself strapped, unable to hire more engineers. This meant, even as he was trying to deal with prospective buyers, he was still very much hands-on. If other team members could have handled the things Kevin was taking care of it would have allowed him to focus on strategic issues, including the selling process. The eventual sale of Financial Guard did let Kevin pursue his desire to help other fintech firms and move on to his next startup. But the very stressful period prior to his exit didn’t make for a conducive decision-making environment.
Rich Langdale, who has been a venture capitalist for two decades, says “Your job as a CEO is to get the business to the point where you no longer are necessary.” To help yourself get there, start with a simple daily tracking exercise in which you jot down what you are doing every 30 minutes for two weeks. Make note of the times when someone in your organization, a customer, or a business partner reaches out to you to make a decision. At the end of each day and week, take a look at all that you did or handled, and identify who else within your organization could have done it instead.
Another exercise is to write down the instructions you’d leave for your team members if you were going to be away for a two-week vacation without phone or Internet. This will highlight which areas of the business can run without you, which areas cause you the most concern or stress, and what you believe needs to be absolutely handled by you. Examine if that is true.
Learning to let go is not easy but has many benefits, beginning with freeing up time for you to focus on the important rather than the urgent — in other words, working on your business rather than in your business, where the quotidian minutiae can drown you. A lesson Kevin and others learned the hard way.
Plan for A Sale Well Ahead of Time — Even If You’re Not Sure You Want To
One of the best ways to ensure your business stays on a healthy trajectory is to act as though you plan to sell it — even if you never intend to. It ensures that you and your entire team are focused and held accountable.
In 1988, Tim McCarthy started a consulting business helping restaurant chains identify and address the performance of the bottom 10% of their outlets. Over the next five years the business grew, with name-brand clients such as Coca-Cola, Hardee’s and Olive Garden, and made it to the Inc 500.
One day Tim’s accountant asked him the purpose question: What did Tim want to do with his life? When Tim answered that he wanted to retire by age 50 to focus on giving back to his northeastern Ohio community, his accountant pointed out a problem: Tim couldn’t sell a consulting business as there was no intrinsic value to it without him in it.
Tim then set out to systemically transform his business from a consulting service to a marketing database company, Workplace Impact. He hired a New York-based investment banking firm to identify which issues within his company needed to be addressed to make it attractive for a potential buyer. Five major issues were identified, and Tim set these up as performance targets for his eight-person management team. Senior officers began running the company on a day-to-day basis, and Tim began working from home. “I came in once a week for a [one-hour] review meeting … and once a month for a half-day review of everything that was going on,” he recalls. Over the next four years they hit all five of their targets attracting interest from prospective buyers and ultimately successfully sold the business.
When entrepreneurs internalize these three lessons — seeking clarity on their purpose, working on the business not in the business, and running their business as though they plan to sell it — happy outcomes result. Not just for themselves, but also for their businesses and their people.