Selling Your Business: Understanding Conflicting Emotions

by May 22, 2020Acquisitions

There is a darker side to a great financial exit, but there’s a way to handle the mixed feelings. 

Most entrepreneurs begin their journey by creating a vision and then investing an incredible amount of labor and willpower to make it happen. One of my favorite definitions of an entrepreneur is someone who will work 80 hours a week just so that they do not have to work 40 hours for someone else.

Then there comes a day in some entrepreneurs’ lives when they have the opportunity to sell their business–to a financial or strategic buyer or even an IPO– for a well-deserved payday.

You would think the founder would be incredibly happy, right?

The strange thing is that many are not. While that might be hard to believe given the financial awards involved, you cannot overlook the emotional costs that can come with selling your business.

Let me walk through two of the most common scenarios entrepreneurs find themselves in–and how you can prepare yourself for them.

1. Sell and Continue with the Merged Firm

The first scenario is when an entrepreneur sells their business to a larger company but also agrees to remain with the business as an employee to help with the integration. The entrepreneur might also have an incentive to stay with the business, such as by having earnouts tied to the future success of the business.

It has been my experience that entrepreneurs who find themselves in this situation initially tackle their new job with incredible gusto. They want to become the best employee of all time. And to do that, they continue to invest the same energy and creative juices they employed from the beginning.

The problem is those big companies do not want this. They typically do not appreciate or know how to handle entrepreneurs-turned-employees. The result is that these entrepreneurs quickly become frustrated, angry–and even depressed. They cannot understand why their contributions are not valued and why the company moves at a glacial pace when making decisions. After the fourth meeting to discuss an issue that should have been decided in 15 minutes, it gets hard to maintain that original energy. It is no surprise, then, that most entrepreneurs are lucky to last with the buyer for a year before they walk away for good.

To be fair, not every big company acts this way. But in most cases, the buyer will want to gain certain synergies in the combination and that means things are going to change, possibly for the worse as viewed by the founder. Unless the entrepreneur is ready to make a mind-shift, they are in for a tough and frustrating time.

Case in point: I was recently talking to a client of mine who had sold his business to a large multi-billion-dollar competitor. My client had done very well in the transaction–but he was miserable working for the big company for all the reasons I laid out above.

But that is when I gave him an intervention: I told him he had to learn to accept it was not his company anymore. He was not the owner, he was just an employee. The sooner he accepted that fact, the less frustrated he would be.

The good news was that when I checked in on my client a bit later, he was working less–and was having more fun at work. He was being a good employee and no more (and counting the time to his inevitable exit). That is a tough transition for entrepreneurs to make–but it is an essential one for the good of your mental health.

2. Sell and Doesn’t Join the Acquirer

Now let us explore the other common scenario, which is where the entrepreneur sells their business but does not join the acquiring company. The result is that after the stroke of the pen to close the deal, the entrepreneur no longer has an office to go to. Even when your bank account has been enriched, you can still experience feelings similar to being fired. Your ego takes a big hit, as does your identity. For many entrepreneurs, their sense of self-worth is associated with their business, but that is all taken away with the stroke of the pen.

I have seen so many entrepreneurs fall into a sense of depression in the weeks and months after they sell their businesses. What is missing is that they did not have anything else to invest their energy in after the sale.

That is why my advice to entrepreneurs is that, if you are considering selling your business before you do it, make sure you have something on the other side that will get you excited. Maybe it is becoming a professional bass fisherman, running a marathon in all 50 states, a cross-country motorcycle tour, or seeing a game in every Major League Baseball stadium. Dream big!

It’s been my experience that many entrepreneurs will also eventually get that itch again to go start a new business. No matter what you do, find something that gives you the satisfaction and the sense of identity that you are trading away. Money alone isn’t enough.

So, if you have the opportunity to sell your business, learn from those who came before you. Plan ahead for what your future life will be like–either in terms of working for someone else or by hatching a new creative adventure to pursue. That’s how you can help ensure that you’re truly living the dream.