At a glance
- Exiting your business may be your ultimate goal, but when it becomes reality, many owners find it harder than they anticipated to let go a company they’ve started and grown.
- Being unable to detach emotionally could hinder a sale – for example, if you’re not willing to give up control of aspects of the business.
- Prepare yourself as early as possible by talking to friends and family and professional advisers about the things you’ll find hard about leaving your business, and start making plans for your next chapter.
Most entrepreneurs have a huge emotional attachment to their business. They’ve lived and breathed it for years, and likely made many sacrifices to help it succeed over the years. Their lives and identities are tied up in it.
Whether exiting due to liquidation, sale or retirement, letting go of a company is a huge moment, and for many, it will bring a host of mixed feelings. Whatever your situation, be prepared to navigate the emotional change of exiting your business as much as the practical one.
The impact of emotions on your exit
A strong emotional attachment to your company can manifest in many ways, including caring deeply for the team, clients and proposition. The downside is that this could lead to a mindset that prevents rational and hard-nosed decisions. The result can be owners withdrawing from a sale process or making it too difficult for the buyers as they’re over-anxious about the new owners doing the right thing for the business and stakeholders.
“Deals have and will continue to collapse because the owners can’t let go,” says Martin Brown, CEO of business-growth advisor Elephants Child. As an example, he highlights the case of a 55-year-old retail business owner who sold his 15-year-old company for several million pounds. The deal took longer than expected to complete, Martin explains, because the owner struggled to relinquish control of the business. He realised that being a CEO gave him status and structure, and he had difficulty imagining how those things could be replaced.
Planning to let go
To ensure your proprietorial nature doesn’t jeopardise a sale, Martin recommends starting to emotionally detach from your company before the exit process starts. “When we know a client is thinking about an exit, we ask whether they’re ready emotionally,” he says. “We urge them to discuss and think about what leaving means to them, and what thoughts and feelings may be triggered during and after the process.”
The earlier you can plan to manage those triggers, the better. Start by talking about the implications of the exit to people close to you, such as friends and family. Discuss it with professionals around you too, including your consultant, accountant and SJP Partner, to benefit from their experience and perspective. Other entrepreneurs have gone through the same process, so speak to ex-business owners to get a feel for what it’s like on the other side.
Martin says there are no right or wrong thoughts and no stupid questions. The more you talk through the matter with others, the more insight you’re likely to get into your thoughts and feelings.
Dealing with the aftermath
Before selling a business, you’ll go through a due-diligence process with the buyer, which can be emotionally challenging and exhausting. Once you’ve achieved a sale, there is usually a strong sense of relief and euphoria. After all, entrepreneurs often dream about their exit and plan it years ahead.
But these emotions can crash once the reality of the change kicks in.
“Most entrepreneurs only sell one business in their life,” says Martin. “It’s a big moment, with lots of processes and individual nuances. When you reach the other side, it can feel like a vacuum. Many assume they’re ‘going out to grass’ – meaning they’ll spend their time going on golf trips and holidays, for example.
“But you could be relatively young – 30, 40 or 50 – and still have many years ahead of you. That’s not going out to grass but into the next phase of your life. While preparing for exit, think about what you’ll do next and start working towards those things.”
You may suddenly have lots of spare time and money, so consider what you want to do with it. Do you want to start another business? Or something more philanthropic or community based? Like our aforementioned business owner, you may realise that you’ll miss the drive, status and social structure that comes with running a business, so think about how you might replace those things.
Some may be happy with a new life of leisure. But for most, having purpose and a small or manageable level of stress is healthy. Martin says that some people who sell their businesses and retire succumb to ill health quickly. Like riding a bicycle, they need to keep pedalling or fall off.
“Doing something with purpose – such as charity work, becoming a trustee or volunteering – can occupy you intellectually and emotionally, and replace that feeling of status in a different but still worthwhile way,” he says.
Exiting your business brings a raft of critical financial considerations, such as how to invest a lump sum from a sale, how to start withdrawing your pension or other income and what insurance cover you need. Planning these issues carefully will help you control the emotional side, too, and make more rational decisions.
How we can help
We can be an important adviser and sounding board as you plan your exit. In addition to looking at pensions, protection and investments, we can help with cash-flow modelling. This shows you how far your money will go in various scenarios, helping you plan to control your income and outgoings. We can also refer you to others who can help, such as consultants, tax advisers and other ex-business owners in our network.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
*We work in conjunction with an extensive network of external growth advisers and SME specialists, such as Elephants Child, who have been carefully selected by St. James’s Place. The services provided by these specialists are separate and distinct to the services carried out by St. James’s Place and include advice on how to grow your business and prepare your business for exit and sale.
Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’sPlace.
SJP Approved 28/02/2023