Sell My Business – Top 5 Reasons Owners Regret Selling

By Darren Cherry

Over 75% of business owners profusely regret their decision within one year of selling their business. While the reasons are many, they typically fall into the following themes.

 WEALTH CONCERNS
When you spend most of your life earning wages and adding to your wealth, entering the stage where you begin to draw down your earnings can take you well outside of your comfort zone. Some concerns are warranted, forcing the owner to re-enter the workforce.

FUTURE VISION
A deep dive into why owners decided to sell includes activities you’re “PUSHED FROM” versus “PULLED TO.” Excess stress, health, time away from family, loss of passion, and burn-out are the most common “Push Factors.” As you might imagine, owners that exit primarily due to “Pull Factors,” such as travel, writing a book, philanthropy, moving close to grandchildren, and starting a new venture, have a much lower level of regret.

DEAL STRUCTURE
Many owners stand firm on price while approaching the deal structure with an “overly open mind.” Next comes that sinking feeling of “it sounded like a good idea at the time.” The most common structure related regrets are as follows:

1.)   Price Contingencies: Items such as earn-out where a portion of the price depends on future performance.

2.)   Cash at Close: Rather than getting 100% at the close, the owner agrees to finance a portion of the sale.

3.)   Future Role: Sometimes, the sellers want to stay longer, or the buyer wants the seller to stay on for an extended timeframe. Rarely are these productive after 6-months.

EMPLOYEE FUTURE
In many cases, the seller feels like the employees are like family. So it is not uncommon for the seller to try and protect their employees. While employees are valuable to the buyer, they are under very few obligations to maintain management practices.  

Where concern for employees is a top priority, owners typically opt for more employee-friendly exit options such as employee buy-out (ESOP), management buy-out, or sale to an independent.

Another approach that is gaining momentum is where the owner, through various mechanisms, shares a portion of the proceeds with employees.

FUTURE STRATEGY
In some cases, sellers have significant frustration with strategic or tactical decisions made by the buyer. It is understandable to have this concern since the company has been your baby for many years. However, once the check clears (in most cases), so do your rights to any further decisions.

For many owners, the sale of your business is a once-in-a-lifetime event. Owners can neutralize these regrets with a robust plan and a qualified team of advisors. Owners should consider succession/exit planning as a component of their ongoing business strategy instead of starting when they are ready to exit.

Get in touch to talk through succession/exit planning.