13 Things No One Tells You About Selling Your Business

A lot of contractors have sold their companies to private equity. More will join them over the next few years, and others will sell to family, employees, competitors, and other buyers. Nearly all will be selling a business for the first time. First-time sellers don’t know what they don’t know. 

When researching to write the book, "The Business Exit Roller Coaster," with M&A Advisor Brandon Jacob, we confidentially interviewed nearly 100 business owners who sold their companies. They told us things they haven’t shared with anyone else due to confidentiality and the desire to avoid admitting mistakes. Ask any owner who has sold his company, and the response will usually be all roses. The truth may actually differ. Here are a few findings we had as a result of the interviews.

1. Proactive Sellers are Happier

Businesses are sold proactively or reactively in response to a crisis, being money-whipped, or other reasons. Business owners who were proactive prepared their companies and themselves for the sale. As a result, they had a smoother process and were more satisfied at the end of the day.

2. This is Not a DIY Event

Selling a business is likely the single biggest financial transaction in a business owner’s life. It’s important, and he has no experience if it’s his first sale. On the other end of the transaction are buyers who buy companies as a matter of course (especially if they are private equity). Because they lack experience and because the transaction is not only financially significant but emotionally taxing, owners are likely to make mistakes that leave money on the table or could even blow up a deal. Owners who engaged representation, such as a broker, M&A Advisor, or investment bank, made few mistakes, sold for more money, and were emotionally happier than owners who took a DIY approach.

3. The LOI is Gain Without Pain

Getting to the letter of intent (LOI) is one of the happiest days in a transaction. There’s a negotiated agreement to sell the company for a set price. The owner is imagining the things he can do with the money, but has yet to face the agony of due diligence.

4. Due Diligence is a Corporate Proctology Exam

We only interviewed one business owner who was completely prepared for it. For the rest, it consisted of varying degrees of agony. The business owners who fared best brought their team into the process to assist with the burden.

5. Buyers Want to See Physical Offices Before the Purchase

This cannot always occur during operating hours, and buyers understand that. They are typically amenable to night or weekend visits.

6. Word of the Sale Will Likely Get Out

Employees will guess that the business is for sale. They may guess 10 times errantly before getting it right, but someone will figure it out, or the information will leak. Owners should be prepared to address the potential for a sale or “recapitalization” with their team if it comes up.

7. Do Not Be Surprised by Betrayals

The sale of a business affects lots of stakeholders, including employees, vendors, and competitors. One or more of these might uncover the sale and use this information to damage the owner or short-circuit the transaction. Owners should not be surprised by betrayals and be prepared to move on, keeping the end in mind.

8. Closes are Anticlimactic — Funding is Not

After all of the build up, the close of the transaction is done over a phone call, Zoom call, or by email. Funding, however, is life-changing.

9. Close = Relief

The most common emotion after the transaction closes is relief. It’s relief that it closed, relief that personal notes for the business disappear, relief from employees and customers, relief from stress, relief from the potential for lawsuits, and more.

10. Expect to Stay, But Not For Long

Most business owners are expected to stay on for a period of time. Most do not last two years.

11. It’s Not Your Company

Buyers will inevitably make decisions that the former owners disagree with. They should remember that it’s not their company and take solace in their newly enhanced financial position.

12. Loss of Identity

Business owners struggle with the loss of identity when they eventually walk away. They need new purpose. Extroverts struggle more than introverts.

13. Regrets Have Limits

While the majority of business owners have regrets, none of the owners interviewed had so many regrets that they would give the money back for the business if given the opportunity. Regrets have limits.