In This Episode
If you’ve ever been involved with the buying or selling of a business, chances are you’ve heard of a term called seller’s remorse. Even if you haven’t been involved in a deal it’s likely you’ve heard about it or seen it. And it doesn’t matter how large or small a deal is, it can happen to anyone…even a billionaire.
The simplest definition of seller’s remorse is the person who was planning to sell the business no longer wants to sell it. And there are a variety of reasons why that might be the case, most of which aren’t logical but emotional. That’s why one of the first questions we ask any business owner who is contemplating the sale of their business is what are you planning to do next. When we hear a response that includes something to the effect of, “I just want to retire and fill in the blank.” It could be that they want to travel, spend more time with family, volunteer, or something else. This is usually a big red flag that this person really has no idea what they’re going to do when they aren’t running this business any more.
Here are a few things to look for to better understand what might be causing the seller’s remorse and how to overcome it:
- Price: so many folks assume that a deal doesn’t happen because the price wasn’t right. More accurately stated, it’s not the price the seller was looking for. As we’ve discovered in the small business market, typically what a seller things their company is worth has little to do with the actual operations and profitability of the business and has more to do with things like how much money and time have been invested in the business, how much money they owe to lenders, or some magical number they feel they need to retire. So while price is important, it isn’t everything and often isn’t even the main thing resulting in seller’s remorse.
- Now What?: we see it all the time with small business owners who talk about wanting to sell or transition their business to the next generation but that potential seller isn’t sure what they’re going to do next. That “R” word of retirement and what does it really look like? For an entrepreneur who has been working since their teenage years and after running this and perhaps other businesses for decades, it’s hard to quit cold turkey. If the potential seller doesn’t have an idea what they’re going to do next then beware because this deal is unlikely to happen…unless you make the owner an offer they can’t refuse!
- Who: this might sound silly, especially to those people who have never worked in or with a small business owner, but maybe the seller isn’t fond of the potential buyers. This business that the seller has built over the years becomes like a child that they birthed and grew and now they’re looking to hand it over to someone else. That someone else has to be the right person who will continue to care for the business and its employees, customer, and vendors in a way the current owner has over the years.
- Unfinished Business: a lot of times the potential seller doesn’t even really want to sell. Instead they’re going through this process because they’ve “advised” by those around them that they should sell at some point. And while the current owner might agree in principle, they really aren’t ready to sell because they feel they have more to accomplish with the business. You see, there are certain things that don’t apply to small business owners. Things like a “retirement age” and it’s usually because the owner is enjoying owning and running the business day-to-day.
- Sacred Cows: kind of related to having the right buyer, it’s often the case that the seller has some sacred cows in the business. Often it relates to certain employees or other folks they want “taken care of” after they leave. It can often go as far as the seller trying to negotiate it into the deal. As you might imagine not too many buyers are going to be thrilled with having to keep on these sacred cows once they are running the show.
Like many problems or potential problems the first step in avoiding or overcoming them is admitting that they are real. So whether you’re the potential seller or the potential buyer you need to be aware of both the possibility of both seller’s remorse as well as buyer’s remorse. We shared several stories and insights during today’s show that we hope you’ll find helpful.
People, Companies and Resources We Mentioned in the Show
- Arte Moreno and Sale of Los Angeles Angels (https://www.mlb.com/news/moreno-family-ends-exploratory-angels-sale-process)
- Price is Right (https://priceisright.com)
- The Godfather/Don Corleone (https://www.imdb.com/title/tt0068646/)