Why Owners Stall the Sale of their Business

How to Get Beyond the Numbers

Why Owners Stall the Sale of Their BusinessThere is something merger and acquisition (M & A) experts, lawyers and accountants have in common; they have all experienced the frustration of having the sale of a business stall. These professionals will say on a scale of 1 to 10, the scenario of a stalled sale is a 10 for extremely frustrating. While the management team, HR department or family may not be in the direct line of the transaction, they may be asked for help when a business owner goes silent prior to completing the sale.

Everything on paper – financials, dates, transactions, EBIDTA, etc. – looks great for the seller. Unfortunately when an unexpected halt to the sale’s progress comes, it is likely due to something the seller is experiencing that no one can identify or remedy.

Why does a business owner, who has brought experienced professionals who specialize in the buying and selling of businesses together, render them helpless and immobile? The reasons are found in this progression of the situation:

  1. The seller is not fully committed to the sale of the business because he or she is not personally ready to transition out of the business.
  2. The seller did not share some essential personal information because the professionals did not ask.
  3. When the seller goes silent, the professionals fear any amount of pressure or questions will kill the deal or cause further delays.

Once the owner has experienced an issue and stalled the sale, what do those involved in the sale do to get things moving again? Bring in an expert who is neutral in the deal and can explore personal issues with the seller.  An outsider is needed because the seller believes all the M & A, legal and accounting professionals must be aware of the underlying problem yet none of them have attempted to address it or provide a solution.

Add to this the probability that the seller and the professionals involved are likely predominantly male. The personal road, which includes emotional, mental and family aspects, is not a comfortable road for men. They are good with numbers and facts but tend to avoid the “touchy feely” stuff.

A qualified professional experienced with creating exit strategies and helping business owners transition into a new aspect of their life enjoys these conversations and likes the challenge of the “soft” and psychological road. Usually, when the conversation gets rolling, the expert will find that the silent seller did a lot of business planning, but very little planning in regard to their future personally. These silent sellers don’t have an exit plan for themselves and have not addressed the big questions to define their future post-business ownership. The lack of a plan leads to stalling the sale because owners are challenged or don’t have answers to these underlying questions:

  1. What will I do after I leave the business?
    There is no exit plan or transitional plan and no idea how to create these plans. Without a plan that spells out the future, it is easier to keep the business and keep working than to try to figure it out.
  2. What if I suddenly get old because I am not busy running the business?
    Business owners are typically type A personalities and workaholics. They have focused so much on the business, they may not have been home much and fear selling the business will mean getting old in the La-Z-Boy.
  3. What do I do with the proceeds of the sale?
    When a large sum of money is received without a plan in place, owners question whether to invest, spend, make big purchases, buy another business or hand out early inheritances. They feel it is better to stall the sale to avoid making the wrong decision.
  4. What if this isn’t my idea?
    Often well-meaning family members apply pressure or hold owners to past promises. When spouses, kids and grandkids feel it is time to sell the business, they hint and play the guilt card.  Owners will start the selling process in order to silence others but have no intention to finalize the sale.
  5. What should I do after receiving a recent health diagnosis?
    A health scare or a challenging diagnosis for the owner or a family member can be the impetus to sell. As time passes and the owner acclimates to the situation, that decision may seem like a hasty reaction that becomes a regret.

Unfortunately, there is no way to answer these personal questions without sitting the owner down and working through them. They are filled with emotion and have strong footings in family dynamics, so are challenging to address. When people lack an exit plan, they are uncertain how to proceed with their personal lives and their business lives. A personal plan and business plan are inclusive and the personal must always be clear and defined in order for the business plan to have any chance of implementation.

Call it the cart before the horse or the boss before the business; when there is a gap or a lack of planning from the “me” perspective, the delay of the business sale will be the first indicator.

If you are prepared to go down the touchy, feely path with your business owner and get answers to these 5 crucial questions click here for an easy template. Be ready to discuss feelings like frustration, worry, stress, fear, uncertainty, overwhelm and anxiety.  If you prefer to call in experts who are comfortable creating an exit strategy and getting your transaction back on track, check out our Exit Success Program or contact us at pam@strategytoexit.com or 604-349-8660.

This entry was posted by Pam Paquet and is filed under Business Owners, Exit Strategies, Selling a Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.