When owners contemplate the sale of their business, they have a lot to ponder. While achieving the highest valuation and best terms is typically the focal point for the owner, there may be other personal, non-quantifiable, non-financial “considerations” that have significant value to the owner. These considerations can carry just as much weight for an owner in the decision making process with respect to moving forward with a sale or deferring the sale decision. For example, is the owner truly ready to step away from the responsibility of managing the company? Is it the right time to “pass the baton” to a new owner or heir apparent? Can the owner add more value to the company by concentrating their time in certain functions rather than generally overseeing all of the day-to-day operations of the company? Are there personal activities that the owner would like to pursue with more vigor, or do they have outside interests, like travel or spending more time with their family, that they would like to pursue?
Below are five non-financial considerations for owners contemplating the sale of their company:
- Reduce mindshare: When considering non-financial factors involved with the sale of their company, the owner must ask: “how much of my brain capacity is my company taking up, and is it competing with other activities that I would rather be doing?” If the answer is anything akin to “too much,” and “yes,” then it is likely time for the owner to consider a sale in order to simplify their life.
- Transfer responsibility to a new owner at a key inflection point: Many companies reach a classic inflection point where the owner has to decide either to invest more capital into the business and extend their time horizon owning the business, or to sell the company and have the new owner make that investment to take the company to the next level. In either case, the investment must be made. It is not an easy decision; the owner’s age, health, energy, time horizon, risk tolerance, other pursuits, and desire are all key factors they must consider as they determine whether to devote their time and resources to the company for another three to five years, or transition it to a buyer, preferably one who will make the investment and honor and uphold the company’s existing legacy and values.
- Find areas of focus: Business owners are generally driven by hard work. Often, their sense of self-worth and purpose are tied to their company. That identification may not stop, even after the sale closes. Rather than running the company, where they typically have to wear many hats and be all things to everyone, the owner may view the sale of their company as an opportunity to focus on one area of strength within the company — such as sales, marketing, engineering, equipment design, or programming, for example.
- Spend more time with family and friends: The owner may have spent more time at the office than at home during all the years they spent building and managing their company. As any entrepreneur knows, long hours and sweat equity are part and parcel of building a business. However, post-sale, the owner now has the opportunity to spend more time at leisure and in the company of their family and friends.
- Pursue personal interests: The owner has often spent years building and managing their business, usually at the expense of interests outside of work. Selling their company provides them with the opportunity to channel that energy, or more of that energy, into new projects or passions, from global travel to their grandkids to philanthropic endeavors to perfecting their golf swing.
The owner who is focused solely on the financial considerations may overlook the intangible considerations described above, or give them only a passing thought. Nonetheless, these non-financial considerations are important to the overall valuation as the owner decides whether to sell their company or stay the course for several more years. Generally, it is not an easy decision, but if the owner feels compelled to pursue a new direction, or to spend more time with family, or to transition the business to a new owner, or to reduce their stress levels, choosing to sell is likely the right decision to help them achieve these objectives.
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