The psychosis of selling a business

It seems that when a business owner decides to sell a business that a certain amount of psychosis accompanies the sale.

This psychosis fits in with what we know about having a sudden money experience, or for that matter a sudden change in what is “normal.”  There are expectations that the buyer is going to believe everything the seller says and that the buyer will go along with whatever crazy demands the seller makes as part of the sales process.

I see that a major role the intermediary plays in the sales process is to help the seller keep the demands and irrational behavior to a level such that the buyer won’t walk away.  I also believe that the reason many businesses never make it to a sale the first time around is that the seller has false expectations as to what the process entails.

It doesn’t matter how many times we’ve told the seller what to expect, the seller still feels they are being personally attacked during the sales process.  I also see that sellers conclude that the way to counteract questions during due diligence is to make demands on the buyer that the seller really has no reason to make.

The simple fact is that sellers going through the sales process move through a series of emotions that often manifest themselves as irrational behaviors.  The buyers often just have to sit on the sidelines while the seller goes through the process of deciding whether it’s more important to market their business or to act out their frustration and emotional changes.

It seems that one of the jobs we have in helping our Clients market their business is to help them manage their emotions.  Many people think that selling a business should be a rational process.  The fact is that most of the time it is anything but.  And, having an understanding that the seller will be on a roller coaster ride can help those who advise the Client make it through this very difficult period.

Good intermediaries are the ones who can help their Clients manage their emotions while going through the sales process.  If we can’t help our Clients manage their emotions, then we won’t be able to help them move their business through a liquidity event.  Sometimes we just have to live through the first failed sale attempt and use that failed attempt as a learning experience for the second time we try to sell the business.  Or, better yet, finding a Client who had a failed attempt and helping them understand why it didn’t work the first time can lead to a more satisfying engagement than working with a first time seller.

The one thing I can say with certainty is that intermediaries earn every cent they make in the business sales process.  Not only is it difficult to sell a business, it’s even more difficult to manage the emotions of the seller.  Without managing those emotions there is no chance the sale will ever take place.

I’m now more convinced than ever that a business owner should never attempt to sell their business without the help of a pro.  This includes those who want to sell the business to their managers as well as selling to an outsider.  Even internal sales fall apart because of mis-communication and failed expectations on both sides.

The bottom line………don’t let your Clients sell their business unless they have a pro guiding them through the process.  There are just too many pitfalls to act as your own intermediary.

Josh Patrick