By Jeremy S. Office, Ph.D., CFP
Learn more about Jeremy on NerdWallet’s Ask an Advisor
I define a true entrepreneur as an effective, self-aware risk taker whose individualism is matched only by his or her drive to succeed. An entrepreneur defines a problem or need; invests time, capital and blood, sweat and tears; builds a solution to the problem; and then goes to market. For many entrepreneurs, the typical process goes: define, invest, build, repeat.
But what happens when you don’t want to repeat anymore? When you’re ready to move on to the next phase of your life? It’s relatively easy to run the numbers to determine how much to sell your business for, but what about the emotional aspects of exiting the business you labored so hard to build?
Of course, there are many operational steps to take to prepare your business before a sale — increasing earnings, auditing financials and internal controls, and diversifying your customer base. But what are you doing to prepare yourself for when you no longer run the business?
To start thinking holistically about selling your business, consider the following questions. Write them down, revisit them, share them with your spouse and business partners. You must be comfortable with your answers, because they will help define the next phase of your life.
1. Why do you want to sell your business?
Is it because you are burned out? OK. Because you want a change? Great. Because you feel you’ve added all the value you can to its success? That’s the self-awareness mentioned earlier. Or is it because you want $10 million in the bank? If so, why? What does that money mean to you? What changes would it bring, and why is this particular amount enough?
2. What do you want your business to accomplish before you exit?
Answering this question helps create a timeline for getting your business ready to sell. It also helps you determine whether there is anything you can improve upon to bring up the price. But perhaps most important, it can show you how emotionally ready you are to walk away. If your list is long or you keep adding to it, you may not really be ready to sell.
3. What is your ideal post-exit lifestyle?
Do you want to retire? Start another business? Travel? Spend time with family? When the exuberance of successfully selling your business passes, how will you fill your days? I promise you there will be a void. Make sure you have a plan for maintaining your happiness.
Keep in mind that these are just three of the many questions we help clients explore when they are preparing for a sale. Ultimately we want to uncover as much as we can about a business owner’s goals for him- or herself and for the business.
Entrepreneurship is a true passion of mine — I even wrote my Ph.D. dissertation on the topic. So while we of course talk numbers and strategies with clients who want to sell their business, we understand that a decision like this is about so much more than a business transaction.
Image via iStock.