Manage Clients’ Stress
It’s important to remember that your client will likely be very inexperienced at the process of selling a business. Having personally experienced the stress, I can speak from experience when I coach my clients through the process and tell them what stressors they may encounter. For example, selling can unleash emotions that make it hard to move forward.
Few business owners are prepared to make the journey unscathed. During the negotiation process, your clients will face immense psychological stress, but if it’s managed well, it can actually be productive and bring focus to the process. If not managed well, clients can find themselves with impaired concentration and a deterioration in judgment. Many of these transactions can end up being one-year “death marches.” Deal fatigue will set in, mistakes will be made, and regret will prevail.
Build A Team
The key to a successful team starts with experience and competency, and ends with your client clearly communicating his or her expectations so that the team understands what they need to bring to the table. Getting an experienced team that has “seen this movie before” is instrumental to reducing the stress and allowing your client to stay focused on primary goals. The team your client will need through the sales process may be partially in place—accountants, lawyers, business valuation experts, investment bankers, etc.
Hopefully you have already developed a close relationship with the client’s CPA, as this will be invaluable in demonstrating what it means if the client does a stock sale or an asset sale. A good lawyer will advise on the impact of non-compete clauses. The sales broker or investment banker will have the necessary experience with your client’s industry or market. You’ll find that valuation experts/consultants as well as competent deal attorneys will pay for themselves many times over. If these talented professionals are not already in place, the advisor’s role is to make the appropriate introductions to individuals that will be part of their team.
A good team will understand the importance of spending enough time and focus on the “letter of intent.” Many of these letters are created just to find out more about your clients’ business even if they have no real intention of actually closing. Rookie teams often make the mistake of focusing on the total dollars instead of the details of the offer.
Once it’s been signed, the letter of intent shifts the control of the process from the seller to the buyer, and feeling less control often causes stress for business owner clients. Only an experienced advisory team can think through all the details like deal structure, business risk, tax savings and earn-out calculations that ensure your client is going to reach his or her goals.
Additional Pointers For Business Transitions
Based on my years of experience working with business owners and helping them transition their businesses, here are some additional tips I’ve found helpful: