November 24, 2022
In our decades of experience as business advisors across Canada – from Vancouver to Edmonton to Toronto and just about all points in-between and beyond – we have found the No. 1 impediment to a successful sale of a business is the failure to plan.
Selling your business is typically the biggest liquidity event of an owner’s life, and it will have a profound impact on your professional life and financial future. It can also take years to complete (at least when done properly). That makes comprehensive, diligent and early exit planning essential to a successful sale.
Yet far too many business owners never take this important step, or only take it when they are forced to sell by events like death, disability, divorce or shareholder disagreements – the dreaded “Four D’s” of business exit failure.
Why is that? We think one of the biggest drivers of procrastination is simply this: fear. After all, selling a business can be a scary proposition – there are so many unknowns – and it’s human nature to avoid taking on challenges that scare us. But here’s the thing: conquering fear is a lot less daunting if we understand what they are and where they come from. And the good news is that a competent team of business advisors can help.
If you are considering putting up your pharmacy business, your veterinary business or any other enterprise for sale, here are six biggest fears that can stand in the way of planning for a successful exit:
After years or even decades of pouring your time, resources and passion into building your business, the very thing to which you have dedicated much of your life will be gone once you sell it. For instance, pharmacist-owners are often seen as and consider themselves as important members of their local communities, and that is justifiably a big contributor to their sense of self-worth. They can lose that when they put their pharmacy business up for sale – and sometimes, sadly, they never get it back. So ask yourself: Who will you be when you’re not building a business anymore? What is your non-business-related identity? Do you have one?
Selling a business hopefully means converting its value into a substantial amount of capital for the owner(s). That’s good, of course, but it raises other challenges. Simply put, the skills needed to manage a large amount of capital are very different from those needed to build and run a business. Just because you have been a successful business owner does not mean you will be a successful wealth manager. “What do I do with all this money?” might sound like a problem we would all like to have, but not knowing the answer can be a source of substantial fear. Getting sound financial advice from an experienced and competent wealth manager can help.
Many business owners pay themselves very well, and they have the lifestyles to prove it. The money they spend usually comes out of the business, in the form of salary and/or dividends, but also of things like company cars, entertainment, utilities and various other expenses that make their lives easier. When the company sells, all that is gone, and the now-former owner has to rely on their nest egg to live, and even seven-figure sums can get burned through pretty quickly by lavish lifestyle choices. Working with a business financial advisor – and some sound budgeting – can help alleviate the fear of running out.
In our work as business advisors in Canada, one of the first questions we ask when helping to plan a business sale is whether the company is properly structured to minimize taxes. Shockingly, the answer is no about half of the time, and the prospect of selling means that the owners are facing a huge tax hit. Again, a good wealth advisor and/or tax accountant can help.
Some business owners agonize over the question of what will happen to their company after they sell. It is a legitimate concern, because in many cases (especially in smaller communities) the owner has to live with their choice of successor, and making the wrong choice can reflect badly on them. Selling to a big corporation that puts profits before people or to an incompetent manager who fails to live up to customer expectations can be frustrating, disappointing and embarrassing to the former owner. Some don’t even want to think about it, and so they fail to plan for an effective succession.
Much of the time, putting a pharmacy for sale moves the owner one step closer to retiring, which moves them one step closer to the end of their life. It’s just reality, but many of us simply don’t want to accept it. That is why so many people (more than half!) don’t write wills. It’s also a reason so many business owners put off exit planning, because it means contemplating a company – and, eventually, a world – without them in it.
We encounter these fears all the time in our work as business advisors, and we understand. The first step towards conquering them is to recognize them. The second, crucial step is to confront them – and get the help you need to identify and mitigate risks and develop a plan that will ease your fears.
So yes, selling a business can be a terrifying thing for owners. But with the right advice and a little bit of forethought, you can make sure that fear does not hold you back. Contact us for more information on the same.