The mistake business owners make when selling a company is not laying the groundwork soon enough. By Tanya Marvin-Horowitz (NY Managing Director, Allegiance Capital)
I make a living representing people who want to sell their company. Whenever I mention that to a group of entrepreneurs, there’s always one person who gives a horrified gasp: “My company is who I am! How could I ever think about selling it?”
I get that. The idea of selling your company can seem as ridiculous as selling your child. But one day your child is going to grow up and go to college. That might mean selling all of the business, selling part of it, or passing it down to family members. I can guarantee that one day you won’t be running the show, and it’s in the best interests of you, your family, and your company to explore your options and start to make plans well in advance.
So, why would you want to sell?
Many business owners mistakenly assume that when you sell your company, you no longer have anything to do with the enterprise. That can be the case, but in the majority of the deals I facilitate, the owners are looking for a partial sale in order to get growth capital. That means you sell some ownership in the company – generally a majority share, but not always – in return for a nice chunk of change. You and the other owners can keep some of it for yourselves, but most of that money is going to go right back into the company as growth capital for expansion. You keep running your business, just with more resources.
Money (For You!)
Of course, sometimes, whether for personal or career reasons, you do want completely out. When that happens, you get to reap the financial rewards of all the hours you’ve put in and all the sacrifices you’ve made. Use it to put ten grandkids through college, or spend all your time on your passion for horse breeding, or start your next exciting new project. Interestingly, my 74-year-old Founder and Chairman, an old veteran in the world of M&A, recently pointed out that women entrepreneurs are significantly more likely than men to use the proceeds of a sale to become angel investors or found philanthropic ventures.
It’s no secret that an entrepreneur’s family makes plenty of sacrifices. Unfortunately, as Anne-Marie Slaughter pointed out in her article in The Atlantic's “Why Women Still Can’t Have it All” - “The decision to value family over professional advancement is directly at odds with the prevailing social pressures on career professionals.” Indeed, in political circles, “leaving to spend more time with your family” is a well-known euphemism for being fired.
There are plenty of legitimate reasons for deciding that it’s time to make your family more of a priority. Your partner might have an exciting career opportunity that means they’ll be the high-powered corporate one for a while. Or you might want to be around for a tricky phase of your child’s adolescence, or to support your daughter in her bid to be a gymnastic Olympic hopeful. Decide on your own priorities and don’t let the occasional raised eyebrow of disapproval discourage you.
Let me end with the exhortation to start planning as early as possible. The number one mistake business owners make when selling their company is not laying the groundwork soon enough.
Editor’s note: Got a question for our guest blogger? Leave a message in the comments below. Photo credit: Gabriela Pinto on Flickr. About the guest blogger: Tanya Marvin-Horowitz is a Managing Director at Allegiance Capital Corporation in the New York office. She is an accomplished investment banker with over 18 years of experience guiding clients through complex investments and M&A opportunities. She has worked for investment advisory firms, as well as numerous HNWIs, family offices, private equity, and other institutional /corporate investors. Her experience spans both domestically and internationally.