If you’ve ever been around the world of business transitions, you’re well aware of the buyers sellers remorse. This is where a buyer becomes very unhappy after the purchase a business. This is a really important topic and I hope you take the time to listen to the entire episode.
There is little attention given to what I consider an even bigger problem…….sellers remorse. This is like buyers remorse except it occurs when a seller becomes very unhappy with the sale of their business. This problem occurs in almost every case where a business is sold to a 3rd party or an outside buyer.
Today’s guest is Paul Cronin from The Successful Transition Planning Institute. Paul specializes in helping business owners think and plan about what life will be like after they sell their business.
In today’s podcast we’ll be talking about:
- What is sellers remorse and why it occurs.
- How to avoid the downwards spiral that often happens after a business owner sells their business.
- What you can do to help prepare yourself for the transition that occurs when you leave your business.
- Why it’s important for you to start thinking about who you are outside of your business.
Narrator: Welcome to the Sustainable Business Radio Show on podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. The Sustainable Business is all about creating great outcomes.
Here’s your host, certified financial planner, student, entrepreneur and private business expert, Josh Patrick.
Josh: Today’s podcast features Paul Cronin, a partner in The Successful Planning Institute. Paul specializes in working with business owners by helping them transition from being active in their businesses to what he calls the next life. Too often, I see business owners sell their business and then wish they didn’t. This is called seller’s remorse. Unless you plan carefully for how you leave your business, it’s almost a certainty that you’ll get seller’s remorse. Let’s visit with Paul and find out which you can do to put together a plan for leaving your business that will provide you a great retirement.
Hey Paul, how are you today?
Paul: Great, Josh. Thanks for having me.
Josh: My pleasure. Let’s start off with seller’s remorse. What is it and why do you think it exists?
Paul: Seller’s remorse is essentially when a business owner has started to think about the process of transferring the business and at some point, in that process, they get cold feet or they may let, what could be relatively minor parts of the deal, really sort of blow up. Essentially, the underlying reason is because they have fears about their future, or they don’t know what they’re going to do next in life, or, something else is sort of subconsciously driving it. Sometimes, it’ll be very obvious and they’ll consciously say, “There’s no way I’m going to sign on the bottom line because I have no idea what I’m going to do the day after the sale.” And so, it’s in essence, the remorse – not sort of the pre-remorse. And then the other, they sell – not having made a plan and then they enter this sort of downward spiral. And then they’re very remorseful and like “I never should’ve sold. I can’t believe I did that et cetera.”
Josh: So what do you think causes the downward spiral?
Paul: For business owners who really devoted their life to doing this, the idea that they need to create a whole new life for themselves really can very daunting. Some will have one idea. For example, we had one client who left his business. And his thought was “Well, we’re going to move halfway across the country where our daughter has relocated, she’s raising her family and we’re going to help raise the grandkids.” Now, that’s all well and good but he forgot that when he came to visit, he was grandpa the rock star. And when he was grandpa there who’s everyday, he wasn’t so special anymore. In fact, he wasn’t as needed as he thought he might. And so, suddenly, he was in a place where he thought he had this great plan for his new life. It wasn’t really working out. Because he hadn’t actually thought of anything else, he was stuck and depressed and he experienced seller’s remorse.
Josh: So before somebody sells their business, we tall talk about the financial side of the business sale, what else might they want to be doing?
Paul: I’d like to say there’s sort of four parts of it. The first part, you’ve got to have a transferable business. I like to shorten up this. “What do I need to do to make my business better? Who do I need to hire to help me make that happen?”
The second question is “What do I need to do to make the whole process matter to me to make sure that I do follow through, that I don’t have seller’s remorse et cetera.” And frankly, that’s the kind of work I do and the people we train to do which is really to help people create these new plans.
The thirds step is, “I’m going to make this income stream last a long time, 10, 20 or 30 years of my life. Do I have the right people who are going to help me manage that?” And obviously, again Josh, you help folks in that area.
And the last part, “I’ve got to make sure it happens. I can’t let little problems blow up into big problems so I’ve got to identify sort of the land mines. I’m going to find the right advisors, whether they’re mergers and acquisitions advisors, attorneys, et cetera, who will actually make It all happen.”
Josh: So, the business owner can’t figure out what to do after they sell their business and you’re working with them, what kind of advice would you give them?
Paul: The first step that I do is really ask people a series of questions. We’ve actually formalized this in some online questionnaires but it’s really a moment of self‑reflection to start thinking about “What other ideas I did and what other activities I did with my life before I was a business owner. What did I enjoy? What did I not enjoy? What other transitions did I go through in my life? Whether it’s going from school to work, or from before you were married to being married. And each of those experiences in your life, you draw lessons from. And as you’re now about to go into this next transition, you draw upon those lessons, you draw upon a self-reflection of you. “How am I valued as a person outside of work?” And that starts to build your confidence. There’s a lot more to it than that but those are a couple of short exercises that we help people get moving west and that really gets the ball rolling from that sort of emotional/psychological standpoint.
Josh: If you had a crystal ball and you could make all business owners do whatever you wanted, how long in advance should they be working with somebody like you before they sell their business?
Paul: We love to work with people a couple of years in advance if we can just because as it gets closer to “the transaction” the options can become more limited. People can start making decisions. For example, someone may buy a retirement home and sort of lock themselves into a process of that’s where they want to be, not realizing that that may not actually be the right place.
If I can tell a short story, a gentleman built a very successful software company and he, on a whim, decided to buy a home in Myrtle Beach. Well, if you’ve ever been to Myrtle Beach, there’s really just three things to do there – you can golf, you can go to the beach, or you can sail and fish. He didn’t do any of those things. He sunk $150,000 into this house because he hadn’t really thought through the process of what kind of life he wanted to live. He just, on a whim, bought this home because he could afford to.
Josh: So, if you get a business owner a couple of years before they sell their business, what are you going to have them do?
Paul: To really start thinking about who they are outside of the business and then really start thinking about where they want to live, what kind of activities they do. Ideally, when they leave the business, they should already be starting to live this new life in terms of how they’re making new social connections. Are they experiencing spirituality in faith? We’re not preaching that but it’s an opportunity to experience that. What kind of activities are they involved with their family? What kind of activities are they involved with their spouse. It’s really hard to just sort of flip the switch one day and say, “Here’s my new life.” But if you start planning it and trying things and finding things don’t work, when that event actually occurs and you’re handing the keys of the business over, it’s not so shocking anymore and you’ve had an opportunity to experience it and tried different things.
Josh: What kind of advice would you give to an owner who has gone through the process and has looked at all the stuff they do and they just don’t find anything compelling besides their business?
Paul: You have to actually have that experience personally. I’m sure it’s possible to happen but perhaps it’s a process of self-selection that people we work with tend to already have that sense that it’s time. I think the people who really can’t imagine life without the business, they think of either their child or their mistress. I feel bad for them frankly in a certain way. But, there are some who recognize that that’s it and we ask them to do is – say if you can’t actually leave the business—in some cases, you can’t for financial reasons, there are other areas you realize that you can explore to make your life richer and more enjoyable.
Josh: This is something I noticed. I had a vending company for 20 years. I was a big deal in the industry and the day I sold the business, I became a non-person overnight. Is this a typical thing that happens? If so, what would you recommend to overcome it?
Paul: Yeah, it’s huge. Most people get about 80% of their social connections through the workplace and business owners could be even a higher percentage. You’d just imagine that in order to be part of your trade group, you have to own a business. If you’re not in it, you can’t go to the conventions anymore which is where all your friends would be. The vendors who were your best friends, because they’re happy to—you were buying stuff from them, they’re don’t necessarily have that use for you anymore.
And so, the challenge for the owner is really just to start imagining and envisioning and brainstorming, “Now, where else can I make these social connections through athletics? Could I make social connections through charity?” Is there an opportunity for me to create some other kind of income-producing work? I mean, it doesn’t necessarily have to be a new business but each of those examples are places where you can make new connections and then therefore you can create and expand a new social network.
Josh: Do you find that business owners have a hard time creating this new social network or is it something that sort of comes naturally to them? And why would that be true either way?
Paul: I think social people are social. They just need to sort of start the process but they’re clearly people who own businesses and they’re very great technically but they may be a little more introverted. So, those people are going to tend to need more assistance but that’s part of the coaching process is to help them brainstorm ideas, talk to other people that they know and trust. And then start looking through those ideas and to start envisioning themselves, participating in those ideas. And once they get that confidence that they can come up with new ideas and try new things. But if they don’t work out, they’ve got more than just one or two ideas.
Josh: So, I own a business. I’m getting ready to transition – or at least I think I’m getting ready to transition, what kind of help and who should I go to? And where do I find them?
Paul: We definitely suggest people go to our website, because there’s lots of free stuff there first, www.theplatinumyears.com. There’s free assessments. There’s articles. There’s podcast. Now, just educate yourself first before you start spending a lot of money on consultants and so forth. I’m one of them. But, when you’re ready – you’ve done some of that, maybe you start out with a program that’s more self-reflecting – answering some questionnaires and so forth, reading some books. And then you take the next step of “Do I call Paul or do I call —we’ve got 17 people we’ve trained around the world including the U.K., Australia, U.S. and Canada and are listed on our site. And then you essentially start interviewing those people virtually, by looking at their profiles, and then calling people up. Or, if they need be, call me and I’d be happy to understand the situation or recommend someone that might be closer to their nick of the woods.
Josh: That sounds like a good idea. What’s the background of the people who are trained in your work?
Paul: The universal background is these are people who have a mentoring, coaching, consulting-type background. They love to help advice other people. And I like to sort of say there’s three things that they bring to the table – they bring advice, they bring connections and they bring accountability. And they’re unafraid of working with people who may be far more financially successful than them but holding them accountable to apparently what they’ve been hired to do. And that—it’s everything. You look at financial advisors, merger and acquisition advisors, psychologists a former Catholic priest. So, it’s a whole mix of folks but ultimately they have those three primary factors that they’ve got to work and feel confident they can work with people. And of course they have to follow our system too, so.
Josh: Of course. So, when someone’s going to leave their business, can you give me a laundry list or just a few bullet points about what best practices would be for them? And how they might want to go about it in a timeframe they should be doing it at also?
Paul: Yeah, in real generality but I’ll do my best. If you have a sense that your business is transferable at all, if you’re unsure, you really need to talk to some mergers and acquisition advisor or business brokers who also are willing to, for a fee, give you some analysis and say “Hey, how transferable is this business?” Because the last thing you want to do is spend $50,000 on consulting fees and realize the business is not transferable at all. It’s just too much about you.
But assuming you can make that, you then need to take a look at shoring up the areas of the business to make it stronger, to increase valuation. And then at a certain point, you need to engage someone along my line to keep you motivated and accountable to the process because, as you know Josh, when you sell a business there’s so many things that can go wrong and it’s very easy for a business owner to say, “The heck with it, I’m doing okay. I’m going to give up on this whole idea of selling the business and I’ll just die at my desk.”
Josh: So, the soft side is where you guys really add a ton of value. We tend to spend way too much time, at least in my opinion, on the numbers. The numbers are the numbers and that’s pretty easy to get to. The soft side of going from being an owner to an ex-owner is something that a lot of people have a hard time getting their arms around. What do you guys do with that?
Paul: In terms of helping people understand the soft side, I’d say that’s probably 80% of my job which is – I’m sort of the chief evangelist for the company, doing as many interviews and talking and speaking wherever I can and to educate the other advisors so rather than being the lone voice in the wilderness there’s other people saying, “You really need to listen to these folks. They’ve been through these.” I’ve had several businesses and I know what it’s like to leave a business and all the challenges therein. And the people that it resonates with, they start to pick up on it. Unfortunately, some people don’t and they end up coming to us after the fact they’ve made mistakes and so forth. We can certainly help them but it ends up costing a lot of time and money and frankly a lot of unnecessary aggravation.
Josh: So what do you do somebody that comes to you after the fact?
Paul: Sometimes, I’m going to walk them off and push them off the cliff as it were. But really, we start almost at the beginning in terms of “What is holding you back right now from changing the direction?” And once you start identifying some of those issues, you can then help people start envisioning – we call it a framework for living a purposeful life. And we start going through, step-by-step, how do you make new social connections? How do you figure out which activities you should be participating with your family and your spouse? Maybe I do want to experience spirituality in faith in my life, I’ve never done that, what would that be like? And step by step, you work with someone. Week by week, build their confidence. Help them come up with the ideas. Get the plans, write them down. And then hold them accountable to implement the plans.
Josh: That sounds like some really valuable stuff to do.
Paul: We hope so.
Josh: Well, in my experience, it is. So, here we are.
Paul, thanks so much for being with us today. I truly appreciate it. I’m going to imagine some of our listeners might want to get in contact with you, so how would they go about doing that?
Paul: The best place is go to the website: www.theplatinumyears.com and all the information is there. Or if they do want to call me directly, my phone number is 978-749-9546.
Josh: Great. Paul, thanks so much for being with us today.
If you need some help with this, go to Successful Planning Institute. They are very good at what they do.
Paul: Thanks, Josh.
Josh: You’ve been listening to the Sustainable Business Podcast where we talk about what you need to do with your business if it was to be here 100 years from now. If you like what you heard and want more information, please contact me at 802‑846‑1264 ext 2 or visit us on our website at www.stage2solution.com or you can send me an e-mail at firstname.lastname@example.org.
This is Josh Patrick and thanks for listening. I hope to see you soon for another edition of The Sustainable Business.