When it comes to valuing and selling your business, there is probably a huge difference between what you need and what you want. Rick Jones, a merchant banker in Toronto, suggests that one of the most common problems encountered by those selling a business is the unrealistic valuation they put on their business. Jones spends a lot of time trying to get owners to see reason.
What do you really need?
When you look at the true market value of your business, even if it isn’t worth what you thought it was, is it enough? Is the extra amount you’d like to hold out for really worth the chance of losing the deal or your health? Will the extra make a significant difference to your lifestyle?
Frank, a former business owner I met on my sabbatical a few years ago, told me that part of the deal he made with the new owner included his daily presence in the business for three years. By the end of the first year he was climbing the walls. He watched as the new owner dismantled all the systems he had put in place to make the business successful. He waited in his office for the new owner to ask him for some advice on how to keep the business going, but it never happened.
Frank’s blood pressure went up every day he went to work. He was stressed and unhappy. One day his wife asked him, what would happen if he walked away. “I signed a contract that committed me to three years. If I don’t stick it out, we lose $10 million.“
“But really, Frank,” she replied. “If we don’t get that $10 million, would it have any impact on our day-to-day lifestyle?”
He thought for a moment, “No. It wouldn’t.”
“Then why are you risking a heart attack every day instead of getting on with your life?”
With a big smile, he handed in his resignation and told the new owner what he could do with his $10 million. He didn’t need it. And once he admitted that, he also realized the way the business was headed, he probably wouldn’t be able to collect anyway.
As you come to grips with what your business is worth and what you need to continue to live the lifestyle to which you’ve become accustomed, consider how much ego you have tied up in ‘winning’. You may want to ask yourself, “What do I really need?” You might already be there.