When to Sell the Firm
Almost all of us who are entrepreneurial and establish personal service firms have been (or are) heavily involved in struggling to make the endeavor successful and warding off disaster. However, many of us will also achieve a position of success which we are not as prepared to handle: Do we sell a part or all of our business?
Most of us are refugees from larger companies, and we’ve chosen entrepreneurship to escape the politics, monotony, and blandness of organizational life. These are life objectives, not business objectives. Consequently, like it or not, any decisions about the destiny of our practices become decisions about our lives, not merely our professions.
Surrendering control—in part or in whole—is a traumatic experience. The “sweat equity” has been ours. I’ve found the best reasons to consider that surrender are:
- Overriding personal objectives, such as the desire to spend more time with one’s family, on hobbies, traveling, etc.
- Health concerns that mitigate against continued travel, stress, and/or long hours.
- Boredom with the business, and the desire to try something new. The worst reasons to sacrifice total ownership include:
- Financial pressure caused by poor sales.
- Funding desired for new projects or expansion.
- The lure of a “big name” with which to associate.
- Need for professional companionship.
The first three bullets represent legitimate life style decisions which must be achieved or avoided through a different business structure. The last four bullets represent business dynamics which have other solutions possible, short of selling equity.
For example, try to arrange financing through a home equity loan, investment from friends (silent partners with no involvement), or a more modest life style; fund new products by partnering with clients who will get the product for free in return for their investment; form loose alliances (if you must) if name recognition is so important (or, better still, stop worrying about it); and get a dog if you need companionship.
Most people who sell their businesses outright, despite all the promises and inducements, simply wind up someone else’s employee, adhering to expense account procedures, travel restrictions, and company holidays. Those who sell a major part of the business to active partners are now supporting at least two sets of personal objectives: their own, and the partners’. And those who seek venture capital are swimming with sharks who will demand total commitment, minimal personal reward for the “owner,” maximum return on the investment, and eventual sale of the future, more profitable business.
Determine why you’re considering selling your business. If it’s for personal fulfillment, then proceed with the options, But if it’s due to business pressure, find other alternatives. The grass is seldom greener, and it’s often not even grass.
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