Several years ago, a former business owner participating in panel discussion told the audience, “I never realized how unpopular I was until I sold the business.” He went on to admit that he had not properly prepared for life after ownership, that he had not been aware of how much of his identity was linked to his role as CEO of the family’s business. Of course, the issue was not that he was simply unpopular. Rather, when he was no longer a decision-maker, the company’s employees redirected their inquiries to the new CEO.
The Risk of Winging It
Without a number of activities or other roles that are completely independent of the activities of the business, business owners stumble through their transitions to life after ownership. Over the years, we have even seen some former owners struggle with depression. Buth we have watched others smoothly segue to this new phase in life and never look back.
When we encounter business owners who can describe only vague expectations of their lifestyles after they sell their companies, we get concerned that they are not serious sellers and may end up holding onto their enterprises. In these cases, we proceed with caution. Unless a seller is fully committed, both parties could end up investing significant time and money, with nothing to show for it. And one way we gauge commitment is the specificity (and passion) with which an owner describes his or her future.
Developing a Plan
We recommend that business owners who are considering a sale of their companies should first work diligently on mapping out the pursuits that will replace the sense of self and the fulfillment that comes from running a business. While a noble pursuit, spending more time with my family simply doesn’t cut it. Our experience is that, after years of being in charge, most business owners need to be solving problems and driving measurable improvements in some sort of organization.
Some examples of how we have seen business owners fill the void created when they step down from their leadership roles include joining boards of other companies and philanthropic organizations, taking on civic projects (whether for local governments or other communities, such as a homeowners association or a country club) and writing, for instance, the great American novel.
The principals of Bootstrap Capital have sold their own companies and made their own transitions to life after ownership. In fact, the founding of Bootstrap Capital is at the core of our strategy for managing the transition. As a result, we are keenly in tune with the issues business leaders face when they decide to sell their companies, as well as many other nuances of transacting in the lower middle market.
In situations where a business owner is working through these issues Bootstrap Capital is, at a minimum, a patient counterparty and, even better, frequently a constructive partner in helping him or her through the process.