Exit Planning: You Need to Grieve it to Leave it
Strategies for the Emotional Side of Exit Planning and Career Transition
It was just a few minutes into our phone call, and our clients started to cry. Working on their business exit planning and reviewing the financial and transactional aspects of selling their nursery operation, it suddenly hit them as they looked over a beautiful array of plants in their greenhouse. Their nursery business was their “baby” that they had spent over 30 years growing day and night, and the fact that they were moving on brought tears of both joy and sadness. We empathized with them, and they began to apologize for their emotions and stated they were ready to move on. “There is no need to apologize, as this is all positive,” we said. “You are grieving the business, and this is an important part of your journey and transition to what’s next.”
Accountants, lawyers, financial planners, business brokers, and business exit planning specialists all work in the transactional areas of selling a business. They bring expertise in each of their fields that, when combined, are critical to a successful sale or transition. However, what about the tears and the emotions involved in exiting a business? According to an Exit Planning Institute (EPI) report, over 75% of business owners who have sold their business profoundly regret it within a year after the sale. Most of these owners will end up grieving the loss of their business for many years to come. Many say that they have lost their identity and their reason for being – “How much golf can a person play?” How do we avoid this seller’s remorse, and what steps can we take to mitigate these feelings of regret during the exit planning process?
We recently interviewed Chip Conley, a noted entrepreneur, author, speaker, and founder of the Modern Elder Academy. According to Chip, “We need to stop retiring from something and retire to something. There are (3) values people take from their company ownership – a sense of purpose, wellness, and community. They seemingly lose all three when they retire, and it can even accelerate their mortality by several years.” During the exit planning process, it is important to plan where the owner will find their purpose, wellness, and community after the sale or outline a personal vision of what life looks like after the business. It helps frame and answers the question, “What are we retiring to?” In addition, when working with owners on their emotional readiness for when they transition, “preparatory grief” or dealing with grief before the event happens is another way of preparing for the day they sign the papers and hand over the keys.
In 1969, psychiatrist Elisabeth Kübler-Ross first identified five stages of grief in her book, On Death and Dying. She noted that those experiencing grief on losing a loved one (and a business can undoubtedly be considered a “loved one” to most owners) go through five emotional stages: denial, anger, bargaining, depression, and acceptance. Naturally, many will argue the merits of the process or disagree with the original and simplistic approach. After all, grieving is complicated, but there is consistency in our experience when the five stages are applied to exit planning. According to Dr. Patrick Downing, a psychologist who has worked with exiting business owners, “Grieving the loss of a business is not a seamless process, and there will be flip flops back and forth between the emotional stages— it is not a linear progression. It is all about finding cognitive strategies to help guide you through the emotions that hit you. It helps steer the emotions in a way to help process a sale of the business.” Thus, we find that exit planning itself can be akin to a grieving process.
“If you fail to plan, you are planning to fail!” – Benjamin Franklin
There is one indisputable fact – 100% of owners will eventually exit their business. It could be through family succession, sale, liquidation, closure, death, or any number of reasons – many of which are outside the owner’s control. According to the EPI, 50% of these exits will be involuntary, and 40% of business owners lack even a basic continuity plan (should something happen to the owner). When it comes to exit planning, denial is by far the biggest hurdle. When we talk to business owners and ask when they plan to exit, the typical answer is 3-5 years. Ask them 3-5 years from now, and the standard answer again is 3-5 years. Denial is clinging to a false reality, and it plays a significant role in why 70-80% of businesses don’t sell.
When we are asked by business owners when they should start exit planning, our answer is always a resounding “NOW!” Whether the business owner is in their 20s or 60s, we have never heard clients complain that they spent too much time planning. On the contrary, planning leads to business optimization, better decision-making, and less owner-centricity, all of which will drive up value in a buyer’s eyes. According to John Dini, author of Your Exit Map, “Five years is a reasonable planning time. Ten years is better. There is no time frame that’s too far out to be thinking about your exit.”
Many owners can get stuck in denial indefinitely. We recently had a 72-year-old client tell us he wanted to delay the start of his business exit planning for at least six months, even over his wife’s objections, because he was just too busy. Certainly not what a potential buyer wants to hear. Overcoming denial is not easy, and it takes a lot of time, effort, and focusing on the bigger picture. We start with a preparedness assessment and a valuation because denial often manifests itself in postponing a departure and what an owner perceives as the fair market value for his/her business.
How can one get past denial? Examine your fears, think about the consequences of doing nothing, and identify the irrational beliefs and your reality. Most importantly, talk to someone— a trusted business advisor, coach, friend, or loved one you trust and express those fears and emotions. Many of the owners we talk to express gratitude and relief that they have someone to talk to because they cannot share these concerns with those in the business.
Once a business owner has identified those fears, irrational beliefs, and emotions that led to their denial in the first place – it is only natural to become frustrated. We have seen owners become frustrated when examining their preparedness – “I should have been doing this years ago.” We also see it when they receive a financial valuation of their business that came in lower than what they were expecting – “Can’t they see what I see?” Unfortunately, no appraisal can account for the blood, sweat, and tears the owner has poured into their business over the years. This stage is also a time of reluctance to make a change (they can’t see a path forward) and inevitable regrets – things they should’ve done, changes they should’ve made, and affixing blame to themselves and others.
How to get over the anger? Lean into it – don’t try to avoid it. Also, give yourself grace. According to Dr. Patrick Downing, “This is a time for owners to appreciate what they have accomplished in their business – the clients, customers, and families they have helped. It helps work through the negative cognitive thoughts, beliefs, and attitudes surrounding their exit from the business.”
Hope is not a strategy, and this stage usually involves the hope that an individual can avoid a cause of grief or regain some control after the denial and anger stages. While negotiation is generally welcome in exit planning, this type of bargaining is different, detrimental, and usually involves changing the timing or postponing exit planning. Our 72-year-old client was in denial, but he was also bargaining. He is delaying the inevitable by six months and the discomfort of going through the process and selling his operation – even against his wife’s wishes.
Bargaining is essential because the owner is willing to concede the outcome in many cases but wants more time. This stage can be uncertain, but thankfully without the denial and anger that can put up major planning obstacles. Eventually, when there is no bargain to be had, and the temporary pause has ended, it leads to our fourth stage: depression.
According to Dr. Patrick Downing, the most profound depression he has seen in retirements are among high-level entrepreneurs – “They simply can’t deal with what happens when they are just ‘John Smith,’ and not the President of some company.” During this stage, the owner will despair at recognizing their mortality. In this state, the owner may become uncommunicative, closed off, and may also be depressed about an offer from a buyer, the due diligence process, or even his/her future identity or legacy after their exit. Some owners struggle mightily with this stage – they are just too emotionally wrapped up in their business.
Consequently, this can be an ideal time for the business owner to switch gears, have fun optimizing their business for a sale, and pour themselves into the planning. According to John Dini, “As the company grows in your chosen direction, you could just be having too much fun to leave on your originally planned date.” There is no antidote for depression quite like having fun and finally making the leap from working in your business to working on your business. In addition, this is where your trusted advisor or friend can keep you focused and be that all-important sounding board. According to Dr. Patrick Downing, “Now you have to redefine your life, and this can be a creative time with no playbook but starting at ground level again.” Fun for some, scary and uncertain for others, but necessary.
We initially thought that our clients, the ones who burst into tears as they were overlooking their life’s work, were in a state of depression. Instead, they assured us it was quite the opposite – “I can’t fight it, so I might as well prepare for it. I’m going to be okay and ready for what comes next.” Acceptance! They have since been active in optimizing their business and preparing it for sale. Having just met with a business broker – their target date to sell is this fall.
According to Dr. Patrick Downing, “Exiting a business is often an issue of identity. Is your work who you are? Preparatory grieving of the business is an important step when it comes to an end. So many do not prepare for what happens next when they sell a company.” You can have the finest advisors, achieve value for your life’s work beyond your expectations, and be financially set for your retirement. However, if you are not ready emotionally – then you could be one who “profoundly regrets” the sale of your business and end up grieving it for years. Business Exit planning is not just about the transaction but also the transition of your life. Grieving the loss of your business upfront will allow you to leave it on your terms.
The single largest transaction and transition of your life deserve special attention.
Are you planning to exit and sell your business? Business Exit planning is quickly becoming a buzzword in the legal and financial communities. Your professional advisors position themselves to provide tax, risk management, wealth management, and contract preparation services. BEST Exit Plan Advisor has been trained to manage your team of tax, legal, business, and financial planners to navigate your exit strategy. Click here for our Special Section on Exit Planning for more details and a video on how to get started.
There is one indisputable fact – 100% of owners will eventually exit their business. The Assessment is a multiple-choice questionnaire that does not ask for confidential or financial information. Nevertheless, it is a critical first step in starting the discussion and planning process. Click here for FAQs and more information concerning our free, no-obligation exit planning assessment.