Article after article have been written about the right time to sell your business. Typical questions or topics covered in these articles usually sound something like this:
- Are the current market conditions favorable?
- Is your company in a position of financial strength?
- Is the timing right with your product/strategy?
- Are you personally ready to give up control?
- Is now the best time from a tax, lifestyle and personal perspective?
All valid questions that require meaningful analysis and research. Even with the best data, you still will have doubts and wonder if it’s the right time, right buyer and right thing to do. Unfortunately, data and analysis can only answer the first part of the equation.
The Risk of Selling
Selling is a risk that very few weigh accurately. Historically, research—including from sources like Harvard Business Review—suggests that between 70% and 90% of mergers and acquisitions fail to meet their intended objectives, implying a success rate of roughly 10% to 30%. Broader estimates across various studies and industry reports suggest approximately 20% to 50% of acquisitions are considered successful in delivering expected value or synergies (source: Grok 3 beta).
The Second Part of the Equation: Qualitative Reflection
As I’ve mentored business owners and entrepreneurs, I’ve certainly worked through the qualitative basics of “what to expect when selling.” But the second part of the formula requires time, honest reflection and humble introspection. These questions are multi-layered and sound substantively different. They might sound like:
- What happens if I don’t sell now? Are you running to something or from something?
- Do I have what it takes to meaningfully grow this business? Can you take it to the next level, and do you still have the tolerance for risk, ideas, discipline and desire?
- Will my impact leaders stay with me if I do/don’t sell? They’ve chosen to follow you instead of other leaders. Will they stand shoulder to shoulder with you, or move on?
- What will happen to the culture/norms/values that define us?
- Do my team members still have “start-up” passion for this company?
These are hard questions to answer, and each has multiple implications you may not anticipate. For example, expect employees to leave after a sale (studies suggest 30%–50%), whether they are passionate about the company or not. If they have a passion for the company and the company brand is no longer part of their social brand, there is real loss. And if they are not passionate about the company and/or its leaders, it becomes an easy excuse to leave.
People Over Process
Yes, the process, legal agreements, valuations and earn outs of mergers and acquisitions are complex. But they pale in comparison to the complexity of human emotions, desires and reactions.
The first part of the equation is quantitative. The second, qualitative. It’s the second part that owners often spend less time on, but it could likely provide the biggest return – sale or no sale.
Contact
For questions on this First Principles Brief, or if it’s the right time to sell your business, please contact:
Brent.Teiken@teikengramer.com
Phone: 701-306-5525
We’ve been through it. We’ll help you prepare for it.