Can you sell your baby?

For many business owners, the business is part of their identity. How do you make the decision to sell something that made you who you are?

I've met with numerous business owners and have owned businesses myself. The emotional link between an owner and the business is hard to understand unless you've been there.

Most owners of successful businesses struggle with the idea of selling. Here are some thoughts from my experience that may help.

The business is alive!

I think that many business owners were surprised and gratified when their creation started to move on its own. There is a magical moment when your team that you've put together starts to work together, solve problems and serve customers without you being there in person. I remember the first time that my business delivered a project to a customer without my direct involvement. It was exciting, and a little scary!

A good business continues to operate when the owner is away. All of us put in the long hours in the beginning, but over time, we realize that we don't have to be there in person every hour of every day.

Like any living thing, the business wants to grow and become more independent. The team you created wants to build something too - growth creates opportunities and new challenges for your team.

Growth means change

As the business grows, its challenges and needs change. At some point, the owner doesn't have enough hands to be involved in every decision every time. Informal processes that worked at first don't get communicated to new employees and quality and service suffer unless processes are documented and people are trained. What worked for a single location won't work for two or three, or more. The accounting, HR and legal functions that were done by the owner (or their spouse) in the beginning require more time. These areas can sink a small business if the business outgrows its competency and makes an avoidable error with the IRS, banks, or employees.

We change too!

As owners, our needs change too. Working 80+ hours a week, traveling wherever required, and putting your heart and soul into the business is what it took in the beginning. You and your family knew and accepted the sacrifice.

Your (and your family's) perspective can change once your business is consistently earning much more than required to pay your living expenses. Your children get older, maybe there are grandchildren, maybe your marital situation changes. While many business owners hope to pass the business to their children, that doesn't always reflect the age or interests of the children.

Your health is a wildcard. You want to work while you're able, but also to enjoy the fruits of your labor while you can.

If you love it, set it free!

As we and our businesses change, they often change in different directions. What the business needs to thrive may not be compatible with our desire for free time and the opportunity to enjoy what we've earned. The parts of the business that we enjoy may not need our attention as much as the parts that we'd rather ignore.

In many cases, the best solution for the business and the owner is to set the business free. Each will continue to grow and thrive and the owner can look at continued growth and success and say, "I built that."

Be careful

The structure of the transaction to new ownership is a time of risk for the business and the owner. The deal needs to be structured in the right way for both to thrive. Elements of a good deal include:

• A fair price for the owner.

• Tax-efficient structure, as much as possible.

• Tailor cash flow to owner's desires. Some owners want cash up front, others want a phased transition.

• Conservative capital structure for the business going forward. The last thing you want to do is sell the business to a PE firm, have them lard it up with huge amounts of debt, and watch the business struggle to survive.

• Committed leadership. You've invested decades in building a team of employees, customers, contractors, suppliers and service providers. The new owner will care for them like you would.