Exiting a business without proper preparation can lead to significant regrets for owners, often because they didn’t take the necessary steps to maximise value or ensure a smooth transition. Here are some of the most common regrets business owners experience after an unprepared exit:
1. Not Maximising Business Value
Many business owners regret not investing time in increasing their business valuation before selling. Without preparation, they often miss out on optimising factors like intangible assets, growth potential, and risk reduction, leading to a lower sale price than expected.
2. Owner Dependence
A common regret is failing to eliminate owner dependence. Buyers are often wary of businesses that rely heavily on the owner for daily operations, and the inability to step away can either scare off buyers or reduce the sale price. Owners realise too late that creating a business that can thrive without them would have increased both interest and valuation.
3. Emotional Detachment Issues
Many owners regret the emotional shock they experience after exiting, particularly when they haven’t planned for their life post-exit. Running the business may have been their identity; without a plan, some feel lost or lacking purpose.
4. Inadequate Due Diligence
When owners rush to exit, they often overlook critical aspects of due diligence. Some later regret not fully understanding the terms of the sale, such as non-compete clauses, tax liabilities, or earn-outs, which can significantly impact their financial outcome or personal freedom after the exit.
5. Overlooking Tax Planning
Owners often regret failing to optimise the sale for tax efficiency. Poor tax planning can result in significant capital gains taxes or missed opportunities to minimise tax exposure through careful structuring of the deal.
6. Selling to the Wrong Buyer
Without a strategic approach, some owners sell to buyers who don’t share the same vision for the business. Post-exit, they regret seeing the business culture deteriorate, long-time employees mistreated, or the business underperform due to poor management.
7. Leaving Money on the Table
Many business owners look back and realise they didn’t explore all exit options, such as employee ownership trusts (EOTs), private equity, or strategic buyers. Without considering all avenues, they may have missed opportunities to maximise both their financial return and the long-term stability of the business.
8. Failing to Secure a Smooth Transition
A hurried sale can result in a bumpy transition for the new owners, employees, and customers. Poor handover processes or lack of transitional planning can lead to operational disruptions, and many former owners regret the negative impact on their business legacy.
9. Underestimating the Time Required to Exit
Many owners regret not starting the exit planning process sooner. Proper exit planning can take years, especially to address inefficiencies, improve operations, or restructure ownership. Rushing often causes them to miss out on opportunities to increase the sale price or find the ideal buyer.
10. Ignoring Employee Impact
A sale without consideration for employees can lead to regret when staff members who contributed significantly to the business’s success are treated poorly or face redundancies. Many owners regret not considering options like employee ownership or ensuring their staff were protected in the deal.
Summary
Regret from not preparing a business for exit often stems from failing to think ahead about valuation, operational independence, personal goals, and the impact on employees. Business owners who take the time to plan their exit carefully, ideally 1-3 years in advance, can avoid these common pitfalls and ensure a smooth, financially rewarding transition.
