Once an owner realizes that a transition of their practice is inevitable (see our article on Death, Taxes and Transitions) the owner needs to take some time and make certain that he or she is emotionally ready. For most, the issue of emotional readiness to sell is a concern.
The emotional bonds of ownership can be strong. The ownership-bond encompasses issues of Identity, lifestyle, and financial security. The best time to come to terms with these issues is before engaging in active discussions with buyers. Otherwise, an owner may find that instead of focusing his full attention on the substantive aspects of the negotiations, his attention is diverted to emotional issues—a situation could obscure the owner’s view of the process and lead to errors of judgment.
Identity Issues
In our culture, what we are is often defined by what we do. If we own a business, it is natural to think of ourselves as owners and “entrepreneurs”. Being an owner can become part of how we define ourselves, part of our self-image.
Ownership pays certain emotional dividends. It can provide a general sense of self-esteem, pride, and feeling of control. It can bring recognition by the community. For some owners, their business and social lives are interwoven, making letting go all the more difficult.
An owner needs understand this transition will happen at some point and prepare mentally.
Lifestyle Issues
An owner enjoys a sense of independence and self-reliance. He’s his own boss. Ownership can provide a sense of focus, direction, and productive purpose to one’s life.
After the sale, the owner may find that they are suddenly retired or working on a part-time basis. If the seller remains with the practice as an employee, he will have to adjust to being an employee and the loss of control and responsibility.
The owner should consider the likely impact of selling on his or her lifestyle. If the owner plans on remaining active in the practice after the sale, is he prepared to account for his actions and report to the new owner? If the owner exits from the practice completely, how will he spend his time?
Financial Security Issues
Fortunately a healthy majority of Dentists we encounter are not so concerned with the financial impact of selling. They have been saving for retirement for years and have minimal personal debt. These Dentists view the amount they receive in a sale as a “bonus”. Others we encounter whom were not so fortunate in financial planning will be losing a very healthy stream of income for an “advanced lump-sum” usually equating to 2-3 years’ worth of full time annual salary. These owners will need to adjust their financial plan. The steady income previously derived from the business through salaries, dividends, and perks will no longer be available. While a revision of the owner’s financial plan can address these matters, the selling owner needs to recognize that future income may be derived from investments rather than the company. The time to begin developing a new financial plan is prior to the sale.
By and large, owners are resourceful and resilient people. Facing the emotional realities of selling should pose no great challenge. Selling is going to change the owner’s life. Before starting the process, the owner should ask himself if he’s ready for the change and what will his new life look like? If he is comfortable with the anticipated change and has a clear vision of “life after sale,” then he is probably emotionally ready to let go of the company and move on to the next chapter of his life. Below are three points to focus on while mentally processing your eventual transition.
1. Accept that this will be a reinvention process
Take an inventory and understand the emotional benefits of ownership. We recommend the books Chapters by Candice Carpenter and Life launch by Frederic Hudson. Excellent reads on reinventing your life after change.
2. Develop a game plan for the first six months
- Get my personal finances in order.
- Coach my grandson’s baseball team.
- Take the extended family on a vacation to Hawaii.
- Become a Mentor
- Volunteer
3. Get curious again
Rather than resist, try to embrace this as a period of exploration. What are you curious about? Remember before you became a “Dentist/Business Owner” what other interests did you have that you gave up on? What life goals did you have? (Examples below)
- Write a book
- Take a cooking Class
- Learn a musical instrument
- Start a blog
- Buy a Motorhome and Travel
- Enter Public Service
When you are thinking about selling, you need to pause and take an inventory of the situation. Do you have a compelling reason or motivation to sell? Do circumstances within the company and the general business climate favor selling at this time? Are you emotionally prepared to sell? Although the above outline is not all-inclusive, you can use it to help you arrive at a decision. If the answers are yes, then perhaps it’s a good time to sell. If the answer is no, then turn your attention to building your business and increasing its value so that when the day comes that it is right to sell, you’ll get the best price and most favorable deal.