The Psychology and Emotion of Selling a Business

Most business buyers and sellers are unprepared for the level of human psychology involved with selling a business.  The reality is that unlike many other investments, the sale of a company is one where human irrationality can many times trump hard facts.  The key is to understand this reality and to deal with advisors who understand this and have the relevant experience to guide you through the transaction.  This article will examine some examples pertaining to when psychology and emotion can interplay within a deal dynamic.

Timelines are important
When you go about selling your business it is critical to respect timelines.  Over and above the legal requirement pertaining to a purchase agreement or a letter of intent, timelines matter because buyers get nervous and delays that pertain to the waiving of conditions or closing can jeopardize a deal.  Buyers are human and they do get cold feet.  Nothing material may have happened to the business to cause a purchaser to back out of the deal but sometimes they talk to friends or family or other people who are not qualified to advise them and the buyer may allow doubts to be cast into their mind.  All other things being equal, for a seller it is better to close a business sale sooner rather than later.

Sometimes professional advisors do not heed the emotion & psychology involved in a deal
A prime example of this is a lawyer.  A lawyer is a professional that is crucial for when a business is sold.  He or she will gave you legal and practical advice regarding the sale but they do sometimes overstep their expertise and give opinions when they don't have all the facts at hand.  Again, they are removed from the intimate contact between a buyer and seller and not be privy to the emotion and normal deal jitters that a buyer may have (even though they may be unjustified).  Again, the principle of, all else being equal, sooner is better than later.  Get the business purchase agreement executed as soon as you can and don't let unnecessary delays happen.  Business for sale listings do get stale if they don't move along quickly enough and delays can impact a buyer's emotions and perceptions of the deal.

A business broker can help you gain perspective
A business broker typically has a depth of experience when it comes to selling a business.  Always rely on your professional advisors and do not rush a deal so as to put yourself at increased risk.  But do heed the advice from knowledgeable (and ethical) business brokers.  They will be able to give you a perspective that an attorney may not. 

In many sales, time is of the essence.  Buyer psychology is intrinsically interwoven with the time required to execute an agreement and generally move things along.  Conditional periods that drag on and lawyers and other professionals that do not move quickly enough can have a negative outcome on the sale of the company.  The key point to remember is that you are ultimately the client and are in charge.  Be prudent and stay protected by heeding professional advice but don't let negativity and delays dictate the way your sale progresses.