When a business owner’s identity is fused with their business, it makes it harder to successfully leave and embrace their new life. So their identity gets defined by their role in ways that only people in positions of power and prominence understand.
For even the most level-headed operators, starting a business is intensely personal: They’re in an industry they understand and believe in, they work to practices and systems they feel are right, and they build a community by choosing the people they like to work with.
Before long, the business becomes a key part of its owner’s identity. For decades they help it grow, tackle challenges, experience wins and recover from losses. Most likely, they spend more awake time with the business than they do with family and friends.
Over time, business owners commonly develop a psychological phenomenon known as ‘role-identity fusion’, which is when the business owner develops a sense of oneness with their business and is unable to separate their business role from their identity as an individual.
But while this deep sense of identification with a business is natural, it can make the process of leaving the business extremely hard.
Dr Allie Taylor, a business psychologist and senior partner with US-based consultancy Orange Kiwi, says there are essential factors that motivate people in life, and for business owners these can often be derived from their role, such as the need for autonomy, to be connected to others, to feel competent and effective, and to feel significant.
“For successful owners, what happens with them is the world interacts with them through their role as the owners,” says Taylor.
She says they get invited to sit on boards, to participate in non-profits and charities and NGOs [non-government organisations], to speak, and into places of influence and power because they’re a business owner. So their identity gets defined by their role in ways that only people in positions of power and prominence understand.
Being unable to let go of a business
Craig West, managing director of succession planning and business advisory firm Succession Plus which has offices around Australia, says for some of the clients he has worked with, the thought of separating from their business causes such anxiety that they talk themselves out of exiting and hang on for far too long.
“We have several clients in their 70s, some in their 80s, they’re still working, they still own the business, they think about leaving but they’re not anywhere near ready to do it because they’re afraid,” West says. “Their business is their whole life.”
In some cases, overly attached business owners become an unwanted distraction for the new owners due to their inability to let go.
“I’ve seen examples where people have just turned up at their old business to keep an eye on things,” says West. “I say ‘you can’t do that anymore, it’s like turning up at a house you just sold and saying ‘I just wanted to make sure you are keeping it clean’.”
Hanging on for too long due to an unhealthy fixation with a business can make it much harder to leave in years to come.
Preparing a business for sale takes time. Seeing the business off in good shape and in the hands of the right buyer can go a long way to easing the business owner out of their identification with the business. To achieve this, West has seen some owners choose a buyer they trust over a buyer offering a larger sum.
But in some cases, business owners miss the chance to plan their exit well by not leaving when the time is right: their children are over 50 and thinking about retirement themselves, and therefore unsuited to take on the business; health issues force the owner into a hasty exit which isn’t planned properly and leads to a less than ideal sale result.
Planning an exit early is essential to an owner’s wellbeing
Leaving a business presents a two-pronged challenge for business owners.
Firstly, they need to find the validation and motivation they got from their business, elsewhere.
Secondly, they must maintain control and confidence during their business exit, when teams of advisers and investors arrive and begin to question and critique an entity that is a key part of the business owner’s identity.
For some business owners this can be profoundly disturbing. One client said to Taylor: “When the suits show up I feel like I’m a three-year-old child. I feel completely incompetent.”
Dr Taylor says 70 per cent to 80 per cent of businesses fail to sell on the first try, depending on which statistics are looked at. Out of the minority that do exit, about three quarters are either dissatisfied or profoundly dissatisfied with the result, she adds.
Conversely, business owners who begin planning years ahead and oversee a business transition that sees the bottom line swell and profit reach new heights are far more likely to leave the business in a healthy state of mind, inspired and ready for new personal challenges.
A well-planned process that allows plenty of time for readying the business for sale can help the owner gradually adjust to their post-sale life. Building a community and systems that can function without the owner’s input is a major step toward letting go. This can also help the business owner go, eyes open, into the selling process.
Using old skills to adjust to a new life
Ashley Sanchez, a private banker at ANZ, says business owners she has worked with sometimes become more emotional than they expect when “instantaneous retirement” kicks in. Their morning purpose and pre-work rituals are replaced by an empty sense of what to do next.
“I've had a couple of clients for whom, in the lead-up to the sale, weren't actually ready to have a conversation about what's next,” Sanchez says. Rather, their focus was on readying the business for sale.
But one common goal many can agree on is philanthropy. This is one area where many of the abilities and skills business owners have developed can be put to good use, along with their energy, in return giving them motivation and focus in their post-business life.
Taylor suggests business owners explore opportunities to use their strengths outside the business. This could include volunteering on boards of charities or NGOs in a capacity that uses their skill and experience; or participating in entrepreneurship programs at local colleges or mentoring a young entrepreneur or doing angel investment – bringing both skills and capital to growing businesses.
Business owners also often find there is a large and like-minded community they can participate in once the business is sold, Sanchez says. This could include friends and former business partners coming to them with opportunities to use their skills.
Frank Williamson, chief executive officer of US-based Oaklyn Consulting, which provides merger and acquisition advice to privately held companies, says some business owners are able to keep perspective by being open to new and interesting strategic ideas and relationships throughout their time at the business. Their zest for new ideas helps them adapt more easily to life after the sale.
Connecting with community
Being a member of multiple communities is a major advantage for those parting ways with their business, Williamson says. “If you say ‘hey, it’s come time to leave my business but the only purpose I have in life is my business and I have to go and find another one’, that’s hard to do on a schedule.”
“But if you had been involved in your business, your industry, your church or synagogue or mosque, your local politics or a school, if you had invested in four or five different communities over time, when it comes to the question of changing your purpose it’s not so hard.”