Selling a Part-time Business

Three months ago I sold a business. This is the story to share the experience and emotions behind the event.

Context

Before we dig in, here’s some pre context:

• This was a small business that I founded and worked part-time on for the last 5 years with a few partners.
• This was an asset sale – where the buyer purchased all the assets of the company, not the company itself.
• This wasn’t life changing money.
• I engaged a broker to assist with the sale. This is much different than trying to sell a business on your own, which is why I mention it.

The WHY

I think it’s also important to understand the why behind the sale. For me, it really boiled down to one thing – mental clarity.

I’ve been juggling multiple businesses for years now. To some degree, I’ve actually become quite good at it. This specific business was generating a small profit distribution for me and my co-founder each month. We put a few hours of work in each month and the business spit out a check. To most people this would be a good investment and return on their time.

However, the mental clarity of having one less thing on my plate [at present] is paramount. It far outweighed any financial incentive or gain from the sale. I currently have two other businesses that require my focus and create the lion share of my income. More importantly, I have a wife and two children that command the majority of my attention. I’m in a life phase where business is not the priority.

Additionally, there are a few symptoms of part-time effort that started to weigh on me.

For example:

1. It’s hard to really gain traction when something is a part-time effort. You need to commit if you want meaningful results out of something.
2. Keeping a part-time team engaged is not easy. Everyone has other priorities and often views this part-time effort as “when I can get to it.”
3. I started feeling a strong burden of responsibility to our customers in the sense that we were underserving them. In other words, I knew the product could be improved if someone with more time and focus was leading the business.

My co-founder had similar thoughts on these topics so we decided it was time to sell.

Emotions

To start, this was my first time being the owning seller in an asset sale. I’ve been a part of exit events in other businesses, but this was my first rodeo around selling my baby. And it does indeed feel like selling your baby.

One of the strongest feelings that comes with this type of event is trouble letting go.

I just spent 5 years working on this business. I know every detail, feature, customer and historical event associated with the business. I spent a lot of my time and energy on it. Now I have to just give it away to someone else?

That’s the hard part. There is a strong sense of attachment when you found a business, regardless of size. As I said before, it’s your baby, and parting with it is not easy.

In fact, I actually had two attempts to sell the business, with the first attempt resulting in me backing out. That’s right – I had second thoughts and pulled the plug. This was important because it forced an ultimatum where we had to prove growth or realize the sale. So we spent several months attempting to re-ignite the business with a new growth plan. This did not yield the results we were after… which led me back to broker and realizing the sale.

While there was some level of failure to this, it also brought me incredible peace. I was able to admit to myself that I’d played my part in the business and now it was time to close the chapter. It was time. Bitter sweet as they say.

So we engaged the buyer and committed to round 2 of the sale.

The Selling Process

The process of actually selling the business was fast and chaotic. Here’s an abbreviated version of the events:

The first step is rounding up your KPI metrics.

These are the important numbers in your business that a potential buyer would want to review. I had most of these ready but there was definitely some extra work to pull things given our part-time effort.

Then comes the interview process.

We had a few calls with interested buyers where questions were answered and background was given. This is where I really felt the emotions of starting to let go. The type of questions that were asked forced me to realize areas where I failed or neglected the business. It was an enlightening experience.

When you have a serious buyer they’ll submit an LOI – letter of intent.

This is an agreement between you and the buyer that formalizes their intent to buy the business. Once the LOI was signed we started the final due diligence. This part is where they dig deep into your KPIs. My co-founder and I had to round up some specific data that they needed, and at one point, I had some fear that our lack of such data would break the deal. However, our deal was small enough that it didn’t change their decision. We met the basic criteria so they could confirm their intent and finalize an APA – asset purchase agreement.

The asset purchase agreement is the true contract to purchase the business.

This is where things get real. It’s a lengthy document that normally requires legal review and guidance. For a smaller deal like ours, the contract was fairly straightforward so there wasn’t a ton of back and fourth. Larger deals will generally incur more negotiation in the APA. These details can get very specific, so you have to read the fine print and make sure you understand things. I was fortunate to have a couple friends in my corner who had gone through this before, which gave me some sound advice and guidance.

Once the APA is signed the transfer begins.

This is the final step. It involves transferring all the IP and assets related to the business. This was a true blitz… with our team racing to hand over account logins and other deliverables. We hit a small snag with one of our technical accounts, which almost cost the deal, but the buyer was willing to compromise and it worked itself out. This was the most stressful part of the journey for me. Handing over everything we created and/or setup during the last 5 years was very sobering. It was truly time to say good-bye.

And so we did.

The transfer took a few days and then the business was gone. Just like that.

Many people work out a transition period after the sale where the seller sticks around in advisory context as the new buyer acclimates to the business. We elected a short 30 day window and it went very smooth. I provided some help on the sales side and even got to know the buyer better on the personal level. I’ll be happy to assist them with small things here and there if they arise in the future.

That’s one part I skipped over – feeling good about your buyer. We had the privilege of using a broker who vouched for our buyer, so I didn’t do heavy background research on them. However, I had a good feeling about them from the first conversation, which proved to hold up through the sale. They were a good fit to take care of our baby 🙂

Life after the Sale

It’s currently a couple months after the sale and life is pretty good. I have more quality time to spend with my family. I have more mental clarity and peace with my business life. I’m also relieved of the previous burden of running that business. As a cherry on top, we have a little extra money to put towards a new investment.

Finally, I have some new lessons learned from the entire experience:

• Starting a business is easy. Selling one is hard.
• Lean into mentors and friends. My wife, business partners, and various friends helped me gain clarity on the decision.
• Make a decision and stick to it. I wasted a lot of time and energy second guessing things.
• If you have intentions of ever selling a business, track your KPIs from the start. It will make things much easier later on.
• Trust your gut instinct on who to sell to. First impressions are huge.
• Set time aside for this process. I squeezed things in to my normal work routine and it completely threw me off balance. Selling a business is not a light effort.
• Enjoy the experience as much as possible. Most of us won’t sell many businesses in life. In hindsight, I rushed the experience instead of being fully present with it.

Until the next time!

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