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The Business Owner’s Emotional IRR

When a business owner decides to sell the business that they have grown and nurtured for many years, one of their first thoughts are about leaving the business with the best possible chance of future success. Their Business Advisors will focus on the performance of the Company and look at its IRR (Internal Rate of Return).

However, as an Owner contemplates their independence from the Company they founded, they need to consider a second IRR. Their Emotional IRR and how they will address the three components (Identity – Relationships – Routine) in preparing for their life without their business.

Now is the time to think about how to become emotionally independent from the business, knowing your identity, relationships and routine will change when you are no longer the Owner of the Company you created.

Think seriously about the impact of these changes. It can be frightening to imagine life without your business. Questions that will arise when thinking about your identity are “Who am I apart from my business?” “What is my role in the community without my business?” “My business is who I am. How will I process the change in my identity?”

Consider how your relationships will change. A Harvard study that started over 75 years ago followed young college students and poor teenage boys through their lifetime, beginning with 724 people. Today less than 60 of them are still living. The results from this lifetime of studying these people’s lives ended with one simple conclusion. The greatest happiness they all had in their lives was a direct result of the relationships they had with their family, friends and in their communities. The study determined good relationships keep us happier and healthier. In planning your retirement, you must think about the future of your relationships – will the business relationships you have developed over the years continue? What will replace them if they phase out? In the Harvard study, the people with the most satisfying lives as they grew older had spent the most time transitioning their work & personal relationships.

Finally, how will your daily routine change apart from your business? What will you do with yourself if you’re not going to your business, working with your employees and dealing with the responsibilities of business ownership? How will you develop new routines and engage in new activities? What are you doing today to prepare for that life?

Don’t dismiss this important aspect of exit planning – the Emotional IRR. Most people are adept at the practical and obvious elements of exit planning, but few address these emotional issues. Make this as important as the financial and practical side to exit planning to keep yourself emotionally healthy and happy.

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