After selling their MSP business, many owners experience an unexpected emotional fallout. It’s something Reed Warren, a certified valuations analyst (CVA) and CEO of iT Valuations, has seen again and again. iT Valuations handles more than 100 valuations and up to 15 transactions each year mostly involving MSPs. In a recent conversation with MSP Success, Warren talk about the post-sale blues, which is far more common than you might guess.
MSP Success: How common is it for owners to experience feelings of remorse and depression after selling their MSP businesses?
Reed Warren: Close to 90% of sellers go through some level of mild to severe depression. It usually happens between months six and 18. We keep in touch with our clients after their transactions, and we’ve certainly seen some patterns. Now, in every conversation when sellers start talking about selling, we start talking about the role the business plays in the identity of the owner, and to start preparing for it. Every seller I know has the same attitude pre-sale: “If the biggest problem I have to solve is what to do with all my time and all my money, I think I can figure that out.”
MSP Success: What causes the post-sale emotional upheaval?
Warren: You lose your rhythm because you’re used to getting up in the morning, you’re tackling the problems, you’re working because you want to do something with what you earn from work, and those kinds of things are gone. You lose the drive, and you lose the affirmation from it. The other part is, “Who am I without my business? I’m used to being this, and now I don’t know who I am.”
MSP Success: How bad does it get?
Warren: I do know of people that have sold their business and committed suicide, but it is a very, very small percentage. The fissures, the emotional strains, are underlying elements, and the sale of the business became the tipping point. Selling a business is one of the most emotionally challenging journeys most CEOs will ever go through.
A lot of them end up in divorce. I would say the divorce rate is higher than average. The financial gain can often be the triggering point for not having addressed underlying issues within the marriage such that now the financial gain becomes a path out for either of the two parties.
MSP Success: Why are owners so dismissive of the potential post-sale depression?
Warren: Most CEOs are entrepreneurs. They’ve handled a lot of adversity and figured out a way through it, so they have a high degree of confidence in their ability to solve problems. And [the emotional fallout] doesn’t seem like an insurmountable problem to them. They kind of take it in stride: “Hey, I’ll figure this out just like I’ve figured out everything else.” The reality of what they’ve overcome has been predominantly external in growing a business, and the sell-side blues, if you want to call it that, is a very internal thing that you have to process. You see similar patterns with military personnel that come back from conflict, and even in the sports arena where people have great successes.
MSP Success: How should sellers prepare themselves to avoid emotional fallout?
Warren: The biggest thing is to have a perspective that this is a transition into the next thing. People say, “I’ve always wanted to golf.” “I want to sail around the world.” Activities don’t provide meaning and purpose. What gives you meaning and purpose is aligned with what you’re currently doing. A lot of owners got into the business because they like meeting the needs of clients and have a skillset that lets them bring value to the customer.
Realize this is not a finish line; this is a transition to enable [you] to be more purposeful, and more focused and intentional. Maybe you’d make a great consultant; come back as a peer group leader and give back to the next generation of MSP owners. For some, it’s about writing a book about their experiences; others may want to go into politics.
MSP Success: Are there support groups?
Warren: There is a support group called IT Nation Grow, created by managed services veteran Arlin Sorensen and managed by Scott Scrogin. I encourage my sellers to interact with them. It’s a place to go to help prepare you for post-sales emotions in a proactive way.
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Next Steps For Sellers: Have A Plan
Mike Fowler is one of the fortunate ones. After selling his MSP business, he’s been enjoying his “unemployed by choice” status. But most sellers have a vastly different experience, struggling with identity crises and remorse.
“Yes, there is a sense of loss of identity,” says Paul Cissel, referring to the aftermath of selling his MSP business. Currently, he is CEO of Growth Caddie and M&A Expert in Residence for TMT. But he remembers the empty feeling after selling his MSP.
“Running a company, you are the big dog. Playing golf with retired business owners, the pecking order changes based upon ability, and I am not good at golf,” Cissel jokes.
Estimates indicate 70% to 90% of sellers grapple with remorse and depression post-sale. Fowler is not one of them. “I’ve had a fairytale ending but not all others have been so lucky.”
During the process of selling, Fowler says owners should prepare for the aftermath. Even if they stay on post-sale, they have to accept they are no longer in charge.
Cissel says one of the biggest challenges is trying to stay busy. “You are used to getting hundreds of emails a day, and suddenly you are not. You have a lot of time.”
Currently he helps MSP owners accelerate their business value and reap the benefits. “I really enjoy helping owners that have not been through an exit event to plan what’s next.”
Fowler, who is considering his next steps, admits he misses the rush. “I really miss the people, the challenges, and celebrating our successes together. For so long, my job was my identity, so I’d be lying if I said I didn’t miss it.” But on the flip side, he says, “I do enjoy not having back-to-back meetings all day and occasionally sleeping in.”
