What is EQ? And how does it help the sale of your business?
Posted on April 20, 2022
Upon occasion, The Naples Trust Company reaches out to experts in the area who align with our business goals for the benefit of our clientele. We often work with business owner clients who have grown a successful company and are considering selling in the next year or two. Many facets go into building and selling a business. One of them is Emotional Intelligence and our colleagues at Falls River Group are investment bankers adept at explaining why this is an important facet to consider.
Emotional intelligence (EQ) is defined as the ability to connect one’s own feelings, and the feelings of others, to shape how people engage and react to one another. This is especially important when it comes to success in business. Emotional intelligence is often more important than natural intelligence (IQ) in determining success. “The most effective leaders are alike in one crucial way: They all have a high degree of what has come to be known as EQ. It’s not that IQ and technical skills are irrelevant. They do matter, but…they are only entry-level requirements for executive positions” (Coleman, Harvard Business Review).
Congratulations! If you have a successful business, one that someone else would want to invest in or acquire, that means you have great EQ. So how can this EQ advantage translate into a transition of your business to a new owner, and why does it matter?
According to McKinsey Quarterly 2/3 of all mergers and acquisitions fail to meet their objectives post transaction. Why? In large part because the person with the highest EQ isn’t calling the shots anymore. It doesn’t mean the new owners aren’t smart, capable and deeply committed to the success of the company. It simply means you need to use your EQ before the sale of your business to set the stage for what comes next.
• Don’t be afraid to let go, to turn control over to someone else. The number one reason businesses don’t sell is that the business is completely dependent on the owner who can’t imagine someone else taking his/her place. Use your high EQ to make sure you have the right team in place.
• Clearly define the business’s mission statement, what you envision as the future of the business, for the new owner and your employees. This will help your employees feel empowered and important to the future success of the business. Post transaction failures occur because people are threatened and want to protect their turf. If they can see the runway, the future, then they will be more willing to do their part to make it a success.
• Business owners who excel in high EQ understand their customers and colleague’s feelings and perspectives. It’s not just about what the business is worth monetarily. The key is finding a buyer who will fit the “culture” you have helped create.
• Plan to hire an experienced investment banker to help you sell your business. You are an expert at what you do but you are probably not an expert in mergers and acquisitions. Even if you have grown your business organically and through acquisitions, you need to allow your advisors to run the process. What is extremely important is the chemistry you need to have with the buyer. Only you can make that determination. Your job is to keep running the business as if it is not for sale.
• Valuations vary greatly depending on several factors. You need to be comfortable with what you want/need financially from the sale. If you plan to live off the income from the sale, it is critical to bring a solid investment management and estate planning firm to your team. They will manage your post transaction assets to meet your lifestyle goals. Start having that conversation prior to the sale to mitigate tax consequences.
• Finally, give yourself a big pat on the back. Your tenacity, dedication and high EQ has gotten you to this point.
Maegan Evans, PhD
Strategic Advisor, Falls River Group
The Naples Trust Company and Falls River Group can help you through the process of selling your company, and helping you realize the life you’ve envisioned.
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Falls River Group LLC www.fallsrivergroup.com
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