The Top 5 Reasons People Sell Their Business
The Top 5 Reasons People Sell Their Business
One of the very first questions a buyer asks is “Why?” “Why are you selling your business?” Invariably, behind it is a mistrust or doubt driven by horror stories grounded in very little truth but it is an important question as it sets the context for how a business is run and why certain things are the way they are. After 15 years of M&A and Business Sales and literally hundreds of completed transaction I can tell you two things emphatically: 1) 99% of the time Sellers tell the truth 2) Proper Due Diligence discovers the other issues.
Now, as to the question at hand. The fundamental reason a business owner makes the decision to sell a business may not necessarily be for financial reasons, but to free up resources, focus on other priorities or make time for other opportunities.
In this article, we review why owners might decide to sell a business, along with some steps to consider when preparing for the sale.
1. Retirement
After years of investing time, energy and resources you could well be ready for a rest or retirement. Before realizing the sale value however, you should consider planning for continuity, for yourself as well as for the business.
Depending on the nature and timing of the planned deal, preparations should include delegating responsibility to trusted directors and senior managers, as well as taking tax and pension advice to optimize the date of your intended retirement.
2. Lack of funds for growth
Due to changes in the wider economy and variations in bank interest rates, credit opportunities may not be available or feasible.
In such circumstances, maybe selling part of your business might, in fact, enable expansion or access to other resources that can help grow revenue, reduce costs or mitigate risk.
Maintaining healthy liquidity is crucial and needs to remain an active consideration before selling all of your business.
3. Lack of drive or inspiration
Eventually, boredom and burnout can affect even the most motivated and resilient of entrepreneurs.
During the initial stages, startups tend to take risks almost by definition to achieve organic growth. At this juncture, founders tend to be more confident as their fledgling organization has not yet acquired significant value.
As time passes, however, owners grow older, more conservative and concerned about losses. Perhaps understandably, you may have begun to lose interest in what was a passion or pet project. Nonetheless, it is still necessary to present the business in its best light—including (or especially) when selling up.
4. Ready for the next new project
At times, entrepreneurs set up businesses with a planned exit strategy and sale date in mind from the outset. In such cases, it is important to leave room for the business to grow so it represents an interesting new opportunity for a prospective buyer.
Sometimes, potential purchasers ask why a business is for sale if it is profitable— i.e. what’s the catch? Paradoxically, it is when a company is at its most profitable that it is often the best time to sell.
5. Losing partnerships
Profit motives and increasing revenue may not be enough to maintain everyone’s long-term interest, but not giving a growing concern your full attention usually results in lost opportunities.
It could then be wise to look for something new – perhaps more fun and challenging.
Growth can level off or become stagnant as teams change. Additionally, falling out with a partner or colleague can leave a bad taste. If this happens, it is best not to let this reflect throughout the organization when putting it up for sale. Maintaining a professional approach is likely to help realize the best selling price.
Some of the most successful business owners prefer to keep a watchful eye on the possibility of selling up and realizing their investment because timed correctly, it can be a smart decision.
There are lots of other reasons which include what a colleague calls the 3 D’s : Death, Divestment, Divorce. In Florida, there are even more related to immigration visas and life changes are driven by demographics. Suffice it to say there can also be a combination of factors.
To learn more about this topic and other feel free to contact me at 321-287-0349 or visit my website at https://www.yourfloridabusinessbroker.com .
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