Every day, countless business owners and entrepreneurs ask themselves, “When should I sell my business?” The decision to sell a business is not often an easy one, but there are many reasons an owner might do it. In this article, we’ll take a look at seven common reasons to sell your business.
7 Reasons to Sell Your Business
1. Business Momentum
While this may feel counterintuitive, the best time to sell a business is when it is doing well. Simply put, you can get the most money for your business when it is most profitable. If an owner is near retirement age and business is trending up, many will decide to go ahead and sell because they recognize that buyers want to buy companies that are growing and have a promising future.
On the other hand, even if an owner is not yet ready to retire, they can still sell the business and secure their financial future, but remain active in the company, working for the new owner to help them with their succession and growth of the business. This can be a rewarding experience for an original owner while providing an opportunity to transition gradually into retirement rather than jumping from full-time work to full-time retirement. In this scenario, even if there is a subsequent dip in the economy or the business declines, the original owner no longer carries the risk of losing value in the business.
This is one reason why our valuation process at Viking M&A is extremely comprehensive. We value businesses in a way that helps to indicate the best time to sell a company. We consider financial trends over time; this helps determine an appropriate sales price and also assures a prospective buyer that your business is stable and likely to keep growing. However, since we cannot predict the future, we must keep the primary focus on what we do know. The company’s current and historical financials are the best evidence of your business trajectory.
Burnout is one of the most common reasons given for selling a business. Business ownership is a heavy burden on owners. Most owners believe that the best way to deal with this weight (and prevent burnout) is to invest more of themselves into the business in one way or another. Sometimes this looks like working extra hours; sometimes it means hiring additional support staff. Alternatively, some owners attempt to prevent burnout by stepping away temporarily and taking a vacation.
For owners who have taken steps to prevent burnout, and yet burnout persists, selling the business can offer the means and the time to spend more time doing something more fulfilling. Generally speaking, it is a good idea to sell your business before you fall prey to full burnout. Your lack of interest and motivation can negatively impact the business, which can make selling more difficult.
3. New Interest
We often meet business owners who do not describe themselves as “burned out,” but rather, they have lost interest in their business. These owners simply desire to do something different. If you find yourself feeling disinterested or detached from your business, an unfortunate but likely side effect is that your efforts to sustain and grow the business have probably decreased along with your interest and passion.
New business opportunities come up regularly, and you may find yourself much more interested in something different. This is why many business owners come to us with the desire to sell their current business and potentially buy a new business. Viking business brokers and advisors have owned many of their own businesses, and they have found that pursuing a new interest and starting a new business venture can be incredibly revitalizing. In addition, you can apply your previous skill set to just about any endeavor you choose. Even better, as an experienced business owner, you will have the added benefit of learning from your likes and dislikes from your previous business.
Another common reason to sell your business has a more direct connection to money. An owner may be concerned about having the funds to sustain a future for the company. If business is down, unfortunately, in today’s competitive market, small businesses and startups can experience financial hardship and even bankruptcy. Selling your business will give you the extra funding you need to get back on your feet.
Sometimes selling your business isn’t actually about the business at all. You may simply get to a point in your life when you need or want the capital. Maybe you have a pressing need for cash to cover an emergency, or maybe you want cash to travel, pursue a new interest, or start a new business. Whatever the circumstances, selling your business can allow you to convert the value of your business to liquid cash that you can use for various purposes.
While owning a business can be very fulfilling, selling a business and watching it continue to grow can also bring great satisfaction. Many business owners have dedicated their life to ensuring the success and growth of their company. These owners deserve to enjoy the fruit of their labor while still in good enough health to enjoy retirement. As we mentioned in an earlier point, maybe you’re not ready for a complete transition to full-time retirement. In that case, you can stay on as a part-time consultant, freeing yourself up to enjoy new hobbies while assisting in the business less directly. The choice is entirely up to you. No matter what you choose, though, it is essential that you work with an experienced partner to maintain business continuity, preserve your business reputation and legacy, and ensure a smooth transition.
Sometimes relocation goes along with retirement. For example, an owner may look forward to selling the business and moving to a new part of the country. On the other hand, relocation may be required for family reasons or for another professional opportunity. Keep in mind that when relocation is the reason for selling your business, it may affect the timeframe of the selling process and the type of transition period that a seller will provide to the new owner. Be sure to communicate with your business broker about any time frame constraints involved with your relocation.
7. Selling Was Always the Plan
For some, selling the business is the plan from the start. Some types of business owners are serial entrepreneurs at heart, made to move from one business to the next. This person thrives on taking a great idea and making it a reality. If you like to take things through the start-up phase, but then let someone else handle it from there, the reason to sell your business is simple: it was the plan all along. When done well, each time you sell a business, you will gain capital to invest in your next venture; string together a few of these sales, and you will hopefully continue to move forward with growing momentum and capital.
Were any of these reasons to sell a business surprising or new to you? If you are thinking through a potential exit, a good place to start is with our no-cost, confidential business valuation. We are here to help provide you with essential information to help you make the best decision at the right time for you and your company.