Selling your business is a significant decision that can have profound implications for the rest of your life. If you’re thinking about selling, evaluate your motivations to ensure you’re selling at the right time and for the right reasons. Some motivations are more likely to increase your happiness and overall success, while others may result in disappointment and regret.
Good Reasons to Sell Your Business
- Retirement: After decades of hard work and dedication, it might be time to slow down while you’re still young and healthy enough to enjoy the fruits of your labor. Selling your business could be the key to freeing up time to focus on other pursuits you’ve always wanted to explore but couldn’t due to the demands of your business.
- Health Issues: If you’re facing serious health issues, running a business can become overwhelming and jeopardize the long-term health of your company. It might be good to look at selling while your business is still running well.
- Market Conditions: If your industry is experiencing a lot of growth and there is high demand for businesses like yours, you may be able to sell at a much higher value than normal. This could be a good enough reason to sell even if you weren’t planning on selling yet.
- Strategic Acquisitions: Larger companies or competitors may be willing to pay a premium for your business due to the synergy created by the acquisition, offering them significantly greater opportunities
- Diversification of Wealth: Selling your business can be a strategic move to diversify your wealth. Instead of having all your financial resources tied up in one venture, selling allows you to invest in other opportunities, reducing risk and potentially increasing your overall financial stability.
- Burnout: Running a business can be incredibly demanding and stressful. If you find yourself feeling burned out and lacking the passion you once had, selling the business can be a way to regain your enthusiasm for life and explore new interests or ventures.
Bad Reasons to Sell Your Business
- Short-Term Financial Pressure: Selling a business to address short-term financial pressures can lead to accepting a lower offer than what it’s truly worth. Buyers tend to be more experienced than sellers, and they are seldom as desperate to buy as you might be to sell in this situation. If they sense that you are anxious to sell right away, they will likely use that to their advantage. You would probably be better off exploring other financial solutions before selling.
- Lack of Succession Planning: Most buyers want to see a strong management team in place. If no one on your team can run your business in your absence, you will receive a much lower offer and they will probably require you to stay on for several years after the sale to ensure a smooth transition. The better your business can run without you, the more valuable it is.
- Emotional Decisions: Making the decision to sell based on emotions rather than rational analysis can lead to severe regret. Whether it’s due to a temporary setback, personal conflicts, or frustration, it’s crucial to take a step back and evaluate the situation objectively.
- Market Downturns: Selling during a market downturn can significantly reduce the value of your business. It’s often better to weather the storm and wait for your financials to improve before considering a sale. In 2006 and 2007, several of my clients received astronomical offers to buy their businesses, but they had no interest in selling because they were making so much money. When the financial crisis hit in 2008 and their revenues dropped by over 50%, suddenly they were very interested in selling, but no one was willing to pay anywhere close to the prices they had offered before.
- Unresolved Business Issues: If your business is facing unresolved issues such as declining sales, legal problems, or operational inefficiencies, selling may not be the best solution. Potential buyers will likely identify these issues during due diligence, which can lower the sale price or deter buyers altogether. Addressing and resolving these issues before putting it on the market can greatly enhance the value of your business.
- Peer Pressure: Sometimes business owners feel pressured to sell because their peers are doing so. However, what works for others may not necessarily be the best decision for you. It’s important to assess your unique situation and make a decision based on your specific circumstances and goals.
Maximize Your Chances of Success
No matter the reasons for selling your business, be sure that you have specific ideas for how you will maintain meaningful purpose after the sale. Think of it as running toward an exciting new opportunity, not running away from something you dread.
This is a complex and deeply personal decision with irrevocable implications. We are here to help you evaluate your motivations and ensure that your decision aligns with your long-term goals, minimizing your chances of regret and maximizing the likelihood of a happy, healthy outcome!
