Typically the decision to sell a profitable company is not an easy one for a business owner. In many cases, there are several reasons why someone decides to sell. The reason to sell can make a difference in how quickly you want to sell and how long of a transition period you will provide to a new owner. So it’s essential for potential buyers and Business Brokers to understand a seller’s reason (s) for selling their business. We’ll cover the top 10 reasons that business owners decide to sell and how this can influence the sale of a business.
1. The company is not making enough money
This is one of the most common reasons why someone decides to sell their company. However, if the company isn’t making much money, it will be difficult to sell. Many of these businesses simply go out of business because most people don’t want to buy a business that isn’t profitable.
This is the most common reason profitable companies are sold. Often the company is passed down to a family member, but in many cases, the family members don’t have an interest or the skills necessary to run the business. In this scenario then its time to contact a Business Broker or M&A firm to get a potential selling price and strategy for selling the company confidentially. A Business Broker will find out more about your business and what your goals are.
Some business owners make a decision to sell, and they want to retire as soon as possible. Other Business owners like the idea of transitioning into retirement. A good business broker can look for potential buyers that can accommodate either a very short transition period or the option of a lengthy transition period where the seller can work full time and then part-time if they wish. You can hire an experienced Business Broker to maximize the sale price of your company and provide you with options.
This reason sometimes goes hand and hand with retirement. Many business owners look forward to being able to sell their business and move to a warmer climate or a new place that they want to live in. Alternatively, relocation can be due to the need or desire to relocate for family reasons or another business opportunity. When relocation is involved, it may affect the timeframe to sell and the type of transition period that a seller will provide to a new owner of their business. It’s important to communicate whether there is a timeframe involved in a relocation. This can affect how aggressively a company is priced as well as whether or not there is a need to get buyers that are OK with a very short or remote transition period.
4. Burn Out
There are different types of burn out but I would say in general burn out is being really tired of what you are doing. If you own a business and you aren’t ready to retire, you can try different functions and types of work in the company before deciding to sell your company. However, if you’ve tried out different things to do within the company and you are still just tired off doing what you’ve been doing then maybe it is time to consider selling your company.
Business Brokers offer a confidential consultation to understand how much you would need to get to sell the company and can let you know whether this is achievable or not. This will help you decide whether the proceeds of the sale would be enough to take some time off and go into some other line of work which might be more satisfying for you. When you are burned out its a good idea to sell before you really lose interest in the business and it takes a downturn. In these cases, it can be difficult to sell for a good price.
5. Health Problems
We have spoken with many business owners who have worked well into their retirement age and enjoy what they are doing, but they have called us when they are ready to sell because of a health problem. While this may be unfortunate sometimes it’s a good opportunity for the business owner to slow down and recuperate and then enjoy some activities that they couldn’t do while they were working full time on their business. Sometimes health issues can be a wake-up call to make life changes such as slowing down and turning over the reins to someone else.
6. Other Business Opportunity
When you own a successful business, most business owners don’t want to go back and work for someone else in a regular job. However, some business owners own multiple companies and want to sell one of them. This can be due to wanting to spend more time with friends and family. Or perhaps one of the businesses they own has taken off and just requires a full-time effort to manage it and maximize the opportunities. Or maybe you enjoy managing one company and not the other, so its best to let someone else handle the business that you don’t enjoy.
7. Your Business is at a high point
Some companies continue to grow both revenue and profits for a very long time, but most businesses have different cycles of ups and downs over time. If you are near retirement age and the company is on an upswing, many business owners will decide to sell at that point because they understand that they can get the most money for their business when it is at its most profitable. Business buyers prefer to buy companies that are growing and have a bright future.
So even if you aren’t ready to retire right away, you can sell the business and secure your financial future while still staying active in the company and working for the new owner to help them to continue to grow the business. This can be rewarding and also provide you an opportunity to work part-time and transition into retirement rather than having to adjust from full-time work to full-time retirement. Even if there is a recession or the business does decline you no longer have the risk of losing value in the business.
8. Partner Problems
In some cases where there are partner problems, one partner may buy out another partner. This is the first option to try. However, neither partner may want to buy the other out, or they can’t agree on a price and terms of a buyout.
When this is the case, it’s often wise to call in an experienced Business Broker to provide you with a possible asking price. If this is higher than what one of the partners is willing to pay then it makes sense to start the process of selling the company to an outside buyer. Often they will only need one of the partners to stay on for a transition period, so this will remove the need for the partners to work together. The partner that is staying may want to retain some equity in the business, but keep in mind most buyers want a majority interest in the company they are buying, so it is easier to sell the whole company than a partnership interest.
9. Death of the owner of the Business
Ideally, it is better to sell a company before the owner dies, but of course, this can’t always be predicted. Sometimes we receive calls from a spouse of the owner of a business that has passed away. It is more difficult to sell a business when the owner is no longer there, but we do have experience doing this. An accountant and spouse or family member can provide information on the business to a Business Broker and potential buyers to give them enough information to decide on purchasing the company.
10. Looking for a change
You may not be burned out or may not have another business opportunity, but you may want to take some time off and do something different. In some cases, the business owner may have gone through a divorce or other change in life circumstances where they now want to spend more time doing other things and have the money to do so with the sale of their company. If they are too young to retire, then the sale of their business will at least allow them to take time off and figure out what the next step is in their life.
Selling for a Combination of Reasons
Many times the sale of a business is prompted by a combination of reasons such as health issues and retirement, relocation and retirement, burn out and partner problems, and many more combinations. If you have a business that has an annual profit of $200,000 to $5 Million, Synergy Business Brokers provides confidential consultation to understand your needs and let you know if we can help you achieve your goals.
Synergy Business Brokers M&A
We have experience selling companies in Healthcare, Technology, Construction, Manufacturing, Distribution, Services, Engineering, and Transportation. You can read more about our Sales Process and the team of M&A Brokers and watch some of our videos.
You can contact us at [email protected] or (888) 750-5950. To provide us with more details in advance of your phone call, please fill out our Seller Registration Form. We’ll discuss your situation and let you know if we think the timing is right for you to sell your company.