The COVID-19 pandemic forced businesses across the country to close temporarily, impacting their profitability.
Whether or not your business was considered essential, many industries were affected by the economic shutdown that occurred in 2020.
The economic uncertainty in the U.S. is currently only one of the many reasons that people consider selling their business.
Let’s take a look at seven clear signs that it might be time to consider selling your company.
1. You Have New Opportunities
If you’ve been running a business for quite some time, chances are eventually, new opportunities are going to come up. Whether or not your business has been a booming success or kind of a drag, it’s sometimes necessary to sell one business to start another.
Even if you can financially handle running two businesses, it often stretches people too thin.
When you decide to change paths in business and in life, it can be important to focus all of your energy on the new direction.
Another potential circumstance is if you’ve tried your hand at being a business owner and are actually interested in rejoining the workforce of employees in a new career. Being a business owner can be rewarding, but it comes along with a lot of responsibility, stress, and not always a lot of free time.
If you’ve been presented with an opportunity to work a traditional 9-5 that might be more interesting and will allow you a little more breathing room, you might consider selling your business.
2. The Market Looks Like It’s Going to Move Against You
No one can predict the future, but you can get a sense of which way the wind is blowing.
Is there an overarching trend on the horizon that’s pointing towards your business becoming less relevant? Then it’s probably time to contemplate your exit plan.
It can be difficult to see the market trends turn against you. Many business owners invest everything they have and more into their companies. When factors outside of your control dictate the end of your business, it can be a hard pill to swallow.
There are a lot of businesses that are at risk of becoming obsolete with advancements in technology and automation. That’s why it’s important to stay tied to what’s going on with the industry and make educated predictions on what might happen down the road.
We’ve seen this with a number of industries in the past few decades. When ridesharing apps popped up, you can bet that taxi services felt a bit nervous. For people running hotels and bed and breakfasts, there’s no question that Airbnb’s rise threatened their business.
3. The Location Is No Longer Optimal
The nature of neighborhoods ebbs and flows over time. If you’ve had a business in the same location for decades, it’s possible that a once lovely little neighborhood is now on the decline.
Some business owners might find that their business location is in an area where crime has been on the rise. The customers that used to stop by are no longer willing to risk their safety to make the trip to your store.
Even if the crime isn’t a problem, the area where your business is could be experiencing economic decline. That means that people don’t have as much money to spend, and therefore your business isn’t doing as well as it once did.
It’s also possible that your location was once a central hub of your area, but new development has moved traffic and business away from your location.
In this circumstance, you might just decide to sell the location and move your business elsewhere. However, it’s also a reasonable time to consider selling your business once and for all.
When you move locations, you might have to hire new employees, lay off old employees, purchase or lease new property, find new customers, and find new suppliers. It can feel a lot like starting over again. In this instance, you might contemplate selling the business rather than re-building in a new location.
4. You Get a Fantastic Offer
Occasionally, a business owner who isn’t even thinking about selling is presented with an offer that’s a bit too hard to pass up.
An offer like this, that’s significantly above market value, doesn’t come along every day. It therefore, might be the best opportunity to sell the business the owner has, even if it wasn’t something they were considering in the first place. The reality is, though, that an offer as good may never come again, particularly when you finally do decide it’s time to sell.
Selling your business can be an emotional decision. However, as the saying goes, money talks. And it can be quite persuasive.
Buyers have their reasons for presenting attractive offers to someone who isn’t advertising their business for sale. If they have a particular passion for the business and desire to run it for themselves, this might happen. It’s also possible that they’re a competitor and they want to merge the two companies.
If an opportunity like this comes up, it’s worth at least giving it some serious consideration. If you were planning on retiring a few years down the road, it might make sense to speed your timeline up a bit.
5. It’s Time to Retire
One of the most common reasons to sell a business is that the business owner is ready for retirement. Sure, you can head into retirement and pass the business off to someone else while still reaping some profit, but it can be hard to pull yourself away from the company’s daily happenings fully.
Selling a business can be a reasonable way to fund a retirement. If you’ve been running a business for decades, you can trade in all your hard work over the years for a comfortable next few decades.
It can make sense to sell your business when you’re retiring, even if you already have a retirement account set up. It can give you the extra money you need to buy a new home, pay off your mortgage, or fund your personal projects in retirement.
If you’re going to sell your business as a part of your retirement plan, you want to have it planned out in advance. If you simply wake up one morning and are ready to be done, it’s likely not the ideal time to do so. You want to consider how much you will get for your business now versus how much you might get in several years.
6. Your Business Is in Decline
If your business was once profitable but has been steadily declining for years, you might consider selling your business. Some business owners will put everything they have into trying to save a declining business, only to find that it can’t be propped up.
In this situation, business owners are left with little choice but to try and sell their business before it continues to lose value.
You might be wondering who would want to buy a business in decline?
There are actually several reasons why buyers might want to buy a declining business. They might see it as an opportunity to buy a business for a good price and then turn the business around themselves. While an owner might not make a killing on the sale, they might be incentivized to get bailed out of what they see as a sinking ship.
7. Personal Reasons
Many of these other reasons when to sell a business have to do with the business itself. The reality is, though, that sometimes your life circumstance can lead you to make business decisions.
If you’ve been in declining health, you might not want to spend all of your time managing your business anymore. A diagnosis of a terminal illness might lead you to want to focus on your personal life rather than business operations.
If you’re afflicted with a condition that impacts your physical or mental capacities, you might find that you’re no longer able to operate the business as you once were.
If you anticipate that your health will start impacting your business’s productivity and profitability, it might make sense to sell it sooner rather than later. If you sell your business when it’s still valuable, you’ll have more money with which to move on to the next phase of your life.
When you wait too long to sell a business when your health is declining, you might end up selling it for much less than you could have. That’s why it’s important to consider selling as soon as you realize that you might be in bad health.
Another less dire reason to sell a business is if you’re simply bored with it. Whether you’ve been at it for five years or fifty, sometimes people just can’t stand the industry they’re in anymore and desire a change.
When you run a business, a lot of the time, you’re dealing with the same things every day, year after year. Whether you’re a new business owner realizing that you simply don’t like running the business as much as you thought you would, or if you’re ready for a change after thirty years of operation, boredom is a completely reasonable reason to sell a business.
If you’ve lost interest in your business, it can be hard to succeed. Many successful business owners treat their business as part of themselves and central to their identity. If you simply don’t have the interest, it can be hard for a business to be successful in the first place.
When you get divorced, it can change everything, including your financial situation. Maybe you have to sell your business as a part of your divorce settlement, or you need to sell for the money. If you were operating a business with your spouse and you’re getting a divorce, it can be hard to see the company moving forward without the two of you as a team.
On the flip slide, maybe getting a divorce gives you a new lease on life. Maybe you want to start a new business or try out working in a new industry.
Either way, divorce is a common reason that people sell businesses.
Another unfortunate and unforeseen event that can lead to selling a business is the death of someone close to you. Maybe they owned the business, and now you are inheriting it.
When a family member dies, it can turn your world upside down. Whether they were a crucial part of the business or not, it can lead people to sell a business before the company starts declining.
How to Sell Your Business
There are some different options when it comes to selling your business. Obviously, the best time to sell your business is when it’s thriving, but this isn’t always possible, depending on the particular circumstances.
When you decide to sell your business, you’ll want to get organized in advance. You’ll need to determine how much your business is worth, tidy up your business’s financials, have an exit strategy in place, and start looking for buyers.
If you’re looking for a faster way to sell your business, you might consider using Synergy Business Brokers. With our easy 15-step process, we can make it a timely process for both the buyer and seller.
Selling Your Business: Is It Time?
There are many different things that can come up that make you wonder when to sell a business or hold it. The most important thing is having an exit plan in place so that selling your business can go as smoothly as possible.
Are you starting to think about selling your business? Does your company have an annual net income of $200,000 to $5 Million? If so, contact us today to get a valuation!