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Why Do Business Owners Sell?

by Dave Driscoll

Making the decision to sell a business can be agonizing. Recognizing that only about four in ten businesses listed for sale actually sell, we need to understand that a large portion of the seller population may have waited too long to begin the process.

There are some owners that simply decide they are ready to move on, but most of the reasons to sell a business center around negative issues. I’m from the camp of “always run your business so you could sell it tomorrow.” You never know when that offer will come or your situation may change, so be prepared.

The most common reasons owners decide to sell a business:

• Health. Many owners feel forced to sell when faced with a health crisis – either their own or that of a loved one. In addition, if owning your business causes you undue stress and anxiety, it will eventually impact your physical health in addition to your emotional well-being. When choosing how you want/need to live your life, owning a business should certainly not sacrifice your health. As health issues are typically unexpected and sudden, this emphasizes the importance of always been prepared to sell your business.

• Burn out.  At some point in our careers - whatever we may be doing - we ask the question: “Is this all there is?”  

Owning a business doesn’t mean that you are somehow immune from asking that question. Owners may reach that point of burn out earlier than a non-businesses owner; 100% responsibility and 100% of the time has a way of causing exhaustion and eventual apathy.

Caution: If you feel yourself spiraling toward burn out, do whatever you must to change your attitude; delegate, hire and train your replacement, do whatever is necessary because attempting to lead your business when your whole heart isn’t in it WILL decrease business value AND limit your transition options.

• Poor performance.  The chicken and egg question comes to my mind: did poor performance lead to burn out, or did burn out lead to poor performance?

In any event, life gets much harder when your company is struggling financially, and selling an underperforming business will certainly not produce the financial rewards anticipated in better times. Emotional paralysis is also likely to set in the deer-in-the-headlights, frozen-in-time feeling which accelerates the poor business performance.

• Divorce.  Sometimes the business must be sold to separate the marital assets if the parties cannot agree on a value or neither party has the resources to buy the other out of the business.

• Pursue other interests.  Some owners are serial entrepreneurs who are in the business of buying, growing and selling businesses as an opportunity to grow wealth. Others may feel moved to accept a new challenge – possibly acquiring or starting another business in a related or different industry. Still others may choose to pursue mission or charitable work.  

• Retirement.  Choosing to sell their business at a natural (to them) retirement time allows owners to enjoy their Life Beyond BusinessTM full of family, grandchildren, travel, or hobbies.

Some owners sell a business because they want to and others because they must. Either way, good corporate hygiene with well-documented financials and policies will build business value, as well as preserve your options to transition out of the business in the most profitable way.  

Dave Driscoll is president of Metro Business Advisors, a mergers & acquisitions business broker, business valuation and exit/succession planning firm helping owners of companies with revenue up to $20 million sell their most valuable asset. Reach Dave at DDriscoll@MetroBusinessAdvisors.com or (314)303-5600. www.MetroBusinessAdvisors.com.
 
Submitted 8 years 99 days ago
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