Business owners consider selling their businesses for many possible reasons:
- Boredom or need for change: This is the most frequent reason (statistically). After starting their businesses from scratch and spending countless hours exploring their ideas and implementing them, business owners simply lose interest in their companies. While this seems hard to believe, most entrepreneurs are more excited in launching a new business than in managing it once it becomes established. Managerial tasks such as accounting, managing people and solving daily problems are not as rewarding as implementing new strategies and growing the business. Many of my clients want to sell their business simply because they want to do something different.
Succession planning/Retiring: The majority of small businesses are heavily dependent on their owners. If something happens to the owner, in most cases the businesses will not survive. When owners approach their retirement age, they need to find successors. While transferring the business to their children seems like the natural decision, this is not always possible for the following reasons:
- Children have other interests than their parent’s business
- There is no consensus in the family about who among the children should take over the business.
- Children don’t have the qualifications, expertise or the talent to manage the business.
- The business needs capital for a new strategic direction: This happens more frequently in consolidating industries. In some mature industries, huge economies of scale are necessary to keep the business afloat. The business could simply not survive in its current size. Ideally, a larger corporation/business would buy the business, merge it with its current operations, suppress some redundant costs and make it more profitable.
- Partnership disputes: Divorces and business partnership disputes are common and could be the reason for selling a profitable business with a lot of potential.
- The business is unprofitable and the owner is not able to turn it around: This is generally not a good reason to sell a business since most business buyers are looking for an income source and very few will look at unprofitable businesses. However, some business people with solid turnaround skills and management expertise are constantly looking for turnaround opportunities. The seller has to prove that the business has potential to become profitable.
It is very important that business owners contemplating selling their businesses spend some time understanding their own motives. Most buyers will become very suspicious if the business seller cannot clearly explain their reasons. If you are considering selling your business, visit our business brokerage website for more information about the business sale process.