Nine Main Stream Reasons Sellers Give for Selling Their Business

by Ray Dye 30th of March, 2023

Nine Main Stream Reasons Sellers Give for Selling Their Business

As a business broker, I initiate conversations with entrepreneurs about selling their businesses as a matter of course. Brokers often underestimate the magnitude of making such a decision for a business owner. If the discussion is dealt with sensitively and empathetically, the broker is well placed to ask a core question about the reason for selling the business. The resultant answer after massaging will determine the course of how to approach the sale process.

In this article, I’ll share nine reasons and some tips on how to approach sellers in each of them. Although itemised, in a simple way, they can be extremely complicated and detrimentally impact the sales process if not identified early and managed. Remember, the initial reason presented my be a cover for another reason that the seller does not want to be aired.

1. Retirement

When speaking with business owners who are looking to retire, it’s important to approach the conversation with genuine awareness. They may have more attachment to their business, and their emotions may be running high.

I always try to understand the reasons behind their decision to sell, and help them to feel comfortable with the process. I explain that the transition can be a positive experience, and that there are many buyers who would be interested in acquiring their business which would ensure that the legacy is continued. Encourage such a seller to plan for the future so that they focus on what will happen after the sale.

2. FInancial Hardship

Sometimes, a reason given by a business owner is that they are selling their company due to financial hardship, such a situation can be especially challenging. To all those involved in the sale as there are limited resources available to pay lawyers, advertising and get the obligatory accountancy reports.

It’s important to approach these conversations with sensitivity and caution as the owner may be feeling overwhelmed and embarrassed about their situation.

In this instance, the conversation should be focused on how I can help the business owner get back on their feet. I explain that I understand the challenges of running a business, and that I’m there to help them navigate the process of selling. I reassure them that selling their business is not a reflection on them as a business owner, but simply a means to an end.

3. Partnership Disputes

Another common reason encountered is when a business owner is selling their company due to partnership disputes, Here, it’s important to approach the conversation with a neutral perspective and listen to both sides of the dispute. Credibility is gained by avoiding taking sides.

In these situations, it’s more compelling to be transparent about the process of selling a business, and to ensure that both partners understand the value of the business. (Even if a formal valuation is called for). I communicate the importance of keeping emotions out of the decision-making process which enables them to navigate the complexities of dividing assets and responsibilities.

4. Strategic

If a business owner is selling their business due to a strategic change, they may have mixed emotions about the decision. It’s valid to approach the conversation with an understanding of the business owner’s vision and goals.

In this instance, I am totally transparent about the benefits of selling the business and how it aligns with their new strategy. I highlight the value of the business and the opportunities that are available to potential buyers. I encourage the business owner to think about the benefits of the sale, rather than the potential loss of their company.

5. Burnout

When a business owner is selling their company due to burnout, they may be feeling overwhelmed and stressed but not fully understand the depth of exhaustion that they have reached. In this instance, it’s necessary to approach the conversation with simple but clearly identified steps and to help the business owner understand that they’re not alone.

In these situations, I listen to the business owner’s concerns and offer support. I communicate the benefits of selling the business and how it can help them achieve a better work-life balance. Furthermore, I encourage them to take time to reflect on their goals and aspirations, and to help guide them to make a decision for their future that is logical and beyond a “knee-jerk”.

6. Health

If a business owner is selling their company due to health reasons, they may be feeling vulnerable and anxious. In this instance, it’s necessary to approach the conversation with care, compassion, understanding and confidentiality. I listen to the business owner’s concerns and offer support but I don’t take on their anxiety. I emphasize the benefits of selling the business and how it can help them focus on their health and recovery. I help them understand that selling the business is not a reflection on their abilities as a business owner, but simply a means to an end.

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7. Opportunities

When a business owner is selling their company because of better opportunities, it’s important to approach the conversation with curiosity.

I ask questions about their new venture, and help them to see how selling their current business can help them achieve their goals. I reiterate the benefits of selling the business and how it can help them move forward in their chosen new career or venture. I encourage them to think about the opportunities that are available to them and to see that the sale is just an empowering step to reach new targets.

8. Regulatory Changes

A less frequent reason given and one that is often disguised, for obvious reasons, is that the business owner has discovered that the government will be making changes in regulations and statutes that will have a direct impact on their business. Such information may dramatically affect the value of the business. This also impacts the broker’s need for a duty of care. I look at the issues and see how the seller can restructure the business so that it can be better packaged for a potential sale.

9. Employee Shortages

The pandemic has largely exposed the last reason for selling in this brief list. That of course is the shortage of employees. Staffing is necessary and the shortage in a business will impact its value and some owners get fatigued because of the resultant challenges.

In Summary

This brief list of reasons show us how important it is to look at the sale in a holistic way. The reasons given for selling will alert and focus you on the central, core thinking of the seller and ultimately the buyer.

Remember, the true reason for the sale may be initially hidden.

Tags: selling small business entrepreneurs

About the author

Ray Dye

As a previous multiple business owner in South Africa, Canada and Australia, Ray has an exceptionally high level of expertise when it comes to knowing ...

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