Often we get asked- Why is the business owner selling his business ? It is an important question for some purchasers, almost a part of their due diligence. “if it is a profitable business, why do they want to sell ?” is a thought that possibly crosses everyone’s mind before taking the leap to acquire a booming busy business.
As business sale agents we understand that selling your business is often a succession plan for many business owners. Here are few reasons why business owner sell their business :
Retirement – Is a common reason to sell when there is no one suitable, or willing, to take over your business, then the best option is to sell up. The benefit of selling due to retirement is that there is often ample time available in order to plan an exit strategy.
Health of owners/directors or BURNOUT – A lot of small businesses can put their success down to the hard work and dedication of the owner; once the owner is unable to continue taking an active role in the operations, the business may suffer. Time is therefore of the essence when ill health forces you to sell up. There’s nothing wrong with ducking out when the timing is right. In fact, when faced with burnout, you have more to gain by selling than trying to tough it out. No one can deny you got to this place by being strong and industrious, but after a while you’re not doing yourself or your company any favours by sticking it out for the wrong reasons.
Owners want to do something different – It may simply be that the owner has had enough of running a business and wants to turn their hand to something completely different. Running a business is often time and labour-intensive, and there may come a point when a break, either permanent or temporary, is needed.
Owners have found something more profitable that they would now like to concentrate on – If the opportunity of something more financially rewarding comes along, then it may be the case that you decide to focus all your attention on this new venture. If you are therefore unable to dedicate your energies to your current business, you may look to sell it on to someone who can give it the time and effort required.
Owners and the business has Plateaued : Present owners have taken the business as far as they can – Sometimes a business can grow to such a level that the founders of the company feel they can do no more with it. For a particularly successful business to continue to thrive, it may need to become part of a bigger group with more resources or to someone with a fresh perspective and energy.
Owners can see a decline in profitability coming – It is only natural that if you feel your business has reached the peak of its profitability then you want to get out before the decline starts. This is a common reason for selling a business, and therefore as a buyer you should ensure you do your due diligence and take future financial projections with a pinch of salt.
Concerns about industry changes – This could include new legislation being brought in, a general regional downturn, or political factors . This again is another reason why potential buyers need to conduct thorough research before purchasing a business as a going concern.
The business has reached a value that will support future lifestyle and want to cash in – If the business has been successful and has a healthy valuation attached to it, it may be that the owners would like to release this money by selling the business. This could be used to fund a future business purchase, allow the owner to retire, or just to provide a ‘nest-egg’ for the future. Your Business is an asset after all !
As your broker would tell you, if you are a business owner who has owned their business for several years, or someone who has just purchased a new business, these factors should always be kept in mind. One day or other you will be reaching one of the above stages and would be considering selling.
Speaking to a business broker on time and putting together an exit plan would ensure you have given yourself and your business all the opportunity to guarantee a good sale price and a smooth exit with compromises.