Why sell your business?
The most fundamental question to ask yourself in deciding whether you should sell your business is why? Why are you considering selling? There could be any number of reasons, but understanding your motivation will help you understand whether selling is the best answer.
Here are some 5 common reasons why business owners start thinking about selling:
- Financial – If times are good, you may be interested in taking some (or all) of your cash off the table. Or perhaps you are in need of money beyond what you’re making as an owner through compensation, bonuses or dividends.
- Personal – You’re nearing an age where you’d like to start thinking about retirement. Or you are experiencing health problems that limit the time and energy you have available to commit to your business. Maybe you have a great sense of pride from what you have accomplished in your company, but would now like to pursue other dreams.
- Relational – If you’re one of several shareholders, the age, health and priorities of the others can affect your thoughts of selling. A breakdown in the relationship between shareholders can also lead you to think of whether selling is the best option to part ways.
- Business performance – Business may be booming and you’d like to capitalize on your success while you can. Or maybe your business needs some new capital or access to new markets to succeed, and you think that a new owner with deeper pockets could take your business to the next level.
- You’ve received an offer – Perhaps selling wasn’t on your mind until you received an offer out of the blue. Nevertheless, if you’re entertaining the idea of accepting, take time to think about the underlying reason why. Maybe there are financial, personal, relational or performance matters on your mind and this has come at an opportune time.
Now that you understand your motivation, think about whether there are any alternative solutions that would let you achieve the same outcome. If there were, would you still be interested in selling?
- Hiring new management, or promoting from within, to reduce your time commitments
- Arranging financing for the company to allow you to pursue growth – perhaps even growth through acquisition
- Restructuring the company’s ownership – buy out the shareholder who wants to retire
Selling your business requires a significant financial and emotional commitment. Know your motivation and make sure you’ve weighed all the options before you start down this road.
Douglas Nix, Chairman & CEO
Stillwater M&A Advisors