Why sell your business?

Selling a business is emotionally, psychologically, and financially demanding. It can be hard and for some – cause intense sorrow and regret that can lead to suicide.

So, why do people – especially entrepreneurs who have built this enterprise from the ground up – choose to hand over the reins?

Well, in a world filled with complex situations, there are as many reasons as there are people. But as professionals who broker such deals, here are the top six motivations we see for why people sell their businesses.

Reason #1 Selling Was Always The Exit Strategy

Business owners generally have a business exit strategy. This is simply a plan that may involve eventually selling the company, or sharing it with other venture capitalists, or even competitors.

We see examples of this in management buyouts, initial public offerings (IPOs), and strategic mergers and acquisitions (M&A).

Sellers who don’t find buyers often end up simply liquidating and closing. However, because most founders want to leave a legacy and see the business continue, they opt to sell their company.

Reason #2 The Owner is Ready for Retirement

People can’t work forever. Eventually, they have to retire. The majority of sellers today are baby boomers – those born between 1946 and 1969.

And, as the second-largest demographic of small business and franchise owners in the country, with ages ranging from 53 to 76 years, a lot of them are ready to call it a day.

Retirement is a perfectly valid reason to sell.

Reason #3 The Owner is Facing Litigation

When as brokers we ask you why sell your business?  And we hear ‘litigation’, nine out of ten times, the seller is in distress.

This is probably one of the more challenging reasons that we have encountered as to why people sell their businesses.

Legal contests such as lawsuits, class actions, and divorce compel scores of owners to sell each year.

Divorce in particular is tricky. When couples that used to be former business partners and co-owners decide to legally dissolve their union, the business is often sacrificed. We’ve seen this and heard a handful of stories and it’s not an ideal way to exit.

Selling your business when all is well is difficult enough, but when you throw in divorce, it can make the process significantly harder.

Reason #4 The Seller Can’t Keep Up

The rate at which technology is changing is exponential. Consider the fact that 90% of the world’s data has been generated in the last two years alone!

Much can be said about how the business landscape has also drastically evolved across industries because of digitization, automation, and innovation. The point is it can be hard to keep abreast of all these changes.

Sellers that find themselves in over their heads and unable to compete with younger, more tech-savvy, dynamic entrepreneurs are choosing to bow out of the game and sell their businesses instead.

Reason #5 The Seller is in Poor Health

Running a business can cause increased anxiety and stress levels.  Over time, this may result in poor mental and physical health.

The psychological price of entrepreneurship is a real phenomenon business owners have to contend with daily. According to Gallup’s Well-Being Index:

• Business owners tend to be more worried than employees (34% vs. 30%)
• Entrepreneurs are generally more stressed than workers (45% vs. 42%)

Years of trying to stay afloat, grow the business, and maintain a healthy profit is taxing and eventually many owners succumb to burnout. It’s often at this point that sellers look to sell and poor health is the reason they give to investors interested in the business.

Reason #6 The Business Founder has Died

In an article titled Older Americans Stockpiled a Record $35 Trillion. The Time Has Come to Give It Away, Wall Street Journal highlights that, “The greatest wealth transfer in modern history has begun.”

With this transfer of wealth comes the transfer of business ownership. Many of the children of baby boomers and older generations are finding themselves as the inheritors of vast business empires that they have no desire to manage.

Some of these heirs don’t wish to keep the businesses. This is an acceptable reason to sell. We’ve helped several such sellers in the past in our capacity as business brokers.

The Bottom Line

As you have seen, there is no one-size-fits-all answer to the question why sell your business?

If you would like help to prepare your pitch and negotiate with buyers, our seasoned team of M&A brokers is ready to help.

Contact us today.

Looking for more insight on selling a business? Check out these links:

• Mitigating Post-Closing Risks Through The Rep and Warranty Insurance
• How to Navigate a Buyer or Seller’s Initial Meeting
• Are You Financially Ready to Sell?
• Buyer Motivation – How to Confirm?
• Sell NOW – The Crystal Ball is Pretty Clear

Disclaimer: Any information provided in this blog is not intended to replace legal, financial, or taxation advice given by qualified professionals.