The decision to sell a profitable company is not an easy one for a business owner. In many cases, there are several reasons why someone decides to sell. The reason can make a difference in how quickly you want to sell and how long of a transition period you will provide to a new owner.
Understanding a seller’s business sale motivations is essential for business brokers and potential buyers.
Why sell a business? Many times, the sale of a business is prompted by a combination of motivations.
The following are the top 10 reasons owners decide to sell and how this can influence the sale:
Retirement is the most common reason profitable companies are sold. The company is often passed down to a family member, but in many cases, the family members don’t have an interest or the skills necessary to run the business.
In this scenario, it’s time to contact a business broker or merger and acquisition (M&A) firm to get a potential selling price and strategy for selling the company confidentially. A business broker will find out more about your business and what your goals are.
Some business owners want to retire as soon as possible. Others like the idea of transitioning into retirement. A good business broker can look for potential buyers who can accommodate either a very short or lengthy transition period, where the seller can work full-time and then part-time if they wish.
Hire an experienced business broker to maximize the sale price of your company and provide you with options.
This is also a common reason why someone decides to sell their company. However, if the company isn’t making much money, it will be difficult to sell and simply go out of business. Most people don’t want to buy a business that isn’t profitable.
That said, a buyer may be interested in the parts of the company, such as its intellectual property, market position, assets or established customer base. These qualities may be attractive enough to drive the sale with the hope of turning the business around.
Relocation sometimes goes hand in hand with retirement. Many business owners look forward to being able to sell their business and move to a new place. Alternatively, moving may be attributed to family reasons or another business opportunity.
When relocation is involved, it may affect the type of transition period that a seller will provide to a new owner of their business.
Communicating whether there is a time frame involved in the relocation is important. It can affect how aggressively a company is priced and whether or not there is a need to get buyers who are OK with a very short or remote transition period.
Burnout can have serious consequences for business owners, from frustration to trouble sleeping. When you’re tired of running your company, selling can help you find balance in your personal life again.
If you own a business and you aren’t ready to retire, you can try different functions within the company before deciding to sell. However, if you’ve tried new types of work and are still tired of doing what you’ve been doing, then maybe it is time to consider selling your company.
Business brokers offer a confidential consultation to understand how much you would need to sell the company, and they can let you know whether this is achievable or not. This will help you decide whether the proceeds of the sale would be enough to take some time off and go into some other line of work that might be more satisfying for you.
Selling before you lose interest in your company is always best. Waiting too long to leave when you are no longer passionate about your business can make getting a good price more difficult.
Many business owners work well into their retirement age and enjoy what they are doing, but may be ready to sell if they are dealing with a health problem.
While this may be unfortunate, sometimes it’s a good opportunity for the business owner to slow down and recuperate and then enjoy some activities that they couldn’t do while they were working full time on their business.
Sometimes, health issues can be a wake-up call to make life changes, such as slowing down and turning over the reins to someone else.
If you own a successful company, you may branch out and take on new and exciting ventures. As your portfolio expands, you might want to focus on one particular business or industry.
You may also have an offer to help out at someone else’s company, or maybe one of your businesses takes off and requires a full-time effort to manage it and maximize the opportunities. Selling one or more of your businesses can be the right move to free up more of your time and energy.
Some companies grow both revenue and profits for a very long time, but most businesses have different cycles of ups and downs over time.
If you’re looking to retire or get out of the business, and the company is on the upswing, it is often a great time to sell. Selling when things are highly profitable can help maximize the owner’s return on investment. Buyers prefer to purchase companies that are growing and have a bright future.
Even if you aren’t ready to retire right away, you can sell the business — and secure your financial future — while still staying active in the company and helping the new owner continue to grow operations. This can be rewarding and also provide you with an opportunity to work part-time and transition into retirement.
If partners are at odds, one may try to buy out the other. However, if neither partner is interested in this strategy, or they do not agree on a price or the terms of a buyout, consulting with an experienced business broker is best. They can help determine a possible asking price or assist both partners in the process of selling the company to an outside buyer.
The broker typically needs only one of the partners to stay on for the transition period, eliminating the need for both parties to work together.
The partner that is staying may want to retain some equity in the business, but keep in mind that most buyers want a majority interest in the company, so selling the whole company is easier than a partnership interest.
Selling a company before the owner passes away is best, but of course, this can’t always be predicted. The transaction is often more difficult when the owner is no longer there, but an experienced broker will understand the process and make it easier for those left to deal with the business.
An accountant and spouse or family member can provide information on the company to a business broker and potential buyers to give them enough information to decide on purchasing the company.
Some business owners sell their companies when they are interested in transitioning away from their day-to-day routine. Whether you’re dealing with a significant lifestyle shift, such as going through a divorce or having a child, or you simply just want to switch it up, finding a buyer for your company may be the right move.
The sale may give you the freedom and money to pursue new avenues and spend more time on the things that are important to you.
If you are too young to retire, then the sale of your business will at least allow you to take time off and figure out what the next step is in your life.
If you have a business that has an annual profit of $250,000 to $7 million, Synergy Business Brokers provides confidential consultation to understand your needs and let you know if we can help you achieve your goals.
We have experience selling companies in healthcare, technology, construction, manufacturing, distribution, services, engineering, and transportation.
You can contact us by filling out our Seller Registration Form. We’ll discuss your situation and let you know if we think the timing is right for you to sell your company.
