I recently heard these words from a business owner in his early 70's. This is not unusual. Of the 25 – 30 business we seriously pursue in any year, better than half of the businesses are not sold because the business owner decides to "just keep the company."
In this particular case, the business owner's rationale was as follows: Why would I sell today for X when I can continue to own the company and pay myself X over the next several years and still own the company at the end?
Fair enough: By keeping the business he is entitled to collect the future profits available to ownership, and a few years down the road he may have, in fact, earned X. Yet in the meantime he will also have had all of the risks and headaches associated with ownership.
I think some business owners aren't particularly concerned about the time value of money and, being confident in their abilities, they are making a clear economic choice to pursue the potential future payments instead of receiving a lump sum today.
But in other cases I think there's another explanation: Some business owners are just not willing to let go. Their business has been such a big part of their life for so long that they would rather "die with their boots on" than move on, even if selling is the right economic decision given their age, the condition of the business, its need for reinvestment, etc.
One of our biggest challenges is to separate true sellers from those that just can't bring themselves to sell (see a previous blog post on this topic). Keeping the company is always a strategy, but it is not guaranteed to be the best strategy. The last few years has confirmed this lesson.
SBD
Post script: see Part II and Part III of this series on keeping versus selling a small business.
