We often talk with small business owners who are struggling with the decision of selling their business. It is a very difficult and emotional decision to make and as a result business owners spend a lot of time thinking it through. We see people who sell for all different kinds of reasons, but certain patterns have developed over the years. Here are a few reasons that we have seen:
This is never a good one to see, but it is fairly common. As people get older, health problems tend to pop up. Health problems usually result in an exit when a business is really dependent on the owner for its success.
As business owners get older, the passion for the day to day management often fades. This may mean they are ready for retirement or they are just burnt out from leading the business for 20+ years.
Some serial type entrepreneurs will want to move on to another venture. Once the business is built and is stable, we have seen business owners sell in order to build new businesses or start new projects.
Holding it Back
The skills you need to start a business and get it to $10 million in sales are not necessarily the same skills you need to get it to $20 million in sales. Some owners realize they don't have the necessary skills to get the company to the next level. They feel like they are holding the business back and look to sell.
No Transition Plan
Mom was working under the assumption that her son would want to run the business some day. When mom finally asks her son, she realizes he wants to be a baker and has no interest in running the business.
Spouse Says So
Here the spouse has usually seen their husband or wife obsessed with the business for 20+ years. The business owner promised that one day they would quit and spend more time with the family. That day has come.
Need to Diversify
Business owners often put all their money back into the business. When it comes time for retirement, any financial planner will tell you it is never good to have all your net worth tied up in one asset.
In this example there are usually two owners with significant ownership in a business and one is ready to retire. When the owner who is retiring wants to sell his shares that means the business needs to be valued. After the business is valued the business is more likely to be sold.
These are just some of the reasons we have seen over the years. Sometimes it can be a combination of the above reasons. When considering whether to sell a business, a business owner should do what is best for them. If you are business owner facing one of the challenges above, please let us know. We would love to talk to you.