Running a business goes through many stages, from start-up to growth, to maybe a levelling out. Sometimes there are hard times and other times things run smoothly. Maybe there have been acquisitions and mergers or maybe you have just been content with something small. Whatever your experience, at some point there comes a time to sell. In this article we are going to look at the different reasons for selling and how to decide if it is the right time.
Reasons for Selling
The reason for selling a business can be either Economic or Personal. Sometimes these reasons interlink, but let’s have a look at each of these in turn.
Positive Economic Reasons
It may be that you have reached professional and economic success. You have achieved what you set out to do and have established a good company. You would like to cash in while the going is good and let someone else lead the company onward.
Or it could be that you want the capital to make investments elsewhere, for other business projects or for personal reasons.
If this is you there is no reason why you shouldn’t sell. Put your business in the best order you can to make it attractive to others and go ahead.
Negative Economic Reasons
Often the economic reasons are negative: the business goes through difficult times and profitability is going down. Before you decide to sell, however, see if there is any way you can rectify this negative trend.
There are lots of advisors who can help you analyze your business and the market in order to turn the situation around. You need to look both externally and internally. There may be stronger competitors taking up the market share and having resources you are not able to obtain. The market may be changing and your product is not meeting the need it used to. There may be things that can be changed in the way the business is being run, the management, streamlining production. Are there products that are making a loss and others that are making a profit? Should you reach out into a different market or get a different focus? Do you need an injection of capital to get you on to a new level and to be able to compete successfully?
In short, with the right analysis of the situation, it may be possible to find a solution. When you have put so much work into a business, it is worth reassessing before making a decision to sell.
If, however, with the analyses done, there seems to be no good solution. If it looks like your business cannot continue to get the investment it needs, cannot continue to compete against the stronger competitors or does not have the resources it needs. Then, it is time to sell. This does not mean that your business needs to be undervalued. It may have many valuable assets both physical and intangible that can be of great value to the right buyer, who has the resources you don’t.
Retirement is the first reason that comes to mind when someone is selling a business. When a business owner reaches maturity, there comes a time when they are ready to stop work. They have accrued enough wealth to enjoy the pleasures of life without needing to work, or they have got tired and want to have an easier pace. Some may want to have a different purpose, giving back to society or spending time with family, after all the years of hard labour.
In the same way, even for those less mature, there may come a point where they want to change their lifestyle. They may have other interests or other business ventures they want to pursue. They may have a change in circumstances, need to move or other commitments that mean they need to sell.
Waning health is also a reason for selling a business. Running a business requires a lot of stamina. When you are no longer able to keep up with the operations, then it is time to sell. Do not run the business into the ground through neglect.