Business owners do not tend to think about selling their company when getting set up, but this is something that needs to be planned for a smooth transition and to maximise the sale value. So, what are the main reasons that someone might look to sell their company?
The most common reason that someone will sell their business is simply for their retirement. Once they have reached a certain age or hit a financial target, they may want to step away and start enjoying their life outside of work. The revenue sale for the business can then be used to supplement their retirement income and allow them to enjoy a comfortable lifestyle and step away from the pressures of running a business. When people retire, they often want to leave management to someone in-house for a smooth transition and a management buyout will be a good solution.
Another reason that an individual might decide to sell is simply that the business is growing and they want to cash in when things are going well. Comparable to selling high in investing, it makes financial sense to sell when the business is performing well and investors are often willing to pay above the market value if the business has the potential to keep growing.
As mentioned before, there are pressures in running a business and these can take their toll (particularly if you have been doing it for many years). The best business books will highlight many of the hurdles that successful entrepreneurs have overcome. It is not uncommon for business owners to suffer from burnout, which can then impact their individual performance, the performance of their business and their personal life. An owner at this point may want to step back and find something less stressful to do with their life.
Looking for a Change
Sometimes, people need a change in their life and it is common for people to have a few different jobs in their lifetime. Therefore, it is understandable that a business owner might want a change after a number of years whether this is selling and starting a new company or looking for a completely different job in a different field.
Illness or Family Issues
Of course, there are also personal issues that can lead an individual to sell their business. They might develop an illness, go through a messy divorce or need to sell to raise funds for care for ageing parents just as a few examples.
As you can see, there are many reasons why someone might sell a business and they will always want to make it a smooth transition and to get as much as they can from the sale. When the reasons for a sale are more personal or caused by an abrupt change in circumstances, the sale may be more rushed which could place negotiation power into the hands of a buyer.
How are business sales conducted?
A business may be acquired by an industry competitor. The acquirer needn’t be larger; it is uncommon but not unheard of for smaller companies to acquire larger entities as part of a leveraged buyout. To read more, check out the best merger & acquisition books.