35 Reasons Owners Sell Their Business

In the last issue (#40), Preparing to Sell Your Business – Summary – A 50-Point Action Plan, we summarized the previous seven issues. In this issue we will discuss 35 Reasons Owners Sell Their Business.

"Retirement is like a long vacation in Las Vegas. The goal is to enjoy it the fullest, but not so fully that you run out of money." Jonathan Clements

35 Reasons Owners Sell Their Business

Some owners plan to sell their business with a specific purpose in mind. And that’s great!

The sooner you begin taking these action steps (many require 3 – 5 years), the greater the likelihood of selling your business at maximum valuation. Don’t wait, though. It’s never too early to start! As a side benefit, many of these steps will result in more take home pay for you during the years you continue to own the business.

Don't let yours be among the 75% of businesses that never sell

However, most business owners fail to plan and are forced to try to sell under less than ideal circumstances. In those situations, the business will not sell for nearly as much as it would have had the owner adequately planned. With sufficient advanced planning, even if you are forced to sell, you can achieve a much higher valuation. Let’s not forget: only about 20-25% ever sell and the number one reason for that statistic is owners’ lack of recognition of the need to plan for the sale of their business. Again, about 75% never sell! And many of those were non-planning owners who were forced to try to sell under very difficult circumstances and were not successful.

Following is a list of 35 reasons owners might sell their business, planned and unplanned:

Reasons - planned sales of a business

  • Desire to implement a succession/exit plan
  • Desire to retire (or semi-retire)
  • Desire to cash-out to diversify their personal assets
  • Desire to cash out because they can live comfortably

Reasons - planned sales (and sometimes unplanned) sales of a business

  • Desire to relocate
  • Business growing too fast for owner’s own comfort level
  • Owner does not want to tackle current challenges of business
  • Owner’s personal skills are insufficient for successful management of the business
  • Desire to raise capital for other personal uses
  • Desire to pursue other types of business opportunities
  • Must raise capital to accommodate business growth
  • Desire for a lifestyle change
  • Desire for new challenges
  • Next generation not up to task of acquiring business (or not interested)
  • Take advantage of low capital gains taxes (when rates may increase in the short-term)

Reasons - unplanned (typically) sales of a business

  • Burn-out, boredom and fatigue
  • Health issues or health scares
  • Divorce
  • Disputes with co-owners
  • Business is losing its competitive advantage(s)
  • Owner loses the “fire in the belly” to compete
  • Losing a major customer/client
  • Losing a key employee
  • Family illness
  • Owner recognizes his business is in a declining industry
  • Increased competition
  • A significant job opportunity arises
  • Owner overwhelmed by the demands of the business
  • Owner knows the business has reached its peak
  • Owner receives an unsolicited offer
  • Business is struggling or unprofitable
  • Owner realizes he’s an entrepreneur, not a manager
  • Owner lacks capital to invest to continue the business
  • Family disputes
  • Death

It's never too early to start planning for the sale of your business

The ongoing…