At some stage in your business life you will encounter the situation of whether to keep your business or sell it. This can be quite daunting for so many reasons. However, there are some rules you can go by before you make that all important decision.
In my situation it was just before the GFC that I decided that I had had enough of my business. My passion was gone, I wasn't willing to move to the US to take it to the next level, the dollar was getting stronger which was detrimental to me and I wanted a new challenge. Basically I was done. I thought I had a buyer but at the last minute they pulled out so I decided to hang on. The GFC hit and then the business wasn't as profitable as it once was. In hindsight I should have made more of an effort to sell it before the GFC but we can't turn back the clock. A few valuable lessons were learned during this time.
In my opinion, it is good to sell your business in the following circumstances.
1. Your passion is gone. When you wake up in the morning and don't want to go to work day in, day out, it's time to go.
2. Your business has reached its peak, in your eyes that is and you cannot do anymore to grow the business. If all you see is dark clouds and sales are in a downward trend, it's time to leave.
3. If you receive an incredible offer that is hard to resist, take it. You can use this money to have a well earned break and then use this money to start another business venture.
If you can help it, do not run things into the ground. Most people when they sell, neglect their business. Their stock is low, their attitude is bad, and the work area is untidy and so on. You do not want this. A potential buyer will smell fear and desperation and you will receive much less than your business is worth. If you decide to sell, you want the new owner to walk into a successful and upbeat environment. They will have their own ideas on what they can do to improve the business. Just make sure that they are excited about the prospect of buying your business. Keep marketing and stay focused, I cannot overemphasize this enough. A sale can take months to even years, so you need to carry on your business as normal as you can.
If you are unsure about selling, believe me I still was even though I didn't want it anymore, there are some other options out there.
1. If the business is still making a good profit, let someone else manage it. Tell them you will be coming in once a month and that they are responsible for everything. Give them a bonus in their salary. They will love the opportunity to step up and earn more cash.
2. Bring in a business partner. They can pay you half of what the business is worth and run the place for you. This way, you get a nice cash injection as well as keeping future profits. If after a while you just don't want to be there at all, ask your partner to buy you out completely. This is a brilliant strategy for people who just cannot let go but still want to have some share in a business.
3. If your business can be improved, please hold onto it. It is much easier to improve a business that is running than to start from scratch all over again.
I have seen many business owners sell for the wrong reason. They get bored and lose enthusiasm. Take a vacation. Sometimes that's all you need. Selling something you have created is a massive decision so you want to be sure that you are making the right one. I looked at my business as a baby as I was there from day one. It is an emotional decision so try to be as less emotional as possible if you can.
Don't ever take for granted what you have. Only sell if you really must. If I stayed open I would have eventually shut down due to the strong currency at the time. I was better selling it and getting something versus nothing.
If the dollar was weaker there is no way I would have sold it even if my passion was lagging. The weak dollar along with no passion was the last straw for me. Think carefully when you sell.
When people ask me what they should do I usually tell them the following "If you sell, be happy, you made the right decision. If you stay, be happy, you made the right decision. Don't have any regrets. Be comfortable with your decision and move on."
Aspiring entrepreneur and marketer. Loves building start ups and small business in general. Just released a book called The Beach Bum Millionaire: How to build a Million Dollar Business The Lazy Way
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Denise Hall, SME Business Value Analyst. Business Broker. Exit Strategist at Xcllusive Business Sales Melbourne
As Business Owners, your listed considerations are very important. In addition, what I often see however in my role as Business Broker, is that once selling is leading as the preferred option, the owners want it done yesterday and for more than market price!
One key step to add to this list is to get an Appraisal from a source who plays in the market all day, every day (like myself for example). This will determine saleability and indicative price range. This is the only way to be able to make a truly informed decision about your future because if you're making assumptions incorrectly based, the reality can blow your plans and timing out of the water. Sadly, I see this way too often...
Phil Joel, Chief Revenue Officer at Alex Solutions
Hi Anthony, Great article. I'd like to add that depending on the type of business you are in and the conditions of the Sale that you can realistically achieve, you may want to aim to sell your business before it hits its peak otherwise you may not be able to satisfy the conditions of the sale and therefore not able to maximise on the full financial potential of the deal. For instance, if you are expected to continue to work in the business for a further 2-3 years after the sale and are expected to grow the business in that time as a condition of the sale then it is obviously going to be easier if the business was still growing at the time of the sale. You could also attract more interested parties and potentially multiple offers if the business is deemed to have bright prospects. You will then be in a much stronger position to negotiate a favourable outcome.