Why Do Business Owners Sell?

Entrepreneurs spend years building and investing in their business, so the decision to sell does not come easily. There are a number of reasons that a business owner might choose to sell their business, each of which is unique to their own situation.

Business ownership is a full time responsibility. Building and maintaining a business requires significant commitment, and whether it is a shift in priorities or a change in personal life, the business owner may determine it is necessary to sell the business. If you find yourself wondering if it is time to list your business, taking a look at some of the most common reasons to sell might help develop a clearer picture.

Common Reasons Entrepreneurs Decide to Sell Their Business

The sale of a business can be a highly personal undertaking. Personal and professional pursuits will shift over time. Not all business owners will be in the same position they were in at start-up, 5 or 10 years down the line.

The most common reasons to sell a business revolve around the 5 D’s: Death, Disability, Divorce, Disputes between partners and Distress within markets or operations. In addition to these common reasons for sale, it is also important to consider retirement as one of the key drivers of selling a business.

• Retirement: The goal of many entrepreneurs when starting a business is financial freedom and security. As we reach retirement age, the drive to spend days in the office or combing through spreadsheets fades. All that hard work should allow entrepreneurs to relax in their twilight years.

• Disputes: Partnering with another like-minded entrepreneur might be a great option when starting out on a new business venture; however, motivations can change over time. As partnerships change, the day-to-day operations might become too difficult for one party to manage. When this happens, selling is a way of ensuring continuity of the brand.

• Distress: Due to its all-encompassing nature and wide-ranging applicability, this term is often used as a blanket phrase. The term distress may include everything from market fluctuation, technological advancements such as the emergence of AI, increased competition and many other variables.
  
  Burnout is another common source of distress for business owners. If the current management or ownership of a business is unable to keep up with advancements, it might be better to sell the business prior to any potential negative outcomes.

• Divorce: While separating personal and professional spheres is ideal, divorce often necessitates the liquidation of business assets.

• Disability Or Illness: The inability to operate a business efficiently may be a driving factor for sale. If a business owner is dealing with their own illness or that of a family member, it can often limit their ability to be present in business operations. Selling the business is a way to remove additional stressors, as well as ensure the continued success of the business and secure the financial support necessary to see them through treatment and recovery.

• Death: The loss of a team member, family member or an owner themselves can take a toll on the health of a business. As personal landscapes change, selling a business can help to create breathing room to adjust to new norms.

Although a significant portion of the commonly cited reasons seems to center on adverse or difficult changes and events, there are many other reasons that selling a business may be impactful.

• Opportunity: If you are operating in a hot market in an up-and-coming industry, there is no better time to sell. For any owners planning to sell, timing is everything. If your business is at a high valuation level and there is demand in your industry, selling is a great way to recoup your investment and create a pathway forward for new and exciting ventures.

Setting Expectations When Selling

Once current situations are weighed against overall business goals, it is then time to begin the sales process. Business brokers will assess the state of a business and work with sellers to determine the best time to list, as well as set expectations for timeframes, interest levels based on market research and effective marketing tactics.

Depending on the reason for a sale, brokers will create the most efficient and effective pathway for a successful sale. When the goal is to achieve a quick sale, marketing efforts will have to change, whereas planning ahead for retirement offers allowances for longer timelines and transition periods. A professional business broker will help business owners identify the options and opportunities that best align with their goals.