Establishing and nurturing a business takes time, effort and dedication. Many owners spend their lives building successful companies.
However, even for the most devoted owners, there can come a time when you are ready for a new chapter away from your business. A myriad of factors can lead to this, including retirement, changes in circumstances, or the desire for a new challenge elsewhere.
One of the most popular forms of business exit is a sale. It allows you to hand the company over to capable leaders who will extend its legacy. Selling also gives you the funds you need for your next challenge.
Deciding to sell your business is never an easy choice. You don’t want to have any regrets, which means understanding when to sell.
If you are unsure whether to stay or go, we’ve listed 11 of the most common reasons for a business sale to help you understand if it’s time for you.
Capitalisation
Running a successful business requires money, especially in the start-up stage or investing in growth. It’s common for entrepreneurs to place their own funds into the company to keep things moving.
One common reason for sale is because the owner wants their investment, in terms of money and time, back. This is particularly sought if you are considering a new entrepreneurial challenge or a change in lifestyle which needs funding.
By finalising a sale, you pull your capital out of the company and utilise it for whatever you wish to post-exit.
Relocation
If you need to relocate – whether it’s for your business or personal reasons – it’s not always feasible to move your business with you. Doing so may require additional cost and cause disruption, especially if you have a strong presence in the local area.
In these circumstances, it often makes more sense to sell the business, allowing you to start from scratch in your new area if you wish to and without being tied to wherever your company is based.
There’s nobody to pass it on to
Many owners choose to keep their business in the family, passing it on to younger members as they gradually step away. However, this only works if there are family members ready to take charge of the company with the willingness and skills to succeed.
If there isn’t anyone suitable to pass your business onto, selling is your best option. It gives you the chance to find the right person to move your business forward while protecting your existing staff, so your company still has a future even if it is no longer in family hands.
Seeking a new opportunity elsewhere
Entrepreneurs are constantly coming up with new ideas. Even if you have already experienced success with a company, another vision may pop up that you want to explore.
Similarly, you may get to a point where you’ve achieved everything you can and are looking for something new to get your teeth into.
If you have finished your journey with your company, selling allows you to find new owners that elongate its lifespan while simultaneously giving you the capital and freedom you need to seek out your next opportunity.
The company is in demand
If you have a thriving business generating demand in the marketplace, you will start to receive interest from other companies. This can include competitors or more prominent companies in the industry.
Some of these offers can be lucrative, especially if you have something prospective buyers want. Selling at a time when you’re in demand is likely to maximise the sale value and give you a substantial profit.
If you believe you may want to exit soon anyway, or you think the seller can progress the company in a way you can’t, it will make a sale very tempting and might prove more financially viable than waiting a few years to sell.
Changes in circumstances
Life is unpredictable. Many factors reshuffle your priorities, including health, family and other lifestyle changes. These reduce the time and energy available, making it hard to juggle a business.
When you find yourself unable to prioritise your company, it may be a prompt that you need to hand the reins to someone else with the appropriate bandwidth. The alternative is risking the performance of the business, which would affect your ability to sell later.
Retirement
Retirement is another leading reason to sell. Everyone will reach an age where they want to sit back and enjoy life – even business owners!
If you reach this point, you will likely have built a company that is proven to perform and staff with whom you have a strong relationship. Finding a suitable buyer enables you to keep the business going successfully, even after your tenure ends, so your customers and staff continue to benefit.
Inability to progress
Even if you aren’t necessarily looking to move on, there comes a time when the company is too big for you. This is particularly the case with SMEs who experience rapid growth beyond what even the founders expect.
If you are struggling to lead the business as it scales or believe someone else would be able to charter the course better, it is responsible to consider a partial sale to attract the right individual. This will allow the company to reach maximum potential, even without you.
Industry changes
Contextual changes can affect the performance of your business. While you should be able to overcome the barriers in most cases, there will be instances where it impacts your ability to lead the company.
Some industry changes result in rising costs, falling revenue or other obstacles that make it harder to operate. It diminishes your passion for the company as well as your results.
If you find yourself unwilling to move forward with the company in the face of an evolving market, it is a sign to consider selling. This will enable you to cut your losses before matters get worse whilst ideally handing control to someone who can progress the business in the changed context.
Increasing competition
Running a company means warding off the competition. However, if it gets to a point where the competition is overwhelming, it could spell the end for your business as more customers jump ship.
If you are experiencing this, it could be sensible to sell, especially if you don’t think you can turn things around. Staying with the company would only result in poor performance and falling metrics, which leave you in a worse position.
If you can sell the business, such as to a competitor looking to drive their market share, you will limit the damage – both to yourself and the company.
Poor performance
While it’s never wanted, many businesses fail. Issues like falling profit, struggling sales or other financial problems could spell the end of a company, with much stress in between. Having an out will save you time and effort while minimising the economic impact.
It can be harder to sell a struggling business but not impossible. Your aim will be to find a buyer who has the vision and skills to turn things around, bringing a new perspective and leadership. This should enable you to reduce the personal toil that poor performance brings while potentially revitalising your company.
Conclusion
Selling your business is not a decision to make lightly. However, if you consider it, there are likely to be external factors causing you to want to leave.
Understanding the common reasons for a sale helps you identify when to take the plunge. It will also allow you to find the right time for sale to maximise the value, minimise any financial implications, and protect your company’s reputation.
If you are looking for support in selling your business, we will help you maximise your value and enter the market in a promising position. Get in touch to find out more.