Why are you selling your business? Here's how to answer this challenging question.
Why are you selling your business? As you start the process of exiting your business and engaging with a business broker, this is a key question that will require a clear answer.
Knowing why you want to sell your business and being able to communicate that reason with a potential buyer is immensely helpful in getting your business sold for the right price and at the right time.
Here are 6 different reasons to sell your business, with clarifying questions you can ask yourself for each.
Retirement is one of the most common reasons to sell your business. You have spent your life building your company, and now it's time to reap the rewards of your hard work.
Whether you plan to move, find a new hobby, or pay off your mortgage, you'll need to develop your plan for life after the sale. So here are a few questions to ask yourself as you prepare for retirement and get your business ready to sell:
What do you plan to do after you sell and retire?
What are your needs and financial goals during retirement?
Are you willing to stay part-time to help out the new owner?
How can you best transition your company to new ownership before retiring?
What tasks or projects must you delegate to your staff or the new owner so the business can run smoothly in your absence?
Be sure to visit with your financial planner as you move toward retirement. You'll need to ensure that the profit from the sale of your business can financially support you during this new phase of life.
Start a new venture.
Sometimes business owners find they're burned out or have lost interest in running their businesses. If this is the case for you, now might be the right time to sell and move on to something that better fits your needs and goals.
Whether you want to re-enter the workforce, take some time off, or start a new company, it helps to explain your reasoning to a potential buyer. Here are some questions you can ask yourself to get clear on why you're ready to make a change:
What parts of running a business do you enjoy?
What don't you enjoy about owning your own company?
Are you interested in taking a job within your company after selling it?
What would you do differently if you were to start a new business?
If you were to start your current company all over again from scratch, what would be your main focus?
If you want to do something different, what is it, and why do you want to move on?
It's also important to consider the option of selling before you've reached a breaking point. If you are no longer working to build your company, sales may decline, making the business difficult to sell. Beginning the selling process before you've reached total burnout can ensure you get the right price to support your next venture.
In some cases, partnership issues create a need to sell the business. Whether one partner is ready to leave and the other is not, or there's been a breakdown of the partnership and it's time to dissolve it all together, selling is often the best option.
If a partnership dispute is a reason you're considering parting ways with your company, ask yourself the following questions to gain clarity on the situation:
What do you plan to do after the business is sold and your partnership dissolves?
Looking back, what would you do differently with your business?
Was a buy-sell agreement ever created, and if so, what does it state?
During partnership disputes, be sure to work with an experienced business broker who can help determine your company's value.
The passing of the business owner.
If a business owner passes and their spouse inherits all or a portion of the business, the inherent spouse may decide to sell. Unfortunately, most spouses aren't prepared for this scenario and find it challenging to relay information about the company to a potential buyer.
If you find yourself in a situation where your spouse has passed, and you've inherited the business, these questions can help you take action on what information you'll need to successfully sell it:
Is there someone - a past partner, a manager, or an employee - who can help you understand more about the business?
If you don't have it already, can you gain access to the company's financial data?
Can you access and ensure you have all the necessary legal and filing paperwork for the business?
Will the sale of the business be enough for you and your family to gain financial security?
Remember that you don't have to go through this process alone. A business broker can help you determine the value of the business. Additionally, financial advisors, attorneys, and accountants can help you better understand the business and what to do next.
Business is growing.
One of the best times to sell your business is while profitability is at a high point. Potential buyers are more likely to buy a company showing growth and potential for the future, meaning you can get more money from the sale.
Here are some key questions to contemplate if your business is booming and you're thinking about selling:
What would you plan to do after the sale of the business?
If you're nearing retirement age, are you ready to retire early?
Are you interested in staying with the company after the sale to help guide the next owner?
What does your timeline look like if you plan to stay with the business after the sale?
How does selling your business now play into your succession and exit planning?
Selling your business when revenue and profits are at a high point can not only create financial security for your future but also allow you time to slowly transition to the new ownership.
Loss of profitability.
On the opposite end of the spectrum, you may also need to consider selling your business when concerned about its future. Selling before profitability dips too far can help to ensure you receive the capital you need for your future.
Consider the following:
What goal are you looking to reach by selling your business now?
What would you need from the sale to ensure financial stability?
What can you do to keep profitability afloat while you move through the selling process?
Can you still work to increase your business's value while looking for a potential buyer?
What can you do to make your business more appealing to buyers?
When you, the seller, can clearly define why you want to sell your business, you're more likely to find the right buyer and maximize your profits. Contact us today to receive a free assessment of value and begin the selling process.