As a business owner, your decision to sell can be motivated by various factors. It is crucial to understand your objectives and motives because they will determine the shape and structure of your deal.
Here are some of the typical reasons why owners choose to sell:
Change in Lifestyle
After spending many years in the business, some owners reach a point where they desire to pursue something different in life. It is normal for people to re-evaluate their life goals every decade, so if your objectives are changing, you're not alone.
Entrepreneurs vs. Managers
Many owners of private businesses are entrepreneurs who are creative, full of ideas, and energetic. However, as the business grows, they find themselves increasingly held back by managerial responsibilities like employment legislation, personnel issues, health and safety matters, etc. They may feel that the excitement of running the business has gone, and a company sale becomes the logical and sensible way to exit and start a new chapter in life.
Time
The demands of running a business can be all-consuming, leaving little time for personal activities. This can be a significant reason why owners choose to sell their businesses, especially when it starts to affect their personal life.
Business Lifecycle
There comes a time when a sale is appropriate for both shareholders and the company. It may be due to the need for capital to grow the business, a merger with another company, or simply because it is the right time to exit. Many companies grow quickly in their early years (see Fig 1). In due course sales can start to plateau (A). It is often disproportionately difficult and expensive to break out of this plateau. A significant investment is usually required to hire key sales personnel, for new product development, or to implement a technology upgrade. If this investment is made, then the growth cycle could repeat itself (B). Without investment the company tends to decline (C).
For many business owners, their investment decisions are now a matter of inclination. They may have invested in the business for years, with the expectation that they would be able to start taking money out in the future. However, the thought of postponing the payoff or borrowing heavily to reinvest in the company is no longer a viable option. In such cases, a sale becomes the best option for both the company and shareholders. A new owner, most likely a larger company with vast resources, can help grow the business by leveraging its capital, knowhow, clients, and distribution channels. This means that the company can continue to prosper, and shareholders can benefit from the sale.
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