Published on February 28, 2023
I was giving a talk on the Exit Process for Selling a Business, and a question came up from the audience, “What are the most common reasons someone would want to sell a business, especially if the business is making money?” This sparked a long conversation on doing a planned sale of a business vs selling a company due to a life event and the owner has no other options. In this article I wanted to summarize that conversation:
Some of the most common reasons to sell a business include:
Retirement: One of the most common reasons why a business owner may choose to sell is because they are ready to retire. After years of hard work and dedication, they may feel like it is time to step back and enjoy the fruits of their labor. (Be careful with your dreams of selling your company and then sitting on a beach the next day as many sellers is not aware of the transition period that the new buyer will want, so talk to an expert about this so you can have realistic expectations before buying any one-way tickets)
Health Issues: If the owner is no longer able to run the business effectively, or a significant other has health issues and needs their attention or they have to move to a different area for treatment, they may have no other choice than to sell.
Lack of Succession Planning: If a business owner does not have a clear succession plan in place, no children, friend, partner they have in mind to take over, or that wants to take over, they may choose to sell the business in order to ensure its future success.
Market Conditions: The state of the economy or industry can play a role in the decision to sell a business. For example, if the market is experiencing growth, the owner may be able to get a high price for the business. Conversely, if the market is in a downturn, the owner may choose to sell in order to minimize their losses.
Personal Financial Considerations: Personal financial considerations such as debt, the need for liquidity, or the desire to diversify investments as many worry as time goes on when all of their eggs are in one basket might not be the best thing.
Burnout: Running a business can be incredibly demanding and can take a toll on the owner's mental and physical health. Mental wellness is a consistent theme with owners of companies that is now starting to get more and more attention. (An article I am working on and will be release in the coming weeks will discuss this, so subscribe so you don’t miss it)
Conflict with Partners or Investors: If there are conflicts with partners or investors, the owner may choose to sell the business in order to avoid further disputes. (This goes back to a past article on raising capital and beware of who you take it from and who you go into business with)
Opportunity to Pursue Other Interests: Finally, the owner may simply choose to sell the business because they are ready to pursue other interests or start a new venture. How many owners after 5 years get bored and need a new challenge?
There were many reasons the audience and I came up with for why someone may choose to sell a business. Regardless of the reason, the decision to sell a business is an important one that requires careful consideration and planning so a takeaway is, you don’t know what the reason might be, so one should always be prepared, just in case.
*** The content is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional(s) before entering into any M&A transaction. ***
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Shawn Flynn is a Principal at Global Capital Markets, a premier middle-market investment bank with a global presence. Shawn has expertise in mergers and acquisitions, capital markets, financial restructuring, and secondaries. He speaks Mandarin and is the host of the award-winning Podcast The Silicon Valley Podcast. Connect with him on LinkedIn.
Shawn Flynn, Principal SF@GlobalCapitalMarkets.com
Tel (415) 578-1445 Ext. 4
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As a middle market investment banking boutique, Global Capital provides mergers and acquisition advisory services, access to corporate debt and equity capital, and strategic advisory services to successful middle market companies. For over twenty five years, our team has offered companies a unique blend of sophisticated financial expertise and access to the global marketplace of buyers, sellers and financiers.
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