Your small business has taken up all of your time and energy, so it’s understandable if you hesitate when it’s time to sell. However, there are many reasons why selling your small business may be necessary – and a few reasons why selling your small business could be profitable. Let’s check out the four main reasons why a small business owner may want to sell his or her business.
What Are Four Different Reasons a Business Owner May Want to Sell His or Her Business?
1. Lifestyle Changes
The most common reason to sell a small business is because of lifestyle changes. Think back to when you started your business. Did you have kids? Were you married? Some small business owners who start businesses when they are younger find they’re unable to keep up with the business as they get older or as their life becomes busier. Some specific lifestyle changes that may prompt you to sell your small business include:
Retirement is the goal of every worker in the world. If you have reached the age of retirement and you can comfortably sustain yourself, then it may be time to sell your business. Selling your business for retirement can net you a profit that will allow you to live comfortably for the remainder of your life or begin new interests.
Some small business owners sell their businesses because they’re simply burned out by the constant hustle and bustle of running a small business. Small businesses are often very stressful to run because there is not much help for small business owners day-to-day. This leads to burnout, stress, and depression, none of which help live a happy and fulfilled life. Selling your small business when you are experiencing burnout can be a wise decision.
Small business owners who run into health issues may also wish to sell their business. Chronic health issues, such as cancer, may prevent a business owner from effectively running the business, which can result in a loss of profit. Health issues can also be costly, so some business owners who need to pay medical bills choose to liquidate their businesses to pay these bills.
Finally, relocation is another significant lifestyle change that may prompt business owners to sell their small businesses. Some small businesses can pack up and leave as often as you do, while others require a brick and mortar location or may only be appropriate for certain geographical areas. If you are relocating and your business cannot come with you, then selling your business can be a smart move.
2. Financial Reasons
Financial reasons are another common motivation for why small business owners may want to sell their small business. Financial reasons are typically related to a loss of profit, but they can also coincide with difficulties with business partners or dim outlooks on the overall industry. Specifically, the financial reasons that may motivate you to sell your small business include:
Loss of Revenue
If you are pouring more money into your business than you are getting back, this can be a major problem for your bottom line and the future of your small business. The goal of your business is to be as profitable as possible, but if you are having trouble bringing in enough revenue to even keep the business floating, it might be time to call it quits.
Many business owners don’t consider the loss of revenue to be a sign to sell a business. Instead, some business owners will pour more money into advertising to increase revenue. If you’ve already tried this strategy and your profits have not increased, this could be a sign that your business will not turn around. In this case, it’s better to cut your losses so you can recover your finances.
Some businesses are incredibly niche and can sustain themselves for several years. However, when the market is saturated by other similar businesses or if the industry itself starts to decline, it can be difficult to make profits. For example, if your product was very popular 10 years ago but does not have a lot of general interest now, this could be a sign that your industry is in decline and that it may be time to sell your business.
Additionally, another financial reason a small business owner may want to sell their business could be related to partner problems. If you started your small business with a partner or if you have silent partners in your business, you may eventually run into issues in the delegation of decision-making authority in your business.
Some small business owners are even unlucky enough to have partners who actively create problems or reduce the profits of the business. If you are having problems with a business partner, it may be a smarter idea to sell your business than to stay with a problematic partner.
Bankruptcy is another common financial reason why business owners may need to sell their businesses. If you are filing bankruptcy, your business assets will need to be claimed on your bankruptcy paperwork. Depending on the amount of debt you are in and whether you can protect your business assets, you may have to sell your business during bankruptcy as ordered by the court.
3. New Business Opportunity
Getting new business opportunities is another reason why small business owners may want to sell their companies. For example, if you want to start a different small business, selling your old business can give you the startup money you need.
Another good example of a business opportunity could be getting headhunted by industry giants who want to utilize your skills but who are not interested in buying your small business. In either case, any business opportunity can be an excellent reason to sell your small business, particularly if your new business opportunity can increase your revenue.
4. Sell At High Point
Finally, many small business owners can net a tidy profit when they can sell their business at a high point. This is a dream goal for many business owners.
Imagine that you have worked hard with your small business and you’ve elevated your brand to a point that a large industry giant is interested in buying you out and expanding your business. In this case, selling your business at a high point means that you will be able to claim the current value of your business and maybe even some future value as well, depending on the deal that you cut.
Why Selling Your Small Business May Be Beneficial
These four reasons are the most common motivations for why a small business owner may be interested in selling his or her business. Selling your small business can be very beneficial for several reasons, particularly financial reasons. You are likely to benefit from selling a business that is doing well, but you can also benefit from selling or liquidating a business that is struggling.
Because you have invested so much money into your small business, you are essentially investing more money each day. If this money does not turn around with profits or increase revenue, this means that you are losing money to keep the business going. By selling your business if you are unable to make a profit, you can restore your financial health.
From selling your business at a high point to selling your business to recover financial losses, small business owners should always prioritize their overall financial health when they’re considering keeping a business. To learn more about selling your small business, visit David VS Goliath or check out the David VS Goliath podcast today.