By William Bruce
The decision to sell your business may not be easy. In fact, it may be agonizingly difficult. This is the first step in the “”How to Sell a Business” series.
You probably have an emotional attachment to the business. Over the years, you have attracted a lot of customers and developed many friendships among them. You have also hired and trained a talented group of employees who look to you for their very livelihoods.
And in America, people are identified by how they make their living. Your identity is directly tied to your business, so it’s no wonder that the decision to part with your business is difficult.
But things change. And at some point in their life, most business owners decide, for good reasons, that the time has come to sell their business.
One of the motivations for writing this is that many business owners have told me the same thing. They say that once they make the decision to sell, they don’t have a very clear idea of how to go about it. They have spent their business lives managing their company – and in most cases doing a very good job of it – but they have never actually sold a business. It’s definitely a different “ballgame.” Selling a business in today’s business environment is a major project fraught with many pitfalls. It can be compared to a narrow path winding through a field of landmines. The issues are numerous including pricing, confidentiality, offers, negotiations, financing, due diligence, taxes, and government regulations to name just a few.
Professional advice and assistance to guide you through the minefield is the best “insurance policy” you will ever buy. But then, I’m prejudiced. You see, I have one of the best jobs in the country. In case you haven’t yet guessed, I’m a business broker!
In this series of articles, I’ll be discussing various issues involved in the sale of a business. More will be posted later, but my first piece of advice to an owner considering selling his or her business is: “Have a good reason.”
Be able to give a good reason.
This may seem obvious. However, it’s important to be able to give a good reason for selling your business. The very first question most prospective buyers ask is “Why is the business for sale.”
Buyers are naturally suspicious. For most, buying a business will be the most important financial decision they will make in their lifetime, and because of it, they will have a heightened level of anxiety about the whole situation.
Some of the business buyers with whom I’ve worked in the past have expressed the thought that if a business is for sale, there must be something wrong with it. This is not always the case, of course, and being able to answer this concern with a logical response will be of tremendous value in the sales process.
These are all good reasons
There are valid reasons that some very good privately held businesses are for sale. The first reason most people would think of is retirement. Another is the fact that the owner may be experiencing health problems that prevent him or her from managing the business as usual.
Other reasons may involve estate planning situations in which the owner would rather leave liquid assets that can be split more easily among several heirs than a business entity.
Still other legitimate reasons could involve friction among the owners. This kind of situation can become particularly serious if the friction is among family members who jointly own the business. I recently handled the sale of a business in which the real motivation to sell was to prevent further deterioration of the family relationships. The differences among the partners were serious enough that they would surely have led eventually, if they stayed in business together, to an ugly family split-up. The partners correctly decided that it was better to sell the business and preserve the family. Each partner took their portion of the cash from the sale and went their separate ways. And now they are still congenial when they get together at Thanksgiving and Christmas!
Perhaps the most common reason that a business is for sale is one that might not be readily apparent. But as a business broker, I see it frequently. And I’ll simply label it as “burn out.” After an owner has operated the same business for a number of years, some just plain get burned out. Some people are more prone to burn out than others. It’s highly subjective but certainly understandable.
On a personal note, I experienced it in a previous business that I owned. After 15 years, when it got to the point that I didn’t want to see customers come in the front door because I knew I’d have to spend time with them, I knew it was time to get out! Burn out is real and I see a lot of it.
So in summary, be able to give a good reason for selling your business. It’ll get you started off on the right foot.
In future articles, we will cover the additional issues involved in the successful sale of a business.
Readers of this blog can order the entire series of articles by requesting the 26-page booklet, “How to Sell Your Business While Avoiding Costly Mistakes.” To request your copy, please email William Bruce at Will@WilliamBruce.org.
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