Deciding Whether Or Not To Sell Your Business
There are roughly 22 million businesses in the United States, ranging from small to mid-sized to large and spanning every industry in the world. While the general purpose of a business is to provide a product or service and generate revenue, there is also a range when it comes to what the business owner’s end game is.
Some business owners are so passionate about their company that it is a lifelong project. Through the good times and the bad, they want to keep growing, make their quality consistent, and sustain a valuable relationship to customers and communities.
There are other business owners, however, who have a different kind of passion and that is to grow sustainable business models and then sell them to bigger entities. This is why you will hear of entrepreneurs who have owned dozens of companies. You wonder, how could they possibly run so many businesses at once? Well, usually, they are only actively running a few of those enterprises and the rest they’ve sold for profit.
Some business owners will never sell their company. It’s part of their lives and they’re committed to keeping things a certain way. Others feel that at a certain point, they’ve done as much as they can do and decide it’s time to pass it off to be absorbed into a larger corporation. Depending on how valuable the company is at the time, this deal may afford the business owner with the funds needed to start a new business.
We’re seeing a streamlined, small-scale version of this with Amazon’s fulfillment program, which provides smaller business owners and sellers with the warehousing resources and ecommerce logistics needed to sustainably grow. On the other end of this pipeline, larger companies will buy Amazon FBA business models that have proven to be lucrative.
The question of whether a business owner or seller should sell their business is complex and personal. Sometimes it’s about more than just money. For example, a multi-generation, family-owned farm or agricultural company might be reluctant to hand over the keys of their ma and pop business to a giant corporation. On the other, Etsy sellers that have built red-hot ecommerce shops in volatile industries may decide to make a profit and get out while their valuation is high.
Here are a few factors to consider if you’re deciding whether or not to sell your business.
- Do you have your next steps/projects lined up? What will you do after the sale? If you have another venture lined up, the sale revenue could propel you into a new phase of success. On the other hand, if you’re going to be sitting around wondering what to do, you might want to stick with what’s giving you purpose.
- Will your finances work out in the years to come? How much will you make from the sale and will that be enough to sustain you and your family? You have to add up how much you were making annually from the business and compare that to the money earned from the sale. If it’s only a few year’s worth and you have no backup plan, you might be setting yourself up for a long-term mistake.
- Are you emotionally ready to move on? If you are totally burnt out on your business and ready for a change, it’s probably best to sell for a profit if you can. On the other hand, if you’re still passionate about your company and are worried you may regret giving it up, you need to consider this, too. Ultimately, only the individual business owner knows how much fuel they have left in the tank. Running a company is brutal work and requires a deep reservoir of devotion.
- Are you in a volatile industry or one that is lagging? Businesses can suddenly die and so too can entire industries. Just ask Blockbuster and the brick-and-mortar rental video industry. Part of knowing whether to sell your company is being able to forecast your long-term prospects. If it looks like your industry is volatile and in for tough times and you have a buyer ready now, selling could be the right move. On the other hand, if your industry is about to flourish due to new technology or market forces, you don’t want to sell too early.