Why do business owners sell their businesses?

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When deciding to buy a ready-made business, entrepreneurs have a quite logical question: “Why would someone sell a profitable business?”. Ready-made companies that are put up for sale are distrusted by some entrepreneurs – and this is normal because no one wants to take risks. There can be several reasons why business owners decide to sell their company, let’s try to understand them.

Why do business owners sell businesses?

An operating business is sometimes sold in a situation where, for a number of reasons, its profitability has decreased. 

For example, the business has lost part of the working capital, so the business model has started to bring small amounts, but still continues to work. In this case, the entrepreneur needs to reinvest the profit inside the business for a long time or find a financial source that will quickly return the previous indicators. In such a situation, the business owner may believe that it will be much more profitable to sell a business that is still working than to try to return a turnover of several million or more.

● It is also quite common to sell a working business due to a change of activity or when there is not enough money to invest in a new, more promising project (from the seller’s point of view). Moral fatigue can also be a significant factor in the sale because without enthusiasm, skills, and energy it is hardly possible to successfully develop the business.

● Quite often there are cases when a business is sold due to major disagreements between the co-founders or in case the owner moves to another region or abroad.

● The least rare among the good reasons are cases when the business was originally created from scratch and brought to good performance for the purpose of further sale.

When buying a ready-made business, find out all the details to determine why business owners sell it. Thus, you can learn about all the pitfalls and even achieve pleasant terms of the transaction.

Should I sell my business when it’s doing great?

Let’s say you have a business that is doing well and has customers, turnover, and profit. Where are the reasons that should make us think that it is time to prepare the business for sale, look for a buyer yourself or seriously consider the offer that you have already received? 

1. The life cycle of businesses is constantly shortening. The life cycles of companies are shortening from year to year, and it’s not just the natural aging of the business – this is the modern world of technology. New technological young players enter the market, and old experienced ones gradually leave the scene. Prosperity and “stability” is the only moment for selling a business at a profit, say Website Closers.

2. Human factor. If there is no growth, after about two years, most of the specialists who remained in their positions, even despite various motivation schemes, begin to feel dissatisfaction or fatigue from the same tasks, and people lose their “drive”. If the company is headed by the owner, who also works as the CEO, the first signs of fatigue, are the realization that business is a constant problem that will never end, that it is difficult to find talented managers who can replace him, catch up with him a few years after the start. That is why it is best to sell the company in 3-4 years when it has reached its heyday.

3. Repeating cash gaps. Sale of apartments, property, personal debts – this is what entrepreneurs go out of business without reaching such a scale that the cash gap could be closed with relatively favorable bank loans. Determine for yourself the amount that you are ready to invest in the business in case of problems. A million, two, three – and do not invest more.

Conclusions

Many owners say that they would like to sell the business, they just do not receive profitable offers. But for the sale to take place, it is not enough just to “pull the strap” on the management of the company, even if it is no longer very promising, and invest more and more money in it. Often, the sale succeeds to those who did not try hard to build a real “super business”, but very loudly and professionally told potential investors that they “are doing well, and the prospects are even better”.

Cody Rhodes
Cody Rhodes
Cody Rhodes a learning specialist, designs and delivers learning initiatives (both in-class and online) for a global and internal audience. He is responsible for the ongoing development, delivery, and maintenance of training. He has the ability to manage competing priorities to execute time-sensitive deliverables within a changing environment. He contributes to continually improving the team's processes and standards and works as a member of the team to assist with team initiatives.

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