It’s the dream of entrepreneurs and business owners countrywide to one day sell their business. After all, you’ve worked hard to start, build and grow your business. And for many entrepreneurs, the end goal is to one day sell your business.
But over 60% of businesses fail in the first 5 years and from those that remain, only a small percentage of businesses are sold or transitioned from their current ownership.
I can tell you from experience, that even from this smallest percentage of business exits, the smallest number are truly successful sales i.e. the owners realise full value for the business they’ve worked tirelessly on for many years.
In this article, we’re going to look at the common reasons to sell a business or those reasons entrepreneurs may decide to do so. Of course, there is rarely a single reason to do so and a mixture of each of these factors is commonplace.
Some will be positive instances of sale, but others less so. Yet, the purpose of Move at Pace is to ensure our partners maximise exit value and sell from a position of strength when the time is right. And that can be at any time.
Reasons businesses are sold
Cash-out
Let’s be honest for just a second. If someone put their hand up today and said they want to buy your business for a sensible value. What would you say?
Unless you have significant ambition to grow your business beyond its current position, cashing out is a prudent move.
Now may not be the right time, but maybe it is. Some get tired of our business and feel trapped, while others know it’s time to let others take the company to greater heights. Banking the profits of your efforts is one thing, but taking full value when you can is another entirely.
Valuation
As an exit catalyst realising the value you have built in your business is a significant motivator. Have you built a business worth £XX and would this meet your current and future needs?
Many of us are surprised at the value of our business, but this may not always be for positive reasons. But if you reach a valuation you are happy with, it is of course a valid reason to sell.
Motivation
Working at full tilt on your business for months, years and decades can take its toll. I’ve seen this in myself and with the many clients we support. Staying motivated and disciplined in business is key, but it’s not in endless supply.
Often the motivation we had to start and build a business is not the same as that required to take it into maturity and growth. And that’s again fine. Knowing this is key and presenting your business for sale at the correct time is a significant opportunity.
Performance
Some of us will sell our businesses when it’s performing well. Others, sadly will need to sell in harder times. Depending on the position of your business you may want or need to sell it. The focus should always be to maximise its value or to minimise its liabilities to ensure you get an appropriate valuation.
Involvement
Hands up if you’ve said “f*ck it, I’m done” with direct reference to your business. I know I’ve said this on more than one occasion myself. Sometimes we need to escape the business we’ve built, others, we need to remove ourselves from the day-to-day operations.
And I’ll admit, I saw no other way than to sell the business I built. But at that time, I persevered and focused on building value with one eye firmly focused on exit. Your journey and path will be unique to you, but giving yourself options is always the key.
Changing markets
When you’re fully invested in your business, you’ll happily ride the markets up and down to ensure its success. But sometimes these significant forces outside of your control can feel insurmountable. Or you just no longer want to steer the ship forward. Knowing when to pass the baton over is not a weakness but a strength to be admired.
Lifestyle
Many build their business around their lifestyle. Others focus on moulding it later in its journey. In other circumstances life changes. None of us is getting younger and the energy we once had often fades.
There are many lifestyle changes that we must consider as we get older and in many instances, this may be a significant reason to sell your business.
Ask yourself this question. If you could change your business to meet your lifestyle requirements would you sell?
Strategic planning is one of the key areas of focus we offer to our clients at Move at Pace.
It’s rarely easy to see the changes you need to make when entrenched in the business over the long term. But they can be made and this can positively affect your position in the business.
Target date
I have worked with businesses in their 4th and 5th generation where it is mandated that the Directors will step aside for the next generation. We have worked with other entrepreneurs who have set dates in their minds for exit.
Setting a target date for your exit provides a direct focus on building the business to an end goal. There are many factors outside of your control that influence this however and it is always mindful to consider an exit strategy long before the date you have in mind for selling the business.
Funding requirement
In our business, everything was self-funded. Undoubtedly this slowed business growth and it’s easy to argue we were under-invested in many years of business. Our goal was not to maximise growth but to remove profit from the business as tax efficiently as possible while maintaining the highest level of stability to weather any conditions.
To take the business to the next level our funding requirement was significantly greater than we were prepared to invest and this is common with small to medium owner-led businesses. When we get to a level of profit, we’re happy to protect and maintain this, where an ambitious purchaser will see the value in your business and place the required investment within the business to help it achieve its fullest potential.
Growth plateau
Sometimes our business growth stalls. Markets may stagnate or our competitors grow at a rate greater than ourselves. Sometimes we come to the end of our knowledge in building the business. This can be incredibly scary as we move from the known to the unknown.
You can bring in help to move to the next phase of growth or you can look to sell. The decision is yours.
Dispute between owners
Sadly, disputes are one of the most common reasons to sell a business. What starts off as another day in paradise often ends up as the hardest place in the world to be. When selling a business in a dispute, it pays to put emotions aside, but often this can be the hardest part.
An approach by interested parties
Your hard work to grow and build a successful business has caught the attention of an interested party. Always entertain the opportunity to sell, but be mindful that you do so from a position of strength. Building a good business is the same as building a business that is ready for sale. Many of the attributes that lead to growth and profitability are the pillars of value a potential purchaser wants to see.
Working with an advisory like ourselves, we’ll help you to build the best business possible so that you’re ready for sale at any time, no matter what the opportunity.
If you want to explore the options to work with us, please feel free to schedule a discovery call with me and my team. We’ll work to find out more about your business, tell you a little bit about our offering and finally, if we feel there is something to pursue, we’ll discuss the options to work together. If nothing else, we’ll provide you with the answers to your most pressing questions.
Alternatively, if you want to find out more about our services or watch some further content about growing and selling a service-based business, please feel free to subscribe to our Youtube Channel