Should I Sell My Business? Questions to Help You Decide.

Question #1: Why are you considering selling?

The most fundamental question to ask yourself in deciding whether you should sell your business is why? Why are you considering selling? There could be any number of reasons, but understanding your motivation will help you understand whether selling is the best answer.

Here are some common reasons why business owners start thinking about selling:

  • Financial – If times are good, you may be interested in taking some (or all) of your cash off the table. Or perhaps you are in need of money beyond what you’re making as an owner through compensation, bonuses or dividends.
  • Personal – You’re nearing an age where you’d like to start thinking about retirement. Or you are experiencing health problems that limit the time and energy you have available to commit to your business. Maybe you have a great sense of pride from what you have accomplished in your company, but would now like to pursue other dreams.
  • Relational – If you’re one of several shareholders, the age, health and priorities of the others can affect your thoughts of selling. A breakdown in the relationship between shareholders can also lead you to think of whether selling is the best option to part ways.
  • Business performance – Business may be booming and you’d like to capitalize on your success while you can. Or maybe your business needs some new capital or access to new markets to succeed, and you think that a new owner with deeper pockets could take your business to the next level.
  • You’ve received an offer – Perhaps selling wasn’t on your mind until you received an offer out of the blue. Nevertheless, if you’re entertaining the idea of accepting, take time to think about the underlying reason why. Maybe there are financial, personal, relational or performance matters on your mind and this has come at an opportune time.

Now that you understand your motivation, think about whether there are any alternative solutions that would let you achieve the same outcome. If there were, would you still be interested in selling?

  • Hiring new management, or promoting from within, to reduce your time commitments
  • Arranging financing for the company to allow you to pursue growth – perhaps even growth through acquisition
  • Restructuring the company’s ownership – buy out the shareholder who wants to retire

Selling your business requires a significant financial and emotional commitment. Know your motivation and make sure you’ve weighed all the options before you start down this road.

Question #2: Do you have the resources?

After evaluating your motivation behind selling your business, the next step is to assess what resources are currently available to you.

Are these resources sufficient to enable you to sell your company?

The following points catalogue some of the most important areas of resource to consider:

  • Time – Do you have the bandwidth? It’s easy to focus on the numbers and money side of selling a business, but never overlook the commitment of time required to make it successful.
  • Emotional Support – Selling a business can be an emotional process – there may be tough decisions and some tense negotiations along the way. It is best to enter a sale process from a stable emotional base.
  • Family Support – Does your family support the decision to sell? It is vital that your spouse is on your side as you start the sale, as it can have a significant impact on family life.
  • Financial Strength – There will be costs incurred before you sell your business – legal fees, advisors, tax planning, etc. Make sure you have room in your budget for these costs.

Selling your business requires a significant amount of resources – personally and financially. Make sure the resources you have are sufficient to get you through the transactional process of selling your company.

Consider hiring an M&A advisor to help you through the process – not only will it free up your time and energy, the right advisor can also get you more money through the sale of your business.

Question #3: Is this the right time?

In the first two articles of the series, we looked at the personal questions of resources, energy and motivation to sell. Now let’s discuss the question of timing. You might ask why timing isn’t the only issue to consider when selling a business, due to the ever-shifting global economy and constant ebbs and flows in business outlook. The answer is that timing, although a critical indicator in selling a business, is only important when considered with factors such as peace of mind and personal commitment.

Have you arrived at a time and place where you can honestly say your resources and energy would be more appropriately directed towards something other than the business you are currently running? Or, to put it another way: are you feeling like B.B. King and finding that “The Thrill is Gone”?

If the answer is ‘Yes’, then it is the right time to sell.

Logically speaking, the best time to sell would be a time when your business is earning a good profit and the economic market situation is positive, but these things won’t matter if the time is not right for you.

Once you are mentally ready to sell, and can taste life after business ownership, then the journey to closing is much easier and certain. Ask yourself the question above before going any further in the decision-making process and you will gain better insight into the seemingly confusing matter of timing.