Insights

The Power of Why

Steps to Selling your Business Part 2.

Why?

Every parent will remember that inquisitive, sometimes annoying question coming from your three-year-old from the backseat of the car “but why?” Seldom is that question met with a straight answer; often it is answered with an eye roll or an “I don’t know sweetie, good question.” 

It is the first question we ask people who are thinking about selling their business.

“Why are you thinking of selling your business?”

I make sure I thoroughly explore the question as much as I do any initial financial information. I do this because the answer to that question tells me a lot about the direction of our work. 

Why are you thinking of selling your business? 

First, I want to see that you have an answer to the question. It’s surprising how often I talk to business owners who haven’t thought through what’s motivating their decision to sell. 

Second, once I know your reasons for selling, we can talk through what is involved in selling and we can confirm your commitment to see the process through to the end. For everyone’s sake, we need to know that on the wedding day, you’re going to show up at the altar. 

We can’t stress this enough – it’s vitally important for you to know what your answer is. Why are you selling this business? And, why now? 

Examining what is driving your decision to sell has practical benefits for you because understanding your ‘Why’ will tell you whether it is really time to sell. 

Let me give you an example of a situation where the people involved wanted to sell, but hadn’t thought through their ‘Why’: 

I was having those first, all-important discussions with a management team who had brought their business to us to advise on the sale. 

“Why?”, I asked them. 

They had their answer ready: they did not have the cash it would take to grow the business. It had plateaued, they did not see an escape, and it was time to sell. On the surface, that seemed like a fully formed and defensible response to the question, but I have learned, over time, to probe a little deeper. We all need to solidly confirm the reason and the strength of the ‘Why’. 

“If you did have the cash to grow the business,” I asked them, “would you still sell?” 

They answered “No.” 

That moment was pivotal in clarifying the direction of our work. It stopped being a discussion about selling and started an exciting dialogue about finding the funding the business needed and defining where the business could go next. 

Selling the company seemed like the solution, but it didn’t address the real problem that needed to be solved.   

Thinking through those fundamental questions at the beginning of the process will save you the time and energy you need as you proceed. When you do this, be open to the possibility that it isn’t time to sell after all. 

There are a lot of valid reasons to sell your business, both personal and professional.  

It could be anything: changes in your industry, staffing issues, customer concentration concerns, or maybe you are just exhausted. Perhaps there are fundamental disruptions happening in your sector that validate your decision to exit. We have seen people in distribution, for example, take a real hit in recent years as supply chains compress and manufacturers are aggressively taking costs out of their product by going directly to the end customer.  

Your ‘Why’ might also be deeply personal: I once talked to a successful business owner whose best friend had just been diagnosed with a terminal illness. This gave him pause to reconsider life, how to live, and what was valuable; after years of tireless work, he realized he needed to spend the time he had left differently. So, he sold his business and did just that. 

You should establish personal indicators that signal when it is time to enter the sale process. It is important to share these indicators with your Mergers and Acquisitions (M&A) Advisor, and with your family. No one should be blindsided by such an important decision. 

The person who needs to know your ‘Why’ most, is you.

Once you have settled the ‘Why’, you need to choose an M&A Advisor whom you can trust, with the expertise to evaluate the market and understand the real value drivers in your business. Your Advisor must have a track record of consistently increasing the selling price of the businesses it sells, and have the integrity, experience, and resources to help you successfully accomplish your goals.

By examining your ‘Why’ now, you may realize that it is not yet time to sell. However, engaging with the right M&A Advisor now will help you increase the value of your company when the time to sell does arrive. The right M&A Advisor for you will care about your ‘Why’ and the matters that are important to you and your family. Starting the journey well always takes you to better destinations.   


Stay tuned for next week where we will walk you through two more important questions you need to ask yourself before you begin a sale process. Two Essential Questions to Ask Before You Decide to Sell