Selling a business can be a major financial life event. Especially for those who have built their business from the ground up over decades, it can be a monumental undertaking. While at some point every business owner thinks about selling their business, recognizing the right time is often a much harder problem. There is no right answer, but there are helpful guidelines to consider. Selling a business can be as much about moving towards something new as it is about moving on from your business, so understanding your “why” is critical to your success.
What To Do
Selling a business is a process that may not occur more than once in your life, but could easily affect the rest of your life. If you talk to business owners, many will say that they will never sell and that their business is their retirement plan. While that is a fine thought for the moment, I’d argue that truly answering their “why” question would be more useful to them. Many entrepreneurs eventually realize there is life beyond their current business, and selling it leaves them with a very important question: “Now what?”.
Selling is also not a quick fix. Months and years of preparation for a sale can dramatically change the landscape of your future. Building a sellable business, at the most basic level, is good financial sense. Whether you are a “never-sell” owner or not, building a business that is not solely reliant on you can give you immense wealth. You should always ask, “If I were to sell in the near future, what would that look like? Why would I do it? What would need to be in place beforehand?”. Owners who run businesses that could be sold, but don’t have to, are in a very strong position.
So, how do you answer the “now what” question before making the jump? Knowing why you want to sell the business can do that. Once the process of selling your business begins, buyers will be very interested in the reasons why you want to sell. No one wants to buy a business that will flop. Learning about the true reasons for the owner to sell their business not only helps create clarity but could also impact the value as well.
Moving On From Your Business
The important part is to focus on the internal and external reasons for wanting to move on from your business. There is nothing inherently wrong with selling or leaving your company. Many times, entrepreneurs are very time-focused, and their current company could simply take too much time to manage. Time that would otherwise be spent on the business could be used for more important things to you, like your family or a hobby. Beyond more time, it could also be health-related reasons or burnout/boredom. Ultimately, though, an internal perspective can be crucial to understanding your “why”.
Selling your business to take money off the table and diversify can be another common reason. Owners focused on growing wealth may eventually reach a point where protecting their wealth is more important than reinvesting back into the business. Some business owners inherently believe their business is the “safest” place for their wealth, while at the same time, they are unaware of the actual value of their company. Taking tangible dollars out of the game can help solidify your financial situation.
It could also be external factors leading to your desire to sell. Perhaps you are in a declining market or a changing industry. Maybe you are no longer profitable or cannot provide the level of service required anymore. All the money and time required to keep your market share could be wearing on you, and it is time to move on. To some degree, selling a company is less about financial gain and more about the lifestyle of the owner. I’d argue that nearly any reason to sell a business is a better “why” than having no reason. Selling simply because you are supposed to will not produce the outcome you want.
Moving Towards Something New
Perhaps the most critical piece of selling your business is not why you’re selling your business, but what you are going to do next. Moving towards something new is a plan that is essential to properly exit your company. Without a clear picture of what you are going to do once you are no longer with your company, it will not be long before frustration and disappointment will emerge in your life.
Retirement may be one of the best examples to illustrate this topic, since a lot of business owners claim they will never retire. For anyone, retiring from their job to go sit on a beach 5 days a week until they die is not a plan for (nearly) every single person. The thought of selling out to go do nothing would drive most of us crazy. If you are not sure if this would apply to you, ask your spouse about retiring and see what they say. A better retirement plan would be purposeful, say to retire to work at a church or start a mentoring program.
This is why your next step is crucial to understand. If that is buying a new business, have a plan for where your time and money will go. If that is to start a foundation or non-profit, work with professionals and those in that world to get insight into starting your path. Once again, the only wrong answer to your next step is not having any answer.
Start With Why
At the end of the day, selling your business is just one more step in life. There will still be families to build, communities to grow, and people to focus on. Let your reasons for selling your business guide your decisions, whether that be focused internally or externally. Be intentional about what your next chapter of life looks like and build a “business plan” to achieve it. Have you thought about your why? Start your exit plan with one question: what’s next?
TC Falkner 