Why Do Business Owners Sell Their Businesses? 10 Common Reasons
There are several reasons why people choose to sell their businesses, from retirement plans and relocation to ill health or a change in personal circumstances
Whatever the reason for selling, properly planning the sale of a business ensures business owners get the best price and are fairly compensated for all of the hard work they have put in over the years.
From the hundreds of business transactions that we have overseen across a wide range of sectors, here are 10 of the most common reasons that business owners choose to sell.
Retirement
For many business owners, their business is their retirement plan.
After years or even decades of hard work developing the business to where it is today, it seems only right that they can cash in on all their hard work and use the sale of their business to fund their retirement.
In some cases, the business owner may wish to sell and cut all ties with the business, whereas others may wish to stay involved.
When selling a business, the new owner may request that the owner stays on for a set period of time after the sale to help ensure the handover goes smoothly.
Business owners looking to sell to fund their retirement should keep in mind that selling a business does not happen overnight, so proper planning can help the deal match expectations in terms of price and timeframes.
Take a look at our case study for A4 Asbestos, a Bristol based company that we successfully found a buyer for to fund the owner’s retirement.
Relocation
People choose to sell their businesses and relocate for several reasons including being closer to family, a change in personal circumstances, or as part of their retirement plan.
Whilst technology such as video conferencing means teams can collaborate well even when based in different countries, some business setups mean it’s not practical for the owner of the business to be based elsewhere.
Like retirement planning, it pays to plan in advance when relocating to ensure that the business can be sold without impacting desired relocation dates or the price the business is sold for.
Ill Health
Unfortunately, ill health is another common reason why business owners come to us to sell their businesses.
This may be due to the business owner having an illness, or a close friend or family member whom they now need to care for or wish to spend more time with.
During these often emotional times, some business owners may wish to scale back their hours involved in the business, whereas others will want to have a clean break; these are all terms that will be agreed between both parties during negotiations.
Explore Other Opportunities
A business is a big asset with potentially hundreds of thousands of pounds being tied up in it; this can be restrictive when looking to explore other opportunities.
For business owners looking to pursue different prospects, selling the business may enable them to invest in the new opportunity without the need to raise any additional funds through borrowing.
Furthermore, selling their business means that they can put all of their attention into their new venture, increasing the chances of its success.
Take a look at our case study for a Subway franchise in Bristol which we successfully found a buyer for, enabling the previous owner to pursue a new opportunity.
Personal Circumstances
A change in personal circumstances such as getting married or having children can be a key driver for selling the business.
With a family at home, business owners may wish to spend a lot more time with them and so the business becomes a secondary priority.
This could impact performance, so business owners may wish to sell up and pursue traditional employment or a new role at the business which allows them to have a more structured schedule to spend time with family.
Industry Changes
If a business owner is nearing retirement age, a large industry change can be a reason why they choose to sell earlier than planned.
Significant industry changes often mean that business owners have to understand new legislation, train staff, invest in new equipment and change all of their processes.
If a business owner plans to retire soon anyway, it can be better for them to sell the business early rather than make the necessary investments.
In industries where legislation change is frequent, merger & acquisition activity is often higher as companies will look to acquire others when legislation change happens.
In recent years, we have seen several accountancy practices with senior partners decide to cash in and retire as a result of changes including Making Tax Digital (MTD) and GDPR, both of which create huge new obligations for practices.
To find out more, read our case study for Wilkinson’s Partners who we helped successfully grow by acquiring an accountancy practice with senior owners.
Attractive Offer
In a small number of cases, it can be that the business owner receives an attractive offer that they can’t refuse, even if the business is not listed for sale.
The majority of unsolicited offers that a business owner will receive tend to come from generic mass mail campaigns, with few tailored to the business itself.
When these genuine offers do come along, business owners can quickly understand if they are attractive by having an up to date business valuation.
Burn Out
After running a business for several years, even the most passionate business owners can start to burn out and lose interest in their company.
Selling the business can fund a new opportunity that they are more passionate about or enable the business owner to retire.
If the business owner is burnt out, they may wish to stay on at the business after the sale in a different capacity whilst also working fewer hours; these are all terms that can be agreed on during negotiations.
Increased Competition
Competition eating into market share often means an investment of time and capital is required to come out on top and retain customers.
A business owner may choose to sell when competition is high if they feel that they do not have the necessary skills and resources to successfully fend off the competition.
Whilst selling in this manner cannot always be planned well in advance, having a valuation of the business ready means that the competitive market can be capitalised on to secure a higher valuation.
Profitability Decline
If profitability is forecast to decline or a business owner feels the organisation has reached peak profitability under their leadership, it can be a good time to move on.
However, when selling due to profitability decline, it’s important to note that future financials will certainly be considered when determining the value of the business.
Sell Your Business With Bristol Business Brokers
In most cases, there is no one sole reason why a business owner chooses to sell, but a combination of reasons with the same goal.
Regardless of your motivation, having a business broker on your side means that you can get the best price for your business and agree on terms that work for you.
To find out more about selling your business, call today on 0117 379 0117, or fill out a contact form and we’ll get back to you.