There are many reasons why small companies are placed on the market for sale. Some of the more common reasons can actually have little to do with the company’s general performance. For example, many small business owners discover they need to sell for health reasons or personal concerns, such as divorce or partnership issues. While a business downturn or fear of a larger competitor looming on the horizon might prompt many business owners to sell, economic drivers are also just one of many motivators. Owners may want and need to sell, but often it isn’t always that simple.
Many business owners are looking to retire but are unpleasantly surprised to learn they simply can’t afford to do so. Other business owners don’t actually want to retire or sell but want more freedom in their lives. The day-to-day responsibilities of owning and operating a small business can take a toll. Many business owners are looking to make a change and would love to be free of the responsibilities that come with owning a business. This class of owner has already “checked out” mentally, and this can have profound negative consequences for their business.
Is your business exit ready?
If you’re planning to exit your company in the near future, you may find EastWind’s Exit Strategy Playbook helpful in developing your own exit strategy, making your company more sellable.
When an owner wants out but discovers they can’t afford to sell or retire, it will come as no surprise that there is usually an accompanying decrease in enthusiasm for the business. Ultimately, the vast majority of owners will start to lose focus. They often stop investing the capital necessary to continue the growth of the business, which can trigger other events, such as the loss of key staff members and/or customers. Losing a top customer to a major competitor can further accelerate the downward spiral. The failure of the business to maintain its footing and competitive advantage can lead to a more aggressive posture by existing competitors or even encourage a new competitor to move into the market.
In time, the owner may come face-to-face with the harsh realization that they have no choice but to sell if they are to salvage any of the business’s value. The best way for business owners to safeguard against this situation is to sell when their business is doing well, as this helps to ensure an optimal price.
Working with a merger and acquisition advisor even years before a business owner is interested in selling, is one of the single smartest moves any owner can make. The time to think about selling your business is now, because no small business owner knows what life, or the market, will bring.