Why Does An Owner Become A Seller?

When a business owner has worked hard to establish or grow a business—often from the ground up—why would he or she choose to sell? After investing innumerable hours, energy, ingenuity, and effort to make one’s business known and successful, it appears selling might be the last thing an owner would be tempted to do. But businesses sell all the time and for many valid reasons.

Two Sale Categories

The reasons for selling a business can be divided into two main categories. The first is a sale that is planned almost from the beginning or by an owner who knows that selling is, or should be, a planned event.  The second is exactly the opposite: unplanned. The sale is motivated by a specific event such as health, divorce, business crisis, etc. However, in between the two major reasons are a host of unpredictable ones.

Impromptu Sale

A seller may not even be thinking of selling when he or she is approached by an individual, group, or another company and an attractive offer is made. The owner of a business may die, and the heirs have no interest in operating it. A company may bring in new management who decides to sell off a division or two, or maybe even decides that selling the entire business is in everyone’s best interest.

External Threat Prompted Sale

A major competitor may enter the market, forcing an owner to elect to sell. And the competition may not just be another company–a business owner may realize that an existing external threat may cause the company to lose a competitive advantage. New technology by a competitor may outdate the way a company produces its products. Two competitors may merge, placing new pressures on a company. The growth of franchising and the rise of big box stores give these companies the power to promote themselves on a much larger scale than a single business can, no matter how good that business is. National advertising can create the perception that a large business’ pricing, inventory, or service is better than the smaller competitor, even if it isn’t.

Preparing for a Potential Sale

Although these issues may not push a business owner or company management to consider selling, they are certainly causes for consideration. Unfortunately, most sellers fail to create an exit strategy until they are forced to.

An exit strategy should be part of every business plan from the beginning. It helps owners to be clear in the focus of their efforts, direct their paths, and in the end be ready to sell—and get the best value for their business—whether the sale is planned or impromptu. If you are interested in creating an exit plan for your business, the merger and acquisitions advisors at EastWind Business Solutions can help so, like professional athletes try to do, you can exit at the top of your game.

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Copyright: Business Brokerage Press, Inc.
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