Why sell a business? What you need to think about beforehand

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Why sell a business? What you need to think about beforehand
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If you’re thinking about selling a business, the first thing you should consider is why you want to sell your business. You probably already realize that it is quite a long process, so you should make sure you are really committed to the idea before you start taking steps in that direction. If you haven’t already done so, you might want to review our guide about the why and how of selling a business here.

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Of course, you already know the reason why you're thinking about selling a business, but have you really considered all of your options before coming to that conclusion? It's important to really dig deep into the reasons why you want to sell a business before you start moving forward with the transaction.

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Why are you selling a business?

One possible reason may be that you're thinking about retiring, so you want to sell your business. However, another option is to hire a manager who can handle the business affairs for you while you continue to rake in a profit. Have you explored this possibility before deciding to sell your business? If not, you might want to take some time to run the numbers and see whether it is plausible and worthwhile from a monetary standpoint to hire a manager instead of just selling the business.

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Perhaps you are having health problems that you feel are forcing you to sell, but once again, you might consider hiring a manager to handle the affairs for you. The best thing about this option is the fact that it will still allow you to get back into the saddle again if or when your health recovers.

A major life event could be another reason why you want to sell a business. Couples who co-own a business will have to sell the business and split the profits from the sale unless they are willing to keep working together. Another option is for one of them to buy out the other, which is a slightly different transaction than just selling the business.

Some business owners decide to sell because their partner has died, retired or otherwise left the business. Those who are in this situation may not feel like they have what it takes to run the business without their partner, but there is another option. You could find a manager or employee to take up the responsibilities of the partner who left or passed away, or you could find another partner with similar skills. Perhaps there is already an employee working at the business who would make a great partner.

Do you actually want to leave the industry forever?

Another important consideration to make when you're thinking about why you want to sell is whether or not you are committed to leaving the industry forever. Many business owners find that they can't stay away from the industry they have already given their lives to, so they end up starting the same kind of business again at some point.

Business owners who sell their business generally must sign a non-compete clause as part of the sales contract. That clause is designed to keep them from reentering the industry and becoming a competitor to the business they just sold.

Despite that non-compete clause, many business owners find sneaky ways to get back into the industry, although they could have saved themselves a lot of hassle if they had just approached their problem differently instead of selling their business.

One example of a loophole used by business owners is starting a new business in the same industry using another person's name. Other former business owners wait exactly two years — or however long the non-compete clause lasts — and then dive right back into the industry with a new business.

Why sell a business? Think about timing

If you have already run through all your reasons why you want to sell and explored the other options, the next step is to think about the timing. Even though you may be ready for a change for one reason or another, it might not be the best time to sell the business.

Some business owners wait to sell until they have an outstanding year of earnings and revenue. That increases the value of the business and often means you can get more for it if you sell. Another benefit of waiting a bit to sell your business is the fact that it gives you more time to think and really make sure that you want to shut the door on the industry forever.

On the other hand, you may be thinking about selling your business because its valuation is higher than it has ever been before. This may be the perfect time to sell it, but should you? Simply being able to get top dollar for your business isn't a reason to sell, in and of itself, especially if it means you will be thinking about a loophole to get back into the industry after you sell.

Tread carefully through the sales process

Finally, if you have decided that the reason you want to sell is valid and that you are truly ready to leave the industry forever, it's time to start thinking about where to find the right buyer. After all, the right buyer will pay what the business is truly worth because they understand its value.

If a prospective buyer came to you and is trying to talk you into selling your business, it doesn't necessarily mean they are the right buyer. While they are probably motivated to pay top dollar, you shouldn't let their arguments sway you when it comes to deciding whether or not to sell.

Only you can decide if you want to sell your business and if now is the right time to sell. You may also face a delay if you can't find the right buyer for your business, but it is still best to wait until you do. Selling a business can be very rewarding because it opens your life up for new adventures, but you must make sure your reasons why are valid and will still hold true years down the road. After you sell, it will be a decision that you'll have to live with.

Get expert help from Valuewalk with selling, buying or managing a business by filling out the below form!

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