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There are different reasons why business owners choose to sell their business. While you have invested your money, time, and energy to build and grow your business, there will come a time when selling it might be the best decision you can make. We spoke with the industry experts to help you identify when to sell a business.
Below are the 25 common reasons to sell your business, according to the pros:
1. You Don’t Have the Energy, Skills, or Resources to Grow the Business
One of the good reasons to sell a growing business is if you think you don’t have the energy, time, experience, skills, and other resources to take the business to the next level. A business should continually grow, and as business owners, there will come a time when you’ll feel you can’t do it anymore. This is the right time to sell your business and entrust it to those who have the skills and resources to take it further.
2. You Want to Take Advantage of Low Capital Gains Taxes
The tax rate on capital gains is at an historically low level. This is one good reason to sell your business and enjoy low tax rates. If you are at an age near retirement, or if you have already grown and stabilized your business, then it’s best to sell your business and take advantage of taxes at such relatively low levels.
3. Your Business’ Value Has Improved Significantly
When your business has grown substantially, it might be time to consider selling it. Running a business is risky, and the bigger you get, the bigger the risks you have to face. The value of your business is not liquid until you go through the transaction of selling your company.
Read our article on how to value a business to learn more.
4. You’ve Been Offered a Better Job Opportunity
One reason why some business owners sell their business is that they have a job offer which they can’t resist. This new job opportunity will pay them more than what they earn from their business, less the liability and other demands of owning a business. While it’s kind of ironic to get back to being an employee after being the employer, this kind of opportunity is the best option for some.
5. You Need Cash for Another Business Opportunity
Some small business owners opt to sell their business because they need cash to start an even bigger small business. If you have plans to start another business that you think will earn more income than your current one, but you don’t have the money for a loan down payment, then it’s better to just sell your current business for the new one as long as you believe that it will be worth it.
If you’re looking to sell your business and buy a new one, check out our article on 1031 like-kind exchanges for tax benefits.
6. You Experience Lack of Alignment
If you got into a business for the wrong reasons, you will eventually experience a certain level of exhaustion and burnout that will no longer be healthy for you physically, emotionally, and mentally. If you think that there is no quick fix for the burnout you feel, then it’s time to sell out and move on.
7. Your Business Has Substantial Sales Growth
One reason entrepreneurs choose to sell their business is that it has had a substantial growth. This is appealing to buyers and you can get a great deal from the sale. Some business owners just want to take a lump sum of money from the sale, and the best time to do this is when you can show substantial and consistent sales growth and earnings.
8. Your Personal Interests Change
If you suddenly realize that, after years of running and growing your business, it doesn’t feel as interesting and exciting as when you started it, then it means you’re losing your passion in your business. This is a good sign that you should consider selling it. Over time, it’s normal for your line of interests to change. So it’s best to sell your business to those who will be interested to take over what you’ve started.
9. Your Business Doesn’t Have the Capital to Survive
Usually, small businesses are highly illiquid and risky assets. Without adequate capital, you can’t realize the full potential of your business. If you need more liquidity and are presented with the possibility of selling your business, you may want to consider this opportunity. This can be more advantageous if the value of your business is already high.
10. Your Overall Exit Strategy Is to Sell Your Business
There are business owners who invest in building a thriving business to eventually sell later on for a huge sum of money. If this is your purpose for starting the business in the first place, then it’s a great reason to sell the business as soon as you have reached your desired growth. After all, there are many startups that earn a great amount of money for selling their prototypes.
For more information, check out our complete list of articles on selling a business.
11. You Want to Have a Fresh Start
Entrepreneurs have other motivations to sell their business and one of these is the desire to start a new one. Some entrepreneurs go into business because they want to start and build something bold and take a risk. This is what drives their spirit. If a business has already reached a certain point of growth and stability, some entrepreneurs just want to move forward, sell the business to cash out their hard work, and start something new and exciting.
12. You Need More Time for Your Personal Life
At some point, as a business owner you will finally realize that running a business takes too much of your time. When the time comes that you will need more time for your family and/or your personal life, then selling your business is a good way to do it. You can use the funds from your sale to start a side-hustle business or franchise that requires less of your time and effort.
13. You Want to Retire
The majority of entrepreneurs plan to sell their business as an exit strategy to provide a comfortable retirement. Most local business owners plan to sell their business rather than keep it in the family or hire someone to run it in their place when they retire. The driving force for this stems from the hand-to-mouth lifestyle many entrepreneurs face and lack of savings for retirement.
To read more, go to FitSmallBusiness.com.