Factors That Influence When To Sell A Business

Having been in the merger and acquisition industry for a lot of years, I have frequently been asked for advice on when to sell a privately owned business.  With rare exceptions, the core issue is really a lifestyle decision and not necessarily a financial one. For most business owners operating their business is their life, and if they enjoy it and bounce out of bed every morning anxious to face the day, then it most probably isn’t the right time for them to consider selling.

There are exceptions to the above and they are: {1} if someone offers you substantially more than what the business is really worth, {2} if you have reason to believe you have significant health issues ahead of you, {3} if your spouse hates the business and wishes that you were no longer involved in owning it, {4} if you are ready to retire or want to move on to other opportunities, and {5} if you can accurately predict forthcoming doom and gloom coming in either your industry or in the overall economy.

Let’s examine each of these:

1. One of the prime reasons this rarely happens is that very few business owners have a realistic idea of what their businesses are worth.  By way of contrast, my wife and I have ownership interests in five different privately owned businesses (combined annual revenues over $30 million), one of which I dedicate my full time efforts (Acquisition Services Group owned 50/50 with a partner) and the other four are managed by partners.  Every January and July I do a business valuation on each of them and those figures are used as follows: as vital information in formulating written Business Plans, updating personal financial statements, and entry into our Estate Planning Binder so that either my surviving spouse or replacement Trustee in our Family Trust can have a head start on making any necessary business decisions.  What??  You don’t know the value of your business?  You don’t have a written Business Plan?  You haven’t done any Estate Planning?  That is bad news for you and your heirs, but great news for your competitors, the IRS and all the lawyers that will end up getting involved before all is said and done!!

2. Most privately owned businesses lose 50% or more of their value when their primary owner becomes either incapacitated or deceased.  Obviously this is an insurable risk; however, if you have early warning signs or you might be in a high risk category, you should proceed accordingly.  What?? You don’t get an annual physical?? That is the equivalent of trying to run your business without either financial statements or getting any professional advice.

3. Quality of Life is basically the name of the game, and if your spouse is not on board in the ownership of the business, you really want to give the idea of selling a great deal of thought.

4. Getting burned out or lacking any challenge in your business means it is time to start thinking about hanging it up (if net worth will accommodate retirement) or selling and doing something else --- those who live their lives doing something that they enjoy outlive those who don’t!

5. My life experiences have been that virtually no one is good at anticipating doom and gloom and jumping off the railroad trestle just before the train rushes by!.  Just yesterday a friend told me about a financial guru who correctly predicted the 2007/08 credit meltdown of the stock market and economy.  My friend had signed up and paid this guy for his future advice.  I really didn't have the heart to tell him that the guy had been around for at least 40 years, to my personal knowledge, and he had continuously been predicting the end of the world, during which time he had missed three of the greatest bull markets in stocks, in real estate and commodities.

Short term traders are almost always unsuccessful, and the vast majority of personal fortunes that have been accumulated have been those that have been because of having faith in the US economy, hard work and taking intelligent longer term positions in their choice of business or industry.

About The Author:  Steve Fitzgerald is a business broker in the San Diego area assisting business buyers and sellers throughout Southern California. You can reach Steve by phone at 858-320-0474.

Categories: BizBen Blog Contributor, How To Sell A Business, Selling A Business

  Helpful Resources To Assist In Selling And Buying California Businesses
Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Mike Brewer: Liquor License Broker, ABC Consulting Service

Liquor license brokerage and consulting services. We provide: Alcohol License Transfers Application Consulting & Processing, Liquor License Purchases & Sales, City Zoning Permits & Land Use Entitlements, Public Convenience or Necessity Findings and Letters. Phone Mike Brewer direct at 800-437-1100.

Brad Steinberg, Business Broker: Laundromat Specialist

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.

Larry Larsen: Laundry Consulting, Brokerage, Insurance

I have over forty years of experience in the sales, ownership, management, and construction of coin laundries. He is a licensed broker active in the sale of coin laundries, a licensed insurance agent specializing in coin laundry insurance. Phone me at 714-630-9274 or 714-630-Wash.

Joanne Weber, Broker: Preschool Specialist, Southern California

The Ryan Craig Company is in its 46th year as the recognized expert in Southern California, dealing exclusively in the sale of preschools, Montessori schools, day care centers, and private schools. Our extensive list of references speaks for itself. Phone Joanne at 818-760-3684 for more info.

Ryan Clark, Business Broker: Southern California

The Veld Group provides a refreshing approach to Business Brokerage, Mergers & Acquisitions and Business Consulting and Valuations. From Your Street to Wall Street, we cater to Main Street Businesses as well as more complex Strategic Firms and Start-Ups. Phone Ryan, Business Broker at 310-652-8353.

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