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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
Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

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.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Brad Steinberg, Broker - Laundromat Specialists

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.

Mike Brewer: Liquor License Brokers, ABC Consulting Services

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.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Michael Davidson, Business Broker - Southern California

Los Angeles Business Broker providing M&A quality services for Small Business Owners. We leverage our technology and expertise to Simplify & Expedite the Business Sales Process. Matching the right buyer with the right business is how we define success.

Lee Petsas, Business Broker - Orange, San Diego Counties, Inland Empire

UBI Business Brokers has been successfully selling businesses in Southern California since 1965. Our Agents have over 100 years of experience in selling small to medium size businesses throughout Southern California. We service Orange County, Inland Empire, San Diego. Phone Lee at 714-363-0440.


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