In a previous post, I discussed how to assess when to sell your business. The decision to sell your business can be very personal, or it can simply be part of your business strategy. After over 30 years in business brokerage, I’ve observed that the decision to sell is usually one of three distinct reasons. In this post, I want to delve a little deeper into seller motivations.
Just as demand and popularity change for almost any product, the demand for types of businesses ebbs and flows as well. When the market is hot for an industry, it’s not unheard of for business owners in that industry to receive unsolicited offers to buy. In this instance, sellers can leverage the demand for their business to secure a higher valuation [link to positioning on price].
With estimates between 40% and 67% of small businesses being owned by baby boomers, retirement and health concerns are the most common reasons for selling businesses. Making up a quarter of the US population, baby boomers began retiring in 2011 and will continue retiring through the early 2030s. This will mean a steady supply of businesses going on the market, as owners look to sell their life’s work in preparation for retirement.
While many businesses are and continue to be sold to cash out for retirement, selling is sometimes part of a business strategy. Business owners are similar in their entrepreneurial spirit. This innovative and ambitious type of person is frequently ready for the next challenge. Successful business owners are prone to starting up numerous businesses. For this business owner, selling is a way to move on to his next endeavor. Along the same vein, some business owners have an exit strategy from the start of their business. From the beginning, these business owners grow the business with the intention of selling it.
With an understanding of seller motivations, you can begin to understand what kind of buyer[link to positioning on price] will fit a business. Having seen this in my business for decades, this step is crucial to me. When working with a buyer or a seller, I carefully evaluate the synergy between my buyers and sellers. This helps to ensure that the goals of my clients in a business transaction are met.