Why Do Entrepreneurs Sell Their Small Businesses?
Some small business owners are in it for life. Entrepreneurship isn’t just a lifelong dream for them – it’s a dream they want to hold on to for life.
But for others, the “finish line” is much nearer. Some small business owners will get that entrepreneurial fire, only to turn around and unload their company after a few years.
Neither type of business owner is “wrong.”
Entrepreneurs get out of their small businesses for a host of reasons. Understanding why might help you come to terms with your own decision to exit, or in some cases, help you better relate to an owner whose firm you’re hoping to buy.
The following are some of the most common reasons business owners call it quits.
5 Reasons Entrepreneurs Sell Their Small Businesses
Retirement
You can’t work forever, after all.
No one bats an eye when an office worker calls it quits at age 65. It’s common. It’s expected. But business owners often come to be so defined by the shop they run that outsiders are often surprised when they decide to hang up their aprons.
But for a small business owner, retirement is exactly what most other people have been working toward. In fact, in many cases, selling the business is a way for entrepreneurs to help fund the enjoyment of their retirement years.
It’s Just a Great Market for Selling
Some people simply know a good deal when they see one.
Consider the current climate in the automotive industry. Used car prices are reaching historic values in the face of supply chain shortages. As a result, people who weren’t necessarily considering selling off their used cars are having second thoughts simply because of the value they can get for them, anticipating they can jump back into a newer vehicle once prices have moderated.
Believe it or not, you’ll sometimes see a similar situation in the business world.
You can change a lot of minds with the right amount of money. So in a buyer’s market, where private equity firms and other potential acquirers are looking to gobble up anything they can, entrepreneurs who weren’t thinking about selling might suddenly have second thoughts if enough cash is waved in their faces.
Wanting to Get Out Before They’re Pushed Out
In some cases, an entrepreneur will determine that either growth is going to continue for a while, or that growth is cusping, and that either way, now’s the time to get out. This instinct is similar to selling in a seller’s market.
What better time is there to sell a small business, after all, then when you can show a prospective buyer that it’s enjoying red-hot expansion? At that point, it’s a desirable commodity that other businesspeople would gladly purchase.
Indeed, many “serial entrepreneurs” do this their entire lives, building a business and putting it on a sound growth foundation before exiting, cashing a check and starting up the next thing.
However, in other cases, business owners are sometimes pressed into selling once they see the writing on the wall. Growth begins to slow, or the business actually falls into decline, and the entrepreneur would prefer to exit with at least some worth assigned to the company rather than be left with nothing.
Life Obligations
Life happens to everyone.
A small business owner might decide that running a company doesn’t leave them with enough time to raise their kids. They might need to spend extra time taking care of an elderly parent. But family obligations pop up every day, and in many cases, those responsibilities come first – leading an entrepreneur to unload the business so they can allocate their time differently.
And sometimes, the person they’re trying to take care of is themselves. A small business owner who works 60 hours a week to keep everything afloat might decide that a 40-hour work week and a steady paycheck are worth no longer working for themselves.
The Chance to Start Something New
This motivation typically is found among younger entrepreneurs — especially those that love the thrill of building up something from scratch and doing it all over again.
The thing is, no matter how successful you are at growing businesses, it’s difficult to do (and do well) when you’re already running another company. Thus, selling a firm kills two birds with one stone: It frees up the entrepreneur’s time to pursue another passion, while also providing the necessary startup funding for the new venture.
Are You Considering Selling Your Small Business?
If you’ve been entertaining the idea of exiting your small business, but you’re not sure whether you want to pull the trigger, talk to McManamon & Co.
We’re an accounting, tax, fraud, forensic and consulting firm for small and midsize businesses, and among our many specialties is consulting on mergers and acquisitions (M&A) activity for both prospective buyers and sellers. Not only can we help you decide whether now’s the time to exit — we can also help you position your firm for a sale and even assist in finding buyers.
Interested in learning more? Call us now at 440.892.8900 or contact us online.
Tags: McManamon, McManamon & Co., mergers and acquisitions, small business | Posted in mergers & acquisitions