Following are three reasons to consider when thinking about selling your business.
1. Business value
Collegue John Hammett is an investment banker at Corporate Finance Associates and a former company owner himself. At one point in his career, Hammett was working for an entrepreneur in his mid-50s who sold one of two divisions in his company. While working on the transaction with the company owner, Hammett learned some valuable advice that has stuck with him to this day.
“Anytime you have an opportunity to get liquidity in your company, you need to seriously consider it because running a business is risky and the longer you hold on to that business and the bigger you get, the more chance you risk of failure,” says Hammett. “There is value in a business but no liquidity until you go through a transaction of selling a piece or all of your company to a buyer.”
2. Tired of risk
In the early stages of a business, owners are more confident in taking risks, because they don’t have much value in their companies yet to lose. Taking chances are essential and beneficial if the founder wants their business to grow beyond the initial stages.
As the company grows, so does the value — and owners become more conservative fearing greater damage than when it was a smaller business. Owners who are older no longer have the luxury of time to spend years on damage control fixing bad strategies, so they avoid those risky situations that could lose their company.
Business owners should always be looking to exit their investment. Not because the company may be in a bad place but because it is a smart business decision.
3. Time for change
Cal Lai, president and CEO of Recom Technologies (who also is an Cerius advisory board member), points out that owners have many reasons for selling their businesses. Although a chance at liquidity is a good reason for an owner to decide it’s time to sell the business, it may not be the only reason. After dedicating 15 to 20 years of time, energy and resources into building a company, CEO’s and founders may find themselves ready for retirement. Or an owner may be ready for some change and seek a new opportunity. That could be motivation enough