Selling a profitable business may result from changing market demands, personal or financial goals, retirement plans, and many other factors. For entrepreneurs who have carefully nurtured their business from inception to success, deciding to part with a successful venture can be difficult.
After working hard to make their business profitable, many owners are reluctant to give up the fruits of their labor. Despite these reservations and misgivings, there are many reasons why an owner might choose to sell their business.
A business owner may decide to sell if the business has become too large to manage independently. If a venture has grown beyond the capacity of one person to handle, it may be time to bring in an outside partner or transfer ownership.
Business owners face various challenges as their venture grows, from finding and retaining talented employees to managing cash flow.
Finding a broker that understands the business and its needs can be essential to a successful sale. They offer an attractive solution for those who may not be up to dealing with the complexities of a business sale.
In this article, we’ll look at why a business owner might choose to sell a profitable business.
1. The owner is burned out from running it
Running a business while burned out can be a recipe for disaster. Prolonged stress can take its toll on an owner’s enthusiasm and motivation. It can lead to a decrease in quality and customer service, resulting in lost business, profit, and reputation.
Burnout is expected in the business world. It makes business owners feel they have nothing left to give and that the only option is to walk away. When this feeling overwhelms, selling can seem like the only way to regain balance and clarity.
Running a business can be all-encompassing, demanding long hours and continuous attention. This can take a toll mentally and physically, resulting in a feeling of exhaustion for the owner.
The decision to sell can allow owners to take a break and recharge their batteries. Moving on can be liberating, allowing owners to take a step back and assess their next steps.
2. The business is performing poorly
Businesses go through both ups and downs. Despite being profitable, a business can still face challenging times. An owner who is overwhelmed or unable to cope with the downturn can sell their business to move on to something else.
You may feel a sense of failure and disappointment when your business performs poorly. This can lead to discouragement, which in turn can lead to a lack of motivation.
Without the enthusiasm or determination to turn the business around, many business owners opt to sell for a fresh start. Selling can be an excellent way to recoup some of the lost capital and invest it in something more promising.
Selling a business can also be a way to save money. When profits are lower than expected, an owner may sell the business as quickly and cheaply as possible to reduce losses.
Selling a business while at its lowest point can be a difficult decision to make. You are unsure of the future of your business, but you may still need to let go to move on.
3. The owner wants to explore new business opportunities
You may have explored every avenue with your current business and decided it’s time to move on. As an entrepreneur, you may look for new projects and opportunities that align with your interests or career goals.
Selling your company can be an ideal way to free up resources and time for your new business venture. You can sell your existing business for a profit and invest the proceeds into something more exciting.
It is also an opportunity to diversify your portfolio. Instead of having all your eggs in one basket, you can sell and spread the wealth across multiple ventures.
The best part about selling is that it allows you to move on and explore new opportunities without being tied down. You get the freedom to focus on what matters most.
Selling can also be a source of financial security for many business owners. You may sell your business and use the proceeds to fund a comfortable retirement.
4. Retirement plans
After years of hard work and dedication, many owners are ready to take a step back and enjoy their retirement. Selling the business can give owners a nest egg to fund their retirement plans which may include traveling, volunteering, or pursuing hobbies.
When owners sell their businesses to retire, they can use the proceeds to set up a comfortable and secure retirement. This can give them peace of mind and financial security so they can enjoy the next stage of life without having to worry about their finances.
Selling a business at your retirement age can also be an opportunity to set up a legacy. Owners can sell their businesses and invest the proceeds in something that will benefit the community or their loved ones. This could include donating to charities, setting up trust funds for their families, or investing in a business venture that will continue to grow.
A business sale can also help owners set up a retirement plan that works for their long-term goals. They can invest the proceeds in something that yields a steady income and use that to fund their retirement age.
Such strategies can give them the financial freedom to enjoy their golden years without worrying about running out of savings.
5. Selling due to personal issues
Personal issues such as stress, depression, and anxiety can also factor in deciding to sell. Most business owners sell their businesses due to the pressures of running them and feeling overwhelmed.
Stress can take a toll on an individual, leading to decreased motivation and productivity. Selling through business brokers allows owners to escape the stressful environment and focus on their mental health.
They can sell the business and use the proceeds to pursue therapy. Attending regular counseling sessions can help boost your mental health and help you find new career paths.
Sometimes, business owners sell to free up time to pursue other interests. This could be a side business, creative pursuits such as writing or drawing, or entirely different.
Selling can provide the financial means to explore these interests without sacrificing your existing business.
For others, selling can also be a way to break away from an unhealthy work environment, such as toxic relationships with partners or employees. It can be challenging to deal with a hostile workplace, and selling can allow you to start fresh.
6. Owner can no longer grow the business further
At some point, business owners may find that they can no longer grow their business further due to limited resources, market saturation, a lack of new ideas, or the inability to keep up with industry changes.
They may sell the business to someone who can take it further and propel it to greater heights. It’s a rewarding experience for owners as they see the business they built reach new heights.
The new owners may also have access to resources that can help them take the business further, such as capital, technology, marketing, and advertising. They can use these to build the business even more and make it a bigger success.
Selling a business can also be beneficial for the local economy. New owners may bring in new jobs, invest in the community, and help stimulate economic growth. This can be an excellent way for business owners to leave a lasting legacy.
7. The company’s value has grown significantly and reached a plateau
Entrepreneurs often sell their businesses when their value has increased considerably and reached a plateau. This opportune time allows business owners to sell, make a substantial profit, and benefit from the value of their hard work.
The business has typically been around for a few years and has reached a peak. It’s running smoothly, making profits, and no longer requires significant investments to maintain growth.
The company has developed a strong customer base, brand recognition, and market presence. This allows the business owner can sell their business for a higher value and enjoy the fruits of their labor.
Business owners sell when their company’s value is at its peak to maximize their return on investment. They may sell to a larger corporation or angel investors who can take the business further.
8. Lifestyle changes
Changes in lifestyle, such as relocating, health issues, or family commitments, may also be a deciding factor for business owners to sell their businesses. These issues can make it difficult to sustain the business and take care of personal matters simultaneously.
For instance, maintaining a business can become too challenging when an owner falls ill. They may not have the energy to keep up with the business’s demands, so they decide it’s best to sell and focus on improving.
Divorce can also lead to the sale of a business. In some cases, one of the parties may be unable to afford to keep the business due to financial disagreements or other issues. In this case, selling may be the only option to ensure both parties can move on and start fresh.
Disagreements between family members or changes in family dynamics can often make it difficult to keep a business going. In such cases, owners may sell the business and use the proceeds to invest in other ventures that can bring everyone closer together.
9. The owner has another business or found a job they can’t refuse
It’s normal for entrepreneurs to focus on business ventures that offer better opportunities and more potential. If you have an underperforming business, you may sell it and focus on more profitable ventures.
The same goes for business owners who find a job they can’t refuse. If a job offer aligns with your career goals and offers more financial rewards, you will likely sell your business and pursue the opportunity.
This can be a great way to move up the career ladder and work on your financial future. Instead of spending time and energy on a business that’s not performing well, you can focus on the new job and use it as a stepping stone to greater success.
Another reason to sell a profitable business is if you have another venture that needs more attention. If your current business isn’t generating enough revenue or is not taking off as expected, you may sell it and focus on the other business.
Investing your energy and resources into the right business can be a great way to achieve success. Selling your current business and reinvesting in another venture may help you reach your goals faster.
10. The business is in high demand
When a business grows in popularity and demand, it can become an attractive target for potential buyers. It’s not uncommon for business owners to sell their successful business ventures when they’re in high demand for a hefty profit.
A high-demand business will typically sell for a premium price, as buyers are willing to pay more for its success and potential. This can be an excellent option for business owners looking to make a quick profit or reinvest in other ventures.
When selling a profitable business, prepare a strong business plan, secure the proper legal documents, and conduct thorough market research. This will help you maximize the sale price and ensure the buyer understands the business’ potential.
You should also be realistic and patient when selling a business in high demand. Don’t rush the process, as it can cost you both price and quality. Involving a broker in transferring business ownership can also help ensure the selling process is swift and smooth.
11. The owner wants a fresh start
Starting and managing a business is an enriching experience but can also be tiring and stressful. After years of hard work and dedication, some business owners may want to sell their profitable business and pursue a different career path.
This is called an “exit strategy” and is a great way for business owners to get a fresh start. When you sell your business, you can reclaim your time and energy and focus on other passions or pursuits.
Selling the business allows you to receive a financial payout for your hard work and reinvest it into something new. You can use the funds for various purposes, including starting a new business or investing in something else.
If you intend to sell your profitable business, plan ahead to secure the best deal possible. Work with a qualified business broker to ensure you receive a fair price and sell all business assets.
12. Concerns about industry changes
The business landscape is constantly changing, and business owners must stay on top of industry trends to remain competitive. As new technologies, products, or regulations emerge, you must be flexible and willing to adjust your operations accordingly.
However, sometimes the changes can be overwhelming and cause you to sell your profitable business. This can be particularly true in markets subject to sudden changes, like technology or cryptocurrency.
When considering selling your business due to industry changes, determine the impact on your operations and profits. If it’s too difficult or costly to adjust, selling may be the best option.
Most potential buyers have a good understanding of the industry and can spot a business with potential. When preparing to sell, ensure you have the documents to prove your operations are up to date and compliant with industry regulations.
Be sure to discuss the potential changes in your market with the new owner. This will help them understand their investment and make an informed decision.
Takeaway: Sell your business with a qualified business broker
Selling your business is a big decision and requires careful planning. It can result from growing demand, wanting a fresh start, or adapting to industry changes. Whichever the case, you want to ensure you get the best price and a smooth selling process.
Working with qualified business brokers can help you achieve that goal. They have the experience and knowledge to negotiate a fair price, facilitate ownership transfers, and much more.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!