Major Considerations Before Selling a Business

Fri, Nov 2, 2012


There inevitably comes a time for every entrepreneur when the drive to grow their small business fades out. It takes an enormous amount of effort to build a company from the ground up, and whether the burn-out occurs one year later or ten, it will happen. If your company has done fairly well you will have some options at this point, the most attractive of which could be to sell it off. Depending on your industry and past performance you could sell your company and ride off into the sunset of a happy retirement. Or you could use that money and invest it in some new passion, launching a business to take you into the next phase of life. Regardless of which direction you want to go in the end, selling your business is not an easy decision. Here are just a few of the major considerations you should make before selling your business.

First off, will you see a respectable return on your investment? Remember, you put a ton of sweat equity into building your business, and that time and energy should equal additional money at a sale. You have to make sure that your business is in a strong enough place that the years you worked for little pay just to keep the doors open will be recognized. If your company was an overnight success you might be able to just look at the revenue and come up with a number. But if it took serious time and effort to get the business to where it is today, and it usually does, you must be compensated accordingly. Otherwise, you should hold on to it.

Also, do you care what happens to the company after you sell? Some entrepreneurs who buy businesses do so because they can fold the new company into their existing one in a complimentary way. The brand you created will live on, and potentially even grow beyond where you could have taken it. Other people purchase businesses in order to blow them up, either to destroy a strong competitor in the marketplace, to take on a technology or IP they can use or to literally sell the new business off for parts and make a quick buck. Can you deal with this result? If you want the best price for your business you won’t always have the luxury of an opinion on the matter. So if you are unwilling to take this risk, you might not want to sell.

You should also make sure you will be able to work as you would like following the sale. In many instances when an entrepreneur sells his business he has to sign a non-compete agreement, basically declaring he will stay out of that market for a significant amount of time. If a competitor’s company is buying yours this is a huge consideration, as part of the value they are expecting is having fewer products competing in the market. But if you are hit with a great idea the next year that violates your non-compete, you will have to bury it or risk getting sued. Are you willing to move into a different industry?

Finally, you must carefully review the timing. An offer may have come up that suddenly has you considering a sale, where previously it hadn’t even crossed your mind. Are you allowing yourself to be wooed by a substandard offer? Make 100% sure that you aren’t leaving any money on the table by taking the first thing that’s presented. Even offers that seem too good to refuse can be refused, especially if your St Petersburg business brokers can drum up more interest and create competing offers. Don’t allow yourself to be rushed into anything, especially if market conditions or the offer on the table aren’t in your best interest.

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