There are many reasons why a business owner considers selling their business.  These reasons can include:
  • Simply tired of running the business
  • Problems getting along with a partner or partners
  • A divorce
  • Ready to retire and enjoy the fruits of your labor
But, business owners that are considering selling their business often overlook one important question – Are they ready to sell? This is not the same question as “Is the business ready to sell”. For an owner to have a successful experience selling their business, they need to be mentally ready to sell, and know that they will be financially set for their post-sale plans. To decide if you are ready to sell, ask yourself questions such as:
  • What will I do post sale?
  • Do I want to buy another business, work with charities, or retire and do nothing?
  • What will I do, when I’m doing nothing?
  • Do I want the business name to remain the same?
  • Is it important that the ownership change has minimum impact on key employees?
  • Is it important that my loyal customers continue to receive the same quality products and services?
  • Am I prepared for a sales process that will last 6 – 12 months, possibly longer?
  • How long am I willing to stay on in an advisory or consulting role?
One business owner that I know had a successful surveying business in Texas for many years. He went through the process of closing the sale, but found he hadn’t prepared himself for not having a business to go to every day. He missed “running the business”. He took his wife on a driving tour of North America that lasted over 6 months, which certainly took his mind off it. They had a blast. Another owner that I know is 77 years old and is finally considering turning over the reins to his business. Someone once described him as having “flunked retirement”. When he told me that he was finally going to hang up his spurs, he shared with me that he would have to get used to not working, as he had been working since he was 14 years old. He realized that the transition would be difficult. But, he planned to travel extensively with his wife afterwards. Travel seems to be a great pick-me-up for the post-sale blues. After you have decided what your next steps in life are, the next questions and considerations are financial in nature:
  • How will you fund your post-sale life?
  • If the next step is to buy another business, have you worked with a business broker to understand the cost range for that acquisition?
  • If your next step is to retire, have you worked with a financial planner to understand the financial requirements of your retirement as you have envisioned it?
  • Are you willing to partially finance the sale? Most small business sales have some degree of owner financing.
  • Have you spoken with your accountant regarding the tax implications of a sale?
  • And most importantly, is your business’s value enough to fund your post-sale plans and goals?
The last question can be answered by a qualified business broker. If your business will not provide the necessary funds, it may be time to re-evaluate your plans, or, evaluate whether your business is ready to sell. I’ll talk about that in the next blog. Till next time, wishing you the best in all you do!