Small Business Exit Strategies
Selling Small Businesses
Thinking about selling out? How do you decide when it's in your best interest to sell your small business? In this article on small business exit strategies, we examine a few scenarios where selling small businesses can make sense.
It's not very popular to talk about the circumstances under which you might be willing to sell your business.
But talk about them or not, several situations could arise that make selling your company a smart business move. Instead of flying by the seat of your pants, you may want to consider various scenarios ahead of time so when the right opportunity arises you can jump on it.
Selling a business for personal reasons
Most selling scenarios are based on the assumption that your motivation for selling your company is to maximize the profit on your investment. But you also have to consider the real possibility that you may need to sell your business for personal reasons. An unexpected illness, a divorce, a relocation - all of these are legitimate reasons for selling your company. While profitability is always a consideration, don't let it get in the way of getting out if your personal circumstances are telling you that it is absolutely time to sell.
Selling a business when the business is growing
Growing companies are usually more attractive to buyers than stagnant ones. If you can demonstrate a track record of growth and convince other people that the business will continue to grow, then your business may be a hot commodity among entrepreneurs who are looking for an established business with solid prospects.
Selling a business when the industry is in an upturn
Just like businesses, industries go through cycles. Today's hot industry might be tomorrow's old news (remember frozen yogurt?). The best time to sell your business is when the industry is hot and there is no shortage of entrepreneurs looking for a way to get in on the action. This is especially true is you suspect your business is selling a product with a limited lifespan. Wait too long and demand for the product you sell might fade away to nothing. At that point, you won't be able to give your business away.
Selling a business when interest rates are low
Low interest rates make it easier for entrepreneurs to buy new businesses. Interest expenses are reduced and monthly installment payments are lower. That's good news for you because a lower monthly payment means that buyers may qualify for a higher loan amount, i.e. they can pay more for your company.
Selling a business when a partnership dissolves
Sometimes you may have no choice in the question of whether or not to sell your company. In the event of the dissolution of a partnership, there are really only two options. Either one partner can buy out the other partner, or the business can be sold to someone else and the net profits divided between the partners. Unless you can afford to buy out your partner, there's a good chance that a partnership dissolution will necessitate the sale of your company. No matter how unlikely it seems now, have a contingency plan in place should a partnership dissolution occur in your business.
Selling a business when you've lost your passion
Small business ownership should be fun. You should enjoy the ups and downs of owning your own company and have a passion for what you do. But if the passion is gone, it may be time to do something else. Rather than trudging along until retirement, think about making plans to sell your business now. It's the only fair thing to do for your employees, your family, and yourself.
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