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Why does someone decide to sell their business?

See all articlesselling a business
Selling a business
By
Tom Butler
Tom Butler
Associate Director
December 17, 2018
4
minute read

Understand the 4 most common reasons for selling a business

Selling a business is a big decision, as well as a time consuming and expensive process. So it's not a decision that business owners make lightly, and a buyer should understand the reasons why.

At Nash Advisory, we sell more than 10 businesses a year. A buyer naturally views a potential acquisition with caution and assumes that they don’t know the full story, and they are correct in thinking that.

Buyers often assume the worst if the owner is trying to exit the business, like that the business must be in trouble. In our experience, it's much more likely that an owner is selling a business for emotional reasons.

Whether you're buying a business or selling a business, we can help understand every detail.

So why does a business owner decide to sell?

reasons for selling a business

In our experience, there are four typical reasons why someone decides to sell a business:

1. Change of pace

The most frequent reason for selling is when an owner has been working for a long time and needs a break from the 24/7 stress of owning a business. This can happen when the owner is key to the business, and also when they have a full management team – an owner will still feel the stress of being responsible for the overall direction of the company and management of staff.

2. Financial freedom

Some business owners are lucky enough to be in a position where can afford to not work anymore, so selling a business is the right move for them.

For some people that might be $5 million of cash, and for others it might be $50 million. In our experience, most of our clients didn’t start their businesses to get rich. Rather, they started them for the challenge. They enjoyed the challenge, and after years of risks and rewards, they want to change their work/life balance.

3. Change of priorities

As people get older, their priorities tend to change. And many business owners choose to spend more time with their families or doing things they love, like travelling. Many of our clients have put the business first, which often means neglected partners and children over a long period of time.

There comes a point in time when an owner decides that their business has been successful enough and they need to get their priorities right. This often coincides with wanting to explore the world with loved ones. Business owners typically struggle to take holidays that are longer than two weeks at a time – fearing that the business will struggle without them.

4. Retirement

Finally, many of our clients are heading towards retirement age and want to transition out of working life. In most cases, the owner’s children do not choose to follow their parent's path. The owner has few choices but to sell their business. Often the owner wants to see their business succeed under a new ownership rather than falter as they withdraw into retirement.

What are the seller's priorities?

For many of our clients the most important things when they're selling a business are:

  • The terms of the sale
  • Whether or not they believe the new owner will be successful
  • How the staff will be treated after a sale
  • How customers and suppliers will be affected

Typically, a buyer can acquire a good or even great business at a fair price due to the owner not being driven solely by price and terms. Usually the business is growing, has a strong market position, and there are multiple growth levers available for the new owner.

A sophisticated buyer can extract synergies from the business and also significantly enhance revenue by making a few logical changes to the business.

Get expert advice business sales and M&A

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Buyers who assume the worst about an owner's reasons for selling a business could miss out on an outstanding opportunity. That's why you need business advisers who experience on both sides of the transaction.

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