There are different reasons why business owners choose to sell their business. While you have invested your money, time, and energy to build and grow your business, there will come a time when selling it might be the best decision you can make. We spoke with the industry experts to help you identify when to sell a business.
Below are the 24 common reasons to sell your business, according to the pros:
1. You Don’t Have the Energy, Skills, or Resources to Grow the Business
Michael Roub, Managing Partner, Inflection 360
One of the good reasons to sell a growing business is if you think you don’t have the energy, time, experience, skills, and other resources to take the business to the next level. A business should continually grow, and as business owners, there will come a time when you’ll feel you can’t do it anymore. This is the right time to sell your business and entrust it to those who have the skills and resources to take it further.
2. You Want to Take Advantage of Low Capital Gains Taxes
Gene Marks, Owner, Marks Group PC
The tax rate on capital gains is at an historically low level. This is one good reason to sell your business and enjoy low tax rates. If you are at an age near retirement, or if you have already grown and stabilized your business, then it’s best to sell your business and take advantage of taxes at such relatively low levels.
3. Your Business’ Value Has Improved Significantly
Pamela Wasley, CEO, Cerius Executives
When your business has grown substantially, it might be time to consider selling it. Running a business is risky, and the bigger you get, the bigger the risks you have to face. The value of your business is not liquid until you go through the transaction of selling your company.
Read our article on how to value a business to learn more.
4. You’ve Been Offered a Better Job Opportunity
Tom Gesimondo, President, Transworld Business Advisors
One reason why some business owners sell their business is that they have a job offer which they can’t resist. This new job opportunity will pay them more than what they earn from their business, less the liability and other demands of owning a business. While it’s kind of ironic to get back to being an employee after being the employer, this kind of opportunity is the best option for some.
5. You Need Cash for Another Business Opportunity
Derek Christian, Owner, Handyman Connection
Some small business owners opt to sell their business because they need cash to start an even bigger small business. If you have plans to start another business that you think will earn more income than your current one, but you don’t have the money for a loan down payment, then it’s better to just sell your current business for the new one as long as you believe that it will be worth it.
If you’re looking to sell your business and buy a new one, check out our article on 1031 like-kind exchanges for tax benefits.
6. You Experience Lack of Alignment
Vanessa Rende, Founder, Vanessa Rende Inc.
If you got into a business for the wrong reasons, you will eventually experience a certain level of exhaustion and burnout that will no longer be healthy for you physically, emotionally, and mentally. If you think that there is no quick fix for the burnout you feel, then it’s time to sell out and move on.
7. Your Personal Interests Change
Jeet Banerjee, Serial Entrepreneur & TEDx Speaker, Jeet Banerjee
If you suddenly realize that, after years of running and growing your business, it doesn’t feel as interesting and exciting as when you started it, then it means you’re losing your passion in your business. This is a good sign that you should consider selling it. Over time, it’s normal for your line of interests to change. So it’s best to sell your business to those who will be interested to take over what you’ve started.
8. Your Business Doesn’t Have the Capital to Survive
Ville Salminen, Owner, Flixable
Usually, small businesses are highly illiquid and risky assets. Without adequate capital, you can’t realize the full potential of your business. If you need more liquidity and are presented with the possibility of selling your business, you may want to consider this opportunity. This can be more advantageous if the value of your business is already high.
9. Your Overall Exit Strategy Is to Sell Your Business
Yuko Kawamoto, Finance Staff, Founders Guide
There are business owners who invest in building a thriving business to eventually sell later on for a huge sum of money. If this is your purpose for starting the business in the first place, then it’s a great reason to sell the business as soon as you have reached your desired growth. After all, there are many startups that earn a great amount of money for selling their prototypes.
For more information, check out our complete list of articles on selling a business.
10. You Want to Have a Fresh Start
Cindy Anderson, Owner & Managing Partner, Thinc Strategy
Entrepreneurs have other motivations to sell their business and one of these is the desire to start a new one. Some entrepreneurs go into business because they want to start and build something bold and take a risk. This is what drives their spirit. If a business has already reached a certain point of growth and stability, some entrepreneurs just want to move forward, sell the business to cash out their hard work, and start something new and exciting.
11. You Need More Time for Your Personal Life
Cindy Readnower, Owner, Skinny Leopard Media
At some point, as a business owner you will finally realize that running a business takes too much of your time. When the time comes that you will need more time for your family and/or your personal life, then selling your business is a good way to do it. You can use the funds from your sale to start a side-hustle business or franchise that requires less of your time and effort.
12. You Want to Retire
Brad Plothow, VP of Marketing and Communications, Womply
The majority of entrepreneurs plan to sell their business as an exit strategy to provide a comfortable retirement. Most local business owners plan to sell their business rather than keep it in the family or hire someone to run it in their place when they retire. The driving force for this stems from the hand-to-mouth lifestyle many entrepreneurs face and lack of savings for retirement.
13. You’ve Achieved Long-Term Financial Security
John Brown, Founder, Business Enterprise Institute
One good reason to sell your business is if you have achieved a certain level of financial security from running the business and you want to step down and start a more laid-back lifestyle. You don’t need to fully retire to do this. Perhaps you just want to start a less demanding business or just own a franchise that doesn’t require much of your time.
14. You Feel Physically & Mentally Exhausted
Ryan Kaufman, Digital Acquisitions, DigitalAcquisitions.co
As a business owner, you are most likely the hub of operations and decision-making. This can be physically and mentally draining, and the time will come when your responsibilities as a business owner will take its toll on you. If you feel physically and mentally exhausted running the business, then it’s time for you to move on. Don’t wait to get sick before you decide to sell out.
15. You Receive an Offer Too Good to Turn Down
Armin Laidre, Managing Partner, ExitAdviser
If a buyer presents you with an offer you can’t refuse, it’s a good enough reason to accept and sell your business. Such an offer is usually priced way above the market value of your business. This kind of offer is rare, so you wouldn’t want to pass it up because you may not get another one like it the future.
Want to see what your business is worth? Check out our business valuation calculator.
16. You’ve Become More Risk-Averse
Denise Hill, Professional Writer & Owner, Hill Writing & Editing
Risk is essential to your business’ continued growth. If, through the years, you have become risk averse, and you get to the point that new opportunities invoke more fear than excitement, it is a sign that you should call it quits with your business. Becoming too conservative means losing your drive to grow the business, and this is a good reason to sell it out.
17. Your Business Partner Wants to Sell
Ryan Guina, Founder & Editor, Cash Money Life
If your business partner wants to call it quits and move on, you have the option to either buy out his shares and own the business entirely, or just sell the business to a third-party and start anew. Most of the time, the second option is more prudent because you will have an equal, prorated share from the sale.
18. A Sudden Lifestyle Change Affects Your Business
Ron Yates, Owner, Titanium Jewelry
Business owners need to understand that there should be a clear delineation between their personal lives and their business. If a sudden lifestyle change (like getting married, going back to school, or giving birth) becomes in conflict with your commitment to your business, then it’s time to consider selling it out and find another way to earn.
If your business’ industry is thriving, it’s a good time to sell your business and move on to your next project. A business in a thriving industry will likely sell more than if your business’ industry is struggling. You can take this opportunity to liquidate your business while there are more customers interested in buying it at a good price. It’s important to pay attention to industry trends, as it will benefit you when you decide to sell.
20. You Need to Pay Off Personal Debts
Catherine Lovering, Staff Writer, Chron
A reason to sell your business is if you need to pay off a mortgage, debts, and/or other personal financial liabilities but do not have enough cash flow to do so. Getting rid of debts can improve your personal financial situation and relieve stress. You can start from scratch when your liabilities are manageable.
21. You Struggle with Poor Business Performance
Intelligent, Staff Writer, Intelligent.co.uk
Running a struggling business can be very stressful and demotivating. If you notice that your business’ performance doesn’t improve even after you have exerted a lot of effort and invested many resources to lift it up, then perhaps it’s time to consider selling it to someone who has the skills and money to revive and grow it. Just don’t expect to get much from the sale.
22. You Have Health Issues
If you think your business has cost you your health, then it’s time to seriously consider selling it. Facing serious health issues is one of the common reasons why some business owners choose to sell their business. After all, it’s best to prioritize your health, so taking a time off to restore it will help you become more productive later on should you decide to start another business again.
23. The Market is Moving Against You
When the market trend is clearly moving against your business, it is a sign that it’s time to sell out. In today’s fast-growing technological society, it’s possible for nearly all businesses to have the market bottom out on them. It’s essential that they must be on the lookout and prepared for a sale before their business becomes totally worthless.
If you and your family made a major decision to relocate, it’s a good reason to sell your business. Although it is possible to relocate your business, you also need to consider several things, such as the market insights and industry in your new location, relocating your employees, and other needed paperwork. This may be more troublesome than selling your current business and starting a new one in your new place.
Bottom Line – When to Sell a Business
There will come a time when business owners will need to sell their companies. The right time to sell a business is based on various reasons, such as economic conditions, industry trends, personal situations, and professional considerations. Check the common reasons why small business owners choose to sell out to know when to sell a business.