Why NOT to Sell Your Business

Source: Gary T. Brooks

If you follow my posts regularly, you know I often share experiences from my 25-plus years of brokering business sales transactions, usually giving all the good reasons to sell your business – that is, if you’re approaching retirement age or just ready to explore something new in your professional life. But today I want to turn the tables a bit, and give you some reasons NOT to sell your business – at least, not right now.

So, why should you back off from the idea of putting your business on the market? Well, ask yourself whether you fall into any of these categories:

1. You’ve been “burned out” for several years now. Maybe you think this is the best reason to get out from under your business as fast as you can. But if you as the owner have been “running on fumes” for a while, I can just about guarantee you that the value of your business has dropped. It may be true that you aren’t the best person to keep managing things day to day, but my advice is to let a trusted employee take over some of your duties, or find an investor to partner with who can inject some life into the business, and focus your energies on increasing the value of your business until you can reasonably expect a profitable sale.

2. Your business has been through major changes recently. If you just embarked on an expensive R & D project or recently introduced a new product, now is not the time to sell your business. You won’t be able to show the buyer enough stability to get the best returns for yourself. You need to let the business settle in – and work with an Exit Planning professional to make sure you can document the evidence to show that your business is now positioned to grow and thrive in the future.

Usually I’m giving reasons to consider selling your business. And yes, that may be what you should be thinking about. But then again, maybe not! Here are three additional reasons (besides the two I mentioned in my last post) why it might be the wrong time to put your business on the market.

Reason 3. Several companies in your industry have recently changed hands. If you know of more than one major competitor in your city who just sold their business, you’ll probably do better to wait a while before looking for a buyer for your business. For one thing, you don’t want your selling price to depend on what the other companies went for. And you probably don’t want to be stuck with the buyers who didn’t bid high enough to win those sales. Concentrate on growing your business so that a year or so from now you’ll be poised to make a much better sale than you could now.

Reason 4. You aren’t sure whether to sell to an outside buyer or keep the business in the family. The differences between these two options are significant, and you need to be confident about your choice. If you’re on the fence about whether to hand your business over to your heirs, you should put on the brakes and find an expert advisor who can help you consider ALL the consequences of both decisions. Delaying your retirement for a year or two is worth it in order to be sure your future financial needs are covered and your family relationships stay intact.

Reason 5. If you’re honest, you know the sale of your business won’t cover your retirement needs. You may be so tired of dealing with your business that you’re willing to take a hit financially, and you say to yourself, “We’ll get by just fine; I can figure out how to make ends meet later on.” But with post-retirement lifespans lasting twenty or thirty years or more for many people, you can’t afford to be cavalier about what you’ll need to fund your desired lifestyle. You can cut down on your active involvement in the business while retaining ownership for long enough to maximize the value of your business and create a wise Exit Strategy with a team of trusted advisors. You owe it to yourself and your family to do so.