Business owners may choose to sell their ventures for a number of reasons. Sometimes it is as simple as a need for physical relocation. Other reasons may include the need for tangible capital to start a new business or even retire. Owner may not always be faced with a need to sell, and thus need to decide if they should sell. When necessity is not the driving force, careful consideration helps to guide the “should I sell?” scenario.
Risks And Reasons
Even when selling a business is a decision, needs are still to be considered as factors. An owner may wish to relinquish their hold on a company if the work load is more than the financial gains they are making or require. Conversely, if the owner’s spending rate is higher than the gains being made, a sale can free up capital or allow for a period of re-evaluation. When considering the sale of a business, it is important to weight what will be gained against what may potentially be lost.
The Loose-Win Scenario
In a down economy, small business owners may face the fact that running their company is costing them more than it is making. While a sale may not generate an enormous amount of capital, it can still halt a potential bankruptcy situation and would thus benefit the owner in the long run. This decision to sell can create a positive out of a potentially negative situation.
The Win-Win Scenario
Some business owners make the decision to sell when their company is strong and growing. Although this choice could seem counter intuitive to the long-term picture, it might allow the owner the leisure of an early retirement. The trade-off is that a large amount of instant finances is gained while the long term income becomes uncertain. For many owners, this is still an attractive choice, since the sale of a profitable business can give enough capital to finance a comfortable and leisurely life.
The Loose-Loose Scenario
The most dreaded case of selling is making the wrong decision. This happens when factors such as timing, financial needs, and market position are not taken into consideration before selling a business. The scenario most often occurs when an owner has overvalued their company, or put themselves in a position where they must sell, and the buyer holds all of the power of negotiation. The best way to avoid this pitfall is to research market demands, have the company properly assessed, and monitor market projections. By having the proper information, an owner will no longer need to ask “should I sell?” but will be able to make a decision confidently, and when the time is right.
