Last Updated on Thursday, 8 February, 2024 at 11:23 am by Andre Camilleri
Thomas Cremona is founder of idisav
Occasionally, when assisting business owners who are considering possibly exiting their company, they are faced with the typical misconception that a person selling their business is a sign of a failed business. In fact, this is a misinterpretation of what is a natural progression in a company’s journey.
There are a host of reasons for a shareholder to undertake the sale of their business, some of which are discussed below.
Planned strategic exit
As with a founder preparing an initial business plan for the start-up company, the preparation of a planned exit is also important. This plan will allow the owners to optimise their exit and allow them the greatest financial gain.
Financial gain
Selling the business can allow for significant financial gain allowing the business owners to unlock the value that they have worked to accumulate over the years as they nurtured and grew the business.
Market changes
The business landscape is constantly changing and one reason to sell could be that the owners are anticipating a downturn in operations. Another reason, of a variety of possibilities, may be that they do not wish to participate in the industry’s next significant shift, for example complying with new legislation and the relating impact on their business. Thus, selling the business may be a proactive choice made by the owners in the knowledge that a future owner has the energy and drive to adapt to such changes.
Lifestyle choices
While the business environment may be changing, the business owners’ personal life may also be undergoing a shift. The business owner may no longer see the value, or have the passion, to own the company when there could be other ways to utilise the wealth locked into the business. The business owner may wish to consider a new venture which may more closely reflect their current focus.
Alternative opportunities
A business owner may consider that there are wider opportunities outside of the company, possibly in a different sector. Thus, the sale of the owner’s interest in a business may reflect the owner’s judgement that they would prefer to focus on other areas.
Strategic merger and acquisition
In certain instances, larger firms opt for growth by acquiring or merging with target business entities. The sale of such target entities is thus reflecting the belief in the viability of the business through third-party acquisition.
Conclusion
There may be a multitude of reasons for a business owner to consider an exit of their company in addition to those noted above. The decision to sell a business is generally not straightforward, and is often wrought with contrasting thoughts, where one needs to factor in the scenarios that may be driving a sale.
However, until the decision is made to sell the company, a business owner should follow Bo Burlingham’s words of wisdom, “You should build a business today as if you will own it forever but could sell it tomorrow”.
