Reasons for a business Sale

Reasons for a sale

Reasons for selling a business often fall into two main categories. The first is a sale that is planned almost from the beginning or by an owner who knows that sellingthe business is or should be a planned event.  The second is exactly the opposite – unplanned. The sale is motivated by a specific event such as health, divorce, business crises, etc.

In addition to the two major reasons, there are a host of unpredictable causes for the sale of a company.

A seller may not even be thinking of selling when he or she is approached by an individual, institutional investor or a larger competitor, and an attractive offer is made. The owner of a business may die, and the heirs have no interest in operating it. A company may bring in new management who decides to sell off a division or two; or maybe even decides that selling the entire business is in the best interests of its stakeholders.

A major competitor may enter the market, forcing a business owner to elect to sell. And the competition may not just be another company. The owner of a business may realize that an external threat is such that the company will lose a competitive advantage. Utilization of new technology by a competitor may outdate the way a company produces its products. Two competitors may merge, placing new pressures on a company. The growth of franchising and big box stores can promote themselves on a much larger scale than a single business, no matter how good it is. National advertising can create the perception that a large business’s pricing, inventory or service is better than the smaller competitor, even if it isn’t.

Although these issues may not push a business owner or company management to consider a business sale, they are certainly causes for consideration. Unfortunately, most sellers fail to create an exit strategy until they are forced to and as a result leave significant value on the table. Professional athletes want to go out on top of their game, and business owners should do the same.