And why do you sell?
One of the most crucial questions buyers often ask business owners is why they are selling their business. This question seeks to obtain first-hand information about the state of the business and evaluate whether it constitutes a solid investment.
Impact of the Reason for Sale on the Transaction
The reason behind the sale can have a significant impact on the sales price and the terms of the transaction. If the motivation is an urgent financial need or economic problems, the buyer may seek to negotiate a lower price. On the other hand, if the reason is a planned retirement or a different investment opportunity, the buyer might be willing to pay more.
Hidden Indicators in the Sales Reason
Additionally, the reason for the sale may be indicative of potential hidden problems in the business, requiring further investigation by the buyer. Legal or financial issues, for example, might require careful due diligence.
My Particular Perception
In my experience as a business broker in Florida, I have identified the following common reasons for owners to consider selling their business:
- Retirement
Many owners retire and want to sell to enjoy their golden years, opening opportunities for buyers interested in continuing the operation.
- Financial reasons
Financial difficulties or the need for capital for other projects may prompt the sale, although this may lead to lower price negotiations.
- Changes in lifestyle
Desires to move, start new businesses, or pursue other interests may motivate selling as the best way to achieve those changes.
- Market Conditions
When the market is favorable, selling the business can maximize the value of the sale, as buyers may be willing to pay more.
- Association Disputes
Conflicts between business partners can lead to the partial or total sale of the company as a solution to disputes.
- Changes in the Industry
Modifications in technology, regulations or consumer behavior can impact profitability, motivating sales as adaptation to external changes.
- Health problems
Owner health issues that make it difficult to run the business may lead to a sale to provide financial stability and relieve personal stress.
A Complex and Crucial Decision
Selling a business is a complex decision that requires careful consideration by the owner and his or her family. In this process, the guidance of a business broker, attorney, and accountant can be invaluable in ensuring a successful sale.
Transparency should be the 'Reason Behind the Sale'
Clarity on the 'reason behind the sale' is essential to making informed decisions and establishing a path to a new stage in the seller's life, as well as an opportunity for the buyer.
However, an unsubstantiated ‘selling reason’ can undermine buyer confidence and jeopardize the success of the sales transaction. As Samuel Johnson noted, "Clarity is the friend of the wise and the enemy of the fool."
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Author: Alfredo González (Alfred@negociosenflorida.com)
Illustration courtesy of Pixabay.
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