14 June, 2011

Private business exit: Q1. Why do you want to sell?

So why do you really want to sell your business? There are actually many possible answers to this opening question. Here are a few of the more common ones, often answering other unspoken questions:
  • You don’t want to sell any time in the next 10 years, but you’re making sure that if you if and when you do, you’re able to do so.
  • You don’t have any plans to sell any time in the next ten years, but someone might make you a great offer and you’d like to be able to respond effectively, without throwing a spanner in the works. (This is smart – many businesses go off the rails trying to handle the sales process, expected or unexpected).
  • You’re planning to retire sometime in the next few years and you’d like to sell it for the best possible deal.
  • You need to retire immediately and you need the best possible deal
  • You want out, but you’d like to keep a stake for old time’s sake and to show your continued faith in the business.
  • You want some cash for other things, but you’d like to stay in control.
  • You think you’ve taken the business as far as you can, and it’s probably worth more to someone else than you.
  • You reckon that the business is going well today, but its future isn’t that great if it stays as a standalone entity.
  • You’ve got another more exciting project and you want to get some or all of your money out to pursue that.
  • The business is just not as good as you’d hoped and you want out.
  • The business is a dog and you want out now while there’s still something left.
  • You’re bored/exasperated/overwhelmed by the business.
  • Your co-shareholders are dysfunctional/unrealistic/broke/ etc/etc - meaning expansion, major transactions, capital raising, share issue and board appointments are virtually impossible; the only way out is to sell the darned thing.
  • Some of your fellow shareholders want out, but you can’t afford to buy them out.
  • You want out, but your fellow shareholders can’t afford to buy you out.
  • You don’t want to sell the business to anyone else outside the firm, but you’d like to pass it on to family, staff, or an employee trust sometime (having taken enough to give you a comfortable retirement).
There are many more, but you see why I ask the question. Each answer (or combination of answers) puts a very different slant on the way we might think about the business strategy and any preparation for sale. You and your inner cabinet need to be honest about the reasons for selling, so you can plan accordingly.

First posted June 27th, 2008

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