Why Do Owners Sell Their Business?

One of the first questions we hear from buyers is, “If the business is so great, why is the owner selling?” 

And it’s understandable. The buyer is considering whether or not to invest a substantial amount of their time and money. They may be quitting their job, cashing in their retirement funds, and relocating their family to buy this business. The last thing they want is to get stuck with a lemon.

Conversely, for many owners selling can be an emotional experience. This is especially true if it’s a family business they’ve spent many years growing. It’s not uncommon for owners to have “seller’s remorse” and end up reneging on the sale at the last moment.  

But the reality is, all owners are going to exit their business someday. They’re either going to sell it, hand it down, shut it down, or die at their desk. Sounds morbid, but we hear it all the time. 

So every day, there are plenty of great, privately-owned companies, both large and small, that change hands. They’ve often been around for decades, they have experienced employees, they’re making money, and have a great reputation in the community.  

So, why would they sell?

We’ve interviewed thousands of owners about this very subject. While there may be any combination of reasons, there is usually an overriding factor. 

So, without further ado, here is a list of the top 5 reasons owners sell their business. 

1. Retirement

If you’ve looked at online listing sites, you’ve probably seen many businesses listed for sale because the owner is ready to retire. 

Unleashing value that has been built up over a period of years may be a seller’s only opportunity to provide future income and retirement, or build an estate. 

They may decide it’s time to travel, move to Florida, or spend more time with the grandkids. 

But beware… While retirement is listed as a common reason owners sell, it can sometimes serve as a catch-all answer and mask their real reason for selling. 

Depending on age and health, many sellers aren’t quite ready to sit on the front porch in the proverbial rocking chair. After some time off, they often get bored and move on to the next endeavor.    
 

2. Burn Out

Another common reason we see business owners choose to sell is boredom or burnout. The ongoing, daily grind of managing a small business can grow monotonous and tiresome. Often, the owner is just ready to move on to something else.

Some things that can cause burnout in even the most dedicated business owners include: 

• Employee issues
• Customer complaints 
• Isolation
• Long hours 
• Lack of time off

Although business owners may still love their business and be passionate about growing it, they’re also human. 

Many have a difficult time getting away from their company, even on weekends or on vacation. Whether they’re checking emails or just thinking about business, they have a hard time shutting it off. 

When an owner is suffering from burn-out, we often hear comments such as “I wish I could be like my employees and just shut my brain off at 5:00 pm when I walk out the door to go home.”

3. Health Issues

Any significant, sudden change can cause a business owner to reassess their business and personal life. 

But of all things that can affect change, health is number one. 

If the owner, a family member, or a key employee develops a significant health issue, it can shift the focus and energy away from the business and spur thoughts of selling. 

One day you’re five or more years out from selling, and the next day, you need to move on as soon as possible. We’ve seen it numerous times. 

You never know what life is going to throw at you. That’s the reason it’s critical to prepare in advance. 

Take the time to understand the process. Ask questions. Get your books and records in order. Get a valuation to understand your true market value. Make a relationship with a broker. Work with an attorney to craft an estate plan. 

These are a few critical steps that can protect your future and your family’s future. 

4. “Just Need a Change”

Many entrepreneurs enjoy starting and building a business, but get bored with day-to-day operations once they build it to a certain level.

We hear things like “I want to try something new” or “I just don’t feel challenged anymore”. For some entrepreneurs, their love for the business can evolve into boredom in a few short years. 

They may also be looking for a lifestyle change. Perhaps they no longer want to live in the area where the business is located, or just want to work less and slow down. 

The average time someone will own a business before wanting a change is roughly 7 to 9 years. Some people push past this and continue running their business for many years. Others need a change of pace. 

We’ve seen plenty of business owners choose to sell simply because they believe the business needs a new owner with more vitality and focus. It’s natural - don’t feel guilty or ashamed if you want to step away. Life’s too short, as we just mentioned. 

5. S**** Happens

That’s right… STUFF happens!

Life can be messy, and there are endless combinations of factors that can lead a business owner to consider selling.

Here are a few more examples:

• Partnership dispute
• Death
• Divorce
• Competition is growing
• Technology is changing
• The owner is ready to take chips off the table
  
  

Business Owners Sell for Various Reasons

The moral of the story?

No two businesses are exactly alike. No two owners are alike. Industries are not alike. Business climate changes. Personalities factor in. Relationships change. Feelings change. Time moves on.

There are countless reasons why business owners decide to sell.

For a seller, it’s important to be prepared to share why you’re selling. Sometimes that can be difficult, but it’s critical when winning a buyer’s trust.

For a buyer, make sure you ask why the owner is selling, and understand you may not get the full answer. The reasons are often quite emotional and personal for owners to discuss. Ask why, but remember to show a little grace with the answer you receive.

To learn more about why business owners sell their business, read our blog on “The Emotions of Selling a Business” or contact us today!