I've been a CPA for thirty eight years and a Business Broker for nineteen. By now I know the signs that indicate when a business owner should consider selling his or her business. Sales have been flat for several years. This indicates that you have either taken the business as far as you are able, or that you are burning out and just don’t care anymore. It’s either time to sell or to bring on some new employees to enhance your skills or to bring new energy to the business.
Sales are increasing, but your market share is decreasing. If you see this happening, it’s a possible sign that you need to sell quickly before your competition takes over more market share causing your sales to actually decline. Solutions are to improve your product or your marketing effort.
Your spouse doesn't recognize your name on the caller ID. If your work life is your only life for more than just short bursts of time it may be time to sell and get a life. A good work ethic is important, and I’m not downplaying it, but so are family, spiritual pursuits, hobbies, etc. The best run and most profitable businesses that I've seen are those where the owner has built a structure of good people under them that can run the business while the owner is away. If you can’t or won’t do this, it’s time to sell.
You've run out of capital to grow the business. If you've reached this level it may be time to sell the business outright, or sell a percentage of the business to an outsider with funds to grow the company. There is an abundance of money out there waiting to be invested in good companies. You don’t always have to sell a majority interest either.
You’re in bad health and have never even considered a succession plan. If you find yourself in this situation you should immediately surround yourself with a professional team consisting of an attorney, CPA, financial planner, and business broker. You need to formulate a strategy to protect yourself and your family, and when it’s time, to sell on your own terms.
You’re approaching retirement and don’t have any employees or family members that you feel are qualified to take over the business. Conversely, they may be qualified, but do not have the money to buy you out.
You have family members in the business and it’s causing the family to split apart. The trouble can come from the family members in the business not getting along. It can also come from family members that are not part of the business feeling that they are missing out on their share of the family wealth. A sale of the business to an outsider can help you keep peace at the family parties.
Wayne A. Simpson CPA, CBI, M&AMI is a Managing Partner at Utah Business Consultants and a Certified Business Intermediary with the International Business Brokers Association and a Merger & Acquisition Master Intermediary with M&A Source. Utah Business Consultants is a full-service Business Brokerage and Valuation firm.