Top 5 Reasons for NOT Selling Your Business: All Myths

I’m Making Good Money, Why Would I Want to Sell Now?

So, you’ve made it through the lean years. No more putting your paycheck in your top desk drawer until there was enough money to cover it. You are getting a nice paycheck plus you have benefits, other perks and maybe even a yearend distribution.  If your business has been performing well and the revenue and profits are trending up, this might be the best time to sell. For all the talk of serial entrepreneurs, 99% of business owners have one business that they own for most of their career. And the equity in their business makes up the largest component of their retirement savings. Some business owners who want the best of both worlds, take some cash off the table but continue to run the business as a minority shareholder, find a buyer who will structure a recapitalization. But it’s not about how much money you are making “now”, it’s about long range financial planning.

How Will I Spend My Time?

This is a close cousin to “loss of purpose”, “loss of social status”, etc. If you have nothing to do when you sell your business or psychological issues because you’re not a big shot with a title like President or CEO or Founder, you just frankly have “issues”.   There are plenty of new titles to aspire to, like #1 Dad, #1 Grandmom, Most Improved Golfer, Teacher of the Year, etc. etc. Or if you really have the energy and drive, start a new business and get your old title back.

What Will Happen to my Employees?

This was one of my biggest issues. You have assembled a team that gets much of the credit for the growth of your business. Selling your business seems like you’re cashing out and leaving them hanging out to dry. My 35-person company had three departments each led by a single Director – average age about 38 at the time of sale. We were bought by a small public company with 3,000 employees with multiple divisions/departments. Which company provided my 35 employees with more long-term opportunity for advancement and professional development – it’s pretty obvious. And if you really want to thank your employees, think about putting an ESOP in place and sharing some of the equity. The best day of my professional life was the day after closing when I walked around the office and handed out checks to 22 long time employees.

No One Can Run This Business Like Me?

You are correct. The truth is that there are many people out there who can run it BETTER than you. Maybe you’ve grown your business to $10mil, $20mil, $30mil or more. If you are like many entrepreneurs, this is the first time you are running a business of this size, with this many employees. Growing a business from $0 to $30mil is much different than growing a business from $30mil to say $100mil. Large corporations (strategic buyers) and well-run family offices/private equity firms (financial buyers) have teams of very experience professionals. Do your homework and partner with the buyer who is best suited to successfully manage your company through its next stage of growth.

The Timing is Not Right

Think of your investment in your business like you would an investment in the stock market. You sell a stock when you think it has hit a market high. So, when do you know your business has hit a market high? Is your business performing well? Are you in a desirable, growing market? Is the overall economy performing well? Are there more buyers than sellers in the market? Are multiples and valuations at all time high levels? Answer these questions and it will help you decide if the timing is right.

Best of luck, but with proper planning and a team of trusted advisors, you won’t need the luck!

Bob Maiden, CPA is a partner with the M&A Advisory firm Stony Hill Advisors LLC. He founded Maxwell Training Centers, Inc., a four time Wharton Top 100 Business winner and sold Maxwell, renamed MedConference LLC, to inVentiv Health in 2006. Bob provides sell-side advisory services to private business owners and sources deals as an intermediary for strategic buyers with a concentration in B2B Services, Staffing & Recruiting firms, Healthcare and Technology. Bob can be reached at 610-600-1060 or [email protected].