Why entrepreneurs sell their business

  • by David Pottingham 
Selling a business

Entrepreneurs sometimes wait for the right point in the economic cycle

The circumstances in which people tend to sell a business tend to either be personal in nature, related to the condition and development of the business, the state of the sector, the health of the wider economy or even changes the owner foresees on the horizon. 

Very often, there will be a confluence of different reasons. Just as often, sellers won’t enjoy such a convenient convergence of factors; instead, one factor will override another militating against selling a business. 

For example, a couple may be so desperate to retire they sell their business straightaway rather than waiting until market conditions improve or diversifying the customer base first. Another business owner might have been keen on running his business for several more years, but decides to exit immediately when he receives an offer that is too good to refuse.

Below are some of the principal reasons why people sell businesses:

  • Retirement
  • Need funds to finance another venture
  • Tension between management and/or staff
  • Sick of dealing with bureaucracy
  • Not generating enough income 
  • In anticipation of impending changes likely to make the industry more challenging (eg, exiting DVD rental sector might have been shrewd move in recent years as online download market accelerated)
  • Economic downturn
  • Fulfilment of a long-term exit; hit profit and revenue targets 
  • Ideal juncture in the economic cycle
  • Perception that business is at its peak; value will never be higher