Why Sell Your Business?

The first step in effecting the sale of a business is to decide whether or not you want to sell, and if so,
why. There are many reasons why you as a business owner may want to sell your company. In many
cases, selling out may have been your ultimate goal all along, part of a plan to provide for retirement. In
other cases, selling is reflection of changed markets, changed personal circumstances, or changing
objectives.

Often, once a business has been stabilized, the entrepreneur who founded it will want to move on to
new challenges. Indeed it is typical of some entrepreneurs that they prefer the excitement and risks of
creating a new business to the relative predictability of managing an established operation.

In some cases, selling a business is a reflection not of success but of acute difficulty. Owners of a failing
business may wish to sell it to someone in a position to reorganize it and turn it into a viable operation.
The sale may, in fact, be part of formal bankruptcy proceedings managed by trustees appointed to wind
down affairs and liquidate assets on behalf of creditors.

Reasons for Selling a Business

Below are some of the reasons that owners sell their businesses. Each is associated with a different level
of urgency or opportunity that will determine just how badly you want to sell, and therefore at what
price and on what terms.

Personal considerations

• After operating the business for many years, you believe it is now worth enough to allow
  you to make a profitable sale.
• You are reaching an age at which you no longer wish to operate a business or wish to
  retire. Perhaps ill health is making it impossible for you to run the business.
• Poor financial returns, or demand for your products or services has weakened.
• Sales and profits are down.
• Costs are rising faster than sales or profits.

Changing resources

• You have lost major clients or contracts.
• Key employees have left the organization.
• Key leases (e.g. on your premises) are about to expire and either will not be renewed, or
  will be renewed on unfavourable terms.
• Patents on which you relied have expired.
• Key suppliers you depended on are no longer available to you.

Uncertain future

• New competitors are entering the marketplace.
• New products or services are competing with yours.

Inadequate financing

• The business requires a major infusion of cash to develop new products, upgrade equipment or refit the premises and you are unable or unwilling to secure this additional financing.

Frustration

• The complexity and demands of operating a business have become too much for you in terms of government regulations, taxes, managing employees, adverse economic conditions, etc.
• You are faced with disputes and lawsuits.
• New controls or regulations have been introduced that increase your liabilities or make it
  impossible to operate the business as you have done in the past.
• You find it increasingly difficult to collect from your clients and customers.

New opportunities

• You believe the same business can do much better in another location.
• You see a lucrative opportunity for starting a different type of business
• You have been offered an appealing position with a large organization.

In thinking about your reasons for selling, you should also decide which of these reasons you want to share with a possible purchaser. If you are selling to retire or pursue opportunities elsewhere, buyers
may be encouraged since you have obviously done well by the business. But if your reason for wishing to
sell is that you no longer believe the business is viable, you may not want to say this to a buyer.
Remember, however, that serious buyers will be doing their own checking and will find out about any
serious problems with your business. Withholding vital information may undermine your credibility later
on and the deal could fall through. Presenting misinformation might even leave you subject to legal
penalties.

Your best course may be reasonable openness with the buyer without necessarily painting too gloomy a
prospect. After all, a different management team with different skills and resources may see a golden
opportunity where you see only trouble and frustration. Remember, too, that buyers – like sellers – have
many different motivations. They may see in your business a feature that they value far more than you
do.

By Industry Canada, Used with Permission

Download the full article to explore more about selling! The PDF includes:

1. Why Sell?
   1.1 Reasons for Selling a Business
2. What Are You Selling?
   2.1 Assets to be Sold, by Business Type
   2.2 Methods of Assigning Value to Your Business
   2.3 Asset Information Required to Estimate Value
3. Your Financial Records
4. What Kind of Sale?
   4.1 Selling shares
   4.2 Franchising
5. How to Sell
   5.1 Do it Yourself
   5.2 Use an Agent
6. Your Business Information Kit
7. Responding to Offers
   7.1 Negotiating the Deal
   7.2 Alternative Arrangements
8. The Contract