Why Would Anyone Sell a Good Business?

This question was posed to me recently by a radio show host. It was interesting because he couldn’t get his arms around the idea that anyone would ever sell a good business. It’s probably why he will never own one.

Kidding aside, it is a valid question. There are lots of reasons. Personally, I like the morbid ones: death, divorce, health issues, and not because I wish anyone harm. Rather, I think those are better motivators to get a deal done.

The one answer sellers give which many people have difficult with is “other business interests”. This reply naturally begs the same question that the radio show host asked me.
It is entirely possible, and common, that some people just get bored with their businesses.

Haven’t you ever been bored with your job? Perhaps a better question would be: “Have you ever had a job you loved?”

I have found that seller’s boredom is usually a result of them putting the business on cruise control for too long. They have lost their passion. They no longer look at their businesses and try to find ways to get bigger, better and faster everyday.

It is certainly a situation that a buyer can use to their advantage.

While you certainly want to dig in to the seller’s reasons for selling, don’t over-analyze the answer. It is far more important for you to focus upon whether or not there is a compelling reason for the sale that could impact the business after you buy it.

Specifically, are there any looming threats such as: pending legislation that could alter the business or, one large customer who will no longer be buying? Is a major competitor moving into the area, or local demographics that can alter the business significantly?

Of course there are many other possible scenarios which you need to investigate. Or, it may simply be the time has come to sell a business.

Skepticism, I believe, is one of the two most important characteristics that a good business buyer possesses. Use it effectively and not to paralyze you from buying a business, but rather to force you to conduct a flawless investigation and analysis.

The other characteristic is perseverance. Navigating your way through the business-buying process will have its ups and downs. It takes time and above all, it takes “know-how”. However, I can promise you that once you get to the finish line, and you own a good business that you can grow, all the nonsense you may have dealt with along the way will be a distant memory.

Comments

[Joe Davis]

My most memorable why are you selling response came years ago with the owner of a large exterminating company. We were having a rather stiff, formal listing session when I came to the why are you selling part, whereupon he put his head on the desk and with emphasis from a pounding clinched fist said, "I hate bugs, I hate 'em!"

[ZipDrugs Legal Online Pharmacy]

It is interesting when sometimes people say they want to retire from a business that most people would buy TO retire such as laundromat and gas station.

[KEITH MACLEOD]

How would you structure the vender takeback terms for the purchase of an internet based business with few hard assets which has track record of sales and is profitable.

[christy]

I am now in the process of selling my bagel shop. Yes, due to boredom. It's a 7 day a week job 365 days a year. When the line is to the door, one of my customers looks directly at me and says "And you want to SELL? and i just reply exhaustedly 'YES!"
It's been almost 5 yrs. and time to move on, to what? not sure,but i can't wait to find out!!

[Don Busby]

A partnership in which one of the partners vision of the business is now different than the other partner due to the success of the company. One partner wants to grow the company to the next level the other partner wants to enjoy the income and play golf. The two are no longer working for the same goals.

[kathy bury]

Hi Richard:

We're so glad you're available to ask questions. Thank you.

My husband and I are very open to various types of businesses; we do not have a burning desire to own a specific type. We only wish for these things: 1. good records or at least a traceable income 2. somewhat stable in a varying economy, (not huge swings) 3. that it be a business that would be appealing to other investors to buy once we're ready for a change 4. that it provide a good income of apprx. 175k+ net. 5. that we would be able to receive a loan against, along with our 20-30% down payment. Are we asking for too much? It seems there are so many falsely reported earnings on these businesses, we're finding it hard to find a decent one. But our real question is, are there any types of businesses that you could recommend we start looking at that would match our criteria? We both have excellent credit, a good down payment and are open for even the seemingly most boring business if it can meet our criteria above. We're beginning to feel there isn't one out there, at least not now or in our area (Southeast Florida). We're starting to feel a little down at this point of our search. Help!

[Richard]

Thank you for your kind comments. Yes indeed the search can be a daunting task and no, your criteria is not unreasonable.

That being said, from the level of down payment you are looking to contribute, in a general sense, SBA-backed financing will be the most consistent option for you.

As such, I would recommend focuses solely on businesses that either list themselves as lender pre-qualified or with tax returns as the source of documentation.

Additionally, I think it will soon make sense for you to attempt a direct solicitation to business owners and cover ones not on the market. However, that will only be prudent if you narrow down the targets to a specific industry. To do so, you may need to ramp up your search of the open market listings and cover 3-5 business sectors, meet with sellers, do your initial research and then, if none are attractive, focus on a direct solicitation in an industry or business type that you know you wish to pursue.

Richard Parker