Small businesses play a crucial role in the economy, fostering innovation, providing employment opportunities, and stimulating local growth.
However, small business owners often face the decision to sell their businesses for a myriad of reasons.
This article explores the various factors that influence small business owners to sell their businesses, from personal circumstances to industry challenges.
19 Reasons Why SMB Owners Sell Their Businesses
Better opportunity
Some small business owners may decide to sell their businesses to pursue more lucrative or attractive opportunities.
This could involve:
- Investing in a different industry
- Launching a new venture
- Joining an established company that aligns with their personal and professional goals
Bankruptcy or Financial Pressure
Financial difficulties, such as mounting debt or cash flow problems, can force small business owners to sell their businesses.
Selling the business can provide a much-needed cash infusion to pay off debts, avoid bankruptcy, and alleviate financial stress.
Boredom or Burnout
Managing a small business can be challenging and time-consuming, leading to boredom or burnout for some business owners.
Selling the business can provide the opportunity for the owner to focus on new pursuits, seek personal growth, or simply take a break from the pressures of business management.
Business Growth
In some cases, a small business may grow beyond the owner’s capacity to manage it effectively.
Selling the business to a larger company or experienced investor can ensure continued growth and success while allowing the owner to capitalize on their hard work and investment.
Competition
Increased competition in the market can make it difficult for small businesses to maintain profitability and market share.
In such situations, selling the business may be a strategic decision to avoid potential losses or difficulties in sustaining the business in the future.
Close out of Private Equity Fund
When a private equity fund nears the end of its investment horizon, fund managers may sell their stakes in small businesses to realize returns for their investors.
This can result in the sale of the small business to new investors or a larger company.
Death or Disability
Unexpected death or disability can make it impossible for a small business owner to continue managing their business.
In these cases, selling the business can provide financial security for the owner’s family or help ensure the business remains in capable hands.
Disputes
Conflicts among partners or shareholders can sometimes lead to the decision to sell a small business.
Selling the business can help resolve these disputes and provide an equitable solution for all parties involved.
Diversification
Small business owners may choose to sell their businesses to diversify their investments and reduce their financial risk.
By liquidating their stake in the business, they can invest in other assets or industries, spreading their risk across a broader portfolio.
Divorce
In the event of a divorce, a small business may be sold to divide assets between the divorcing parties.
The proceeds from the sale can be used to settle financial obligations and facilitate a fair division of property.
Economic Reasons
Changes in the economy, such as recessions or shifts in consumer spending, can impact the profitability and viability of small businesses.
In response to these economic challenges, small business owners may opt to sell their businesses to minimize potential losses—especially during this time of inflation and the pandemic crisis.
Health Reasons
Physical or mental health issues can make it difficult for small business owners to continue managing their businesses effectively.
In such cases, selling the business can be a practical decision to prioritize the owner’s well-being and ensure the business remains in capable hands.
Recapitalization
Small business owners may choose to sell their businesses as part of a recapitalization strategy.
This involves raising capital by selling a portion or the entirety of the business to new investors, allowing the owner to:
- pay down debt
- invest in growth
- realize a return on their investment
Relocation
Personal circumstances, such as a desire to move closer to family or a spouse’s job relocation, may lead small business owners to sell their businesses.
Selling the business enables the owner to start fresh in a new location or pursue different opportunities in their new community.
Retirement
As small business owners approach retirement age, they may decide to sell their businesses to ensure a comfortable retirement.
The proceeds from the sale can supplement their retirement savings, allowing them to maintain their desired standard of living during their golden years.
Taxes
Tax considerations can influence a small business owner’s decision to sell their business.
By timing the sale strategically, the owner can potentially reduce their tax liabilities, such as capital gains tax, and maximize the financial benefits of the sale.
Unsolicited Offers
In some cases, a small business owner may receive an unsolicited offer to purchase their business.
If the offer is attractive and meets the owner’s financial and personal objectives, they may choose to sell the business even if they had not previously considered doing so.
Other Reasons
Small business owners can face a myriad of unique circumstances that may prompt them to sell their businesses.
One such factor is a change in personal priorities.
For instance, an owner may want to retire, spend more time with family, or pursue other personal interests that take them away from the business.
As a result, selling the business can be an attractive option to free up time and resources.
Points to Ponder
It’s no surprise that many owners have their own set of reasons—ranging from personal to economic reasons.
Apart from the seriousness it involves, some are simply taking it out of their life to be completely immersed in a quiet lifestyle—away from busyness and problems to think of at night.
But, selling a business isn’t just a one-way avenue.
In fact, you have all the options available even if you’re thinking of selling your business ahead of time.
Ultimately, it’s how you make the decision.
Remember your business is not just simply your way of making money for yourself, but your reflection on how you make the lives of other people better.
Make the greatest ultimatum you can give to your business.
Why Selling is Better than Closing
Sometimes, owners get the impulsive decision to shut down a business.
Rather than just closing, selling is the better option to make.
Closing your business means shutting down operations and liquidating assets, which results in a lower return on investment.
However, selling your business to a qualified buyer can provide a much higher return on investment and potentially yield a profit.
You can learn more about the surprising benefits of selling vs closing here.
Conclusion
Small business owners sell their businesses for a multitude of reasons, ranging from personal circumstances to industry challenges.
And if your indecisiveness stops you from doing that big decision, you can take your time contemplating with questions to ask yourself in these articles here:
Instead of keeping it all to yourself, we can lend you a hand and help you out in the intricate process of selling.
To do this, simply call us at Tsetserra Growth Partners and we’ll get your answers sorted out in the most desirable way!
