This is a question that we get frequently at the Institute for Business Acquisitions (I4BA). Well actually, it’s often “Why” would a good business come up for sale? To answer the first question, YES, ABSOLUTELY. Good businesses come up for sale every day all over the country (probably all over the world actually). That being said, let’s take a moment to jump into the “why”.
Why would the owner of a good, profitable business ever want to sell it? The good news is that there are a variety of very good and very legitimate reasons that we come across every day. Here is a list of the 5 most prominent with a brief explanation of each.
This reason speaks for itself and right now with the baby-boomer generation rapidly running through retirement age, this particular selling reason is more prevalent then ever. The baby boomer generation is very entrepreneurial, and millions of them have built excellent businesses! As they continue to prepare to hang up their hat, the opportunities for great acquisitions are great. We will be writing a post soon specifically about the numbers of baby boomer businesses out there for sale and coming up for sale.
This is a very common reason, especially amongst “owner-operated” business. If the owner experiences a health situation that they know will take them away from the business, often their first reaction is to sell the business to someone else who can run it like they did so it doesn’t simply die on the vine.
This is an interesting one, because it usually has the seller in a vulnerable position. They are on the verge of owing a lot of money to their spouse based on the book value of their business, but that value isn’t sitting in cash. So, they are left with the option of turning the business over to their spouse, (which rarely happens) or liquidating it to afford the divorce settlement. Because the seller typically isn’t planning on retiring in this scenario, it often allows the buyer to retain the seller as an employee or consultant for a considerable amount of time as well, adding to the probability of success. We would only advise to have a tighter non-compete in these situations, so the seller can’t jump right back into the business after the divorce is final.
Disagreement Between Business Partners
Unfortunately, even the greatest business partnerships can end with problems…big problems. The irony here is that it seems that this happens more often in successful companies than it does in poor companies. Often one party is working more than the other, or sees themselves as more valuable, or they simply can’t agree on the future direction of the company any longer. They try to buy each other out, but because of the contentious relationship, they can’t agree on a price….so, they decide to just sell the business on the open market and move on. Assuming that their personal problems haven’t caused any problems for the business itself (yet), this can create an excellent buying opportunity!
Owner Is Burnt Out
While you won’t always here this as the “official” reason for wanting to sell, you will often find it to be the actual reason. The owner has been in the business for 20 or 30 years, and while it is still extremely successful, they’ve just had enough of it. They’ve made their money and want to just relax for a while, which creates another great buying opportunity for us (and you). Just be sure that the seller is contractually and financially obligated to help you with whatever transition assistance you need, because it’s likely that once he/she is off the hook, they will be very difficult to get a hold of or get help from.
There are several other very good reasons, which we detail in our Business Acquisition guidebook which you can get here. We also discuss these and more in our Business Buying support forum, which you can join absolutely FREE here.
I hope you enjoyed this article, and I hope to see you in the forum.
Institute for Business Acquisitions