Common Reasons That Owners Have to Sell Their Business

Selling a business is never an easy decision. There could be various reasons for an owner to sell his/her company, however, the decision needs careful consideration as sometimes a hasty decision to sell can lead to feelings of regret, guilt, and loss later. The owner needs to assess the situation and determine whether they are ready to sell their business and prepare themselves emotionally and mentally for it. 

Assessing the reason for selling your business is a major step towards making the decision to sell it. Some of the most common reasons for owners selling their company are:

Debt:  When the outgoing becomes more than the incoming, it is a red flag. A lot of owners end up losing their savings, their assets, and even their houses just because they keep investing and covering themselves with more and more debt to revive their business. A careful consideration of the option to sell the business to recover cost when the debt starts to grow uncomfortable is a good idea.

Business ceases to be profitable: This could be because either the product loses market appeal or the mode of marketing becomes redundant. This is in fact, a good reason to sell if it is not possible to better it in any way.

Passing it on to heirs: This is one of the most preferred ways since the business still stays in the family. Sometimes the owner can’t take the business to the next level, compete with the market, or perhaps they just want the new generation to begin managing the business.

New Business venture: A lot of small business owners start a particular business in order to generate enough income to start their ‘dream’ business.

Boredom: Owners often lose the excitement of owning a business and this happens when the stress of the business becomes unmanageable for them. It is important that the owner is completely sure that they do not want to manage it anymore, not just because of a one-time event.

Retirement: Many people plan their business in a manner to retire by a certain age, and when they reach their milestone, they sell to move on and enjoy their lives just as they had planned.

Pros of Seller Financing: Getting More For Your Business

As baby boomers begin to hit retirement age, many who are business owners are ready to sell. It’s created a market that has many businesses for sale. At the same time, concerns about the economy had made it tough to get financing for many potential deals. Seller financing is one option that could be the solution to get many deals done.

There are a number of benefits for business owners who are considering seller financing:

• Faster sale – Seller financing provides an attractive option for buyers which means that sellers can sell their business quickly.
• Flexibility – Seller financing enables the seller to create a payment schedule, interest rates and loan period that fit their personal needs. 
• Tax breaks – Taking a note for part of the business purchase price may provide a tax break for the seller. The seller can defer some of the tax due on the sale of the business until full payment is received, which could be several years down the road.
• Protections – Asking the new owner to keep the seller up to date with information like monthly profit and loss statements, workforce numbers, order backlog, inventory levels or other items with the monthly payment can be in the sale contract. The additional information allows the seller to keep track of the business and step in to offer advice or help if any problems are detected. 
• In First Position to Be Paid:  If SBA is not in the picture you are in 1^st position if there would be a default.  We encourage a personal guarantee from the buyer to ensure you being paid.

Working with a qualified business transaction professional, like a Certified Business Broker (CBI) or Mergers & Acquisitions Master Intermediary (M&AMI) is also recommended. Certified brokers and intermediaries at Sunbelt BC Business Brokers can provide the guidance you’re looking for when considering seller financing or other financing options.

Business Succession Planning

How to Maximize the Value of Your Business For Retirement

The biggest challenge facing “baby boomer” business owners is one that many haven’t even thought about yet: Retirement. 

Business owners invest a lot of time, effort and money into making their business a success, knowing that it represents one of their largest assets. For many business owners without a pension, the majority of retirement savings come from the eventual sale of their business. “What’s the best way to prepare for your company’s sale? How do you maximize its’ value and avoid costly mistakes? Are there tax saving strategies you could employ to help save thousands for your retirement? These are the questions that you need expert answers to” says Michael Naprawa, President of a Sunbelt Business Brokers in Nanaimo. 

Unfortunately, many successful businesses are not prepared and do not have a planned successor who is prepared to purchase and take over the operations. Sunbelt draws upon their global network of qualified and interested entrepreneurs to ensure you get what you deserve for your many years of hard work. Sunbelt specializes in selling privately owned businesses exclusively. They are experts in analyzing the value in business before putting them on the market, developing a sophisticated and professional marketing profile and finding qualified buyers with the right skills and experience to take over a business. Sunbelt can provide business owners with advice that can make a significant difference in the final value of their business. 

What makes Sunbelt truly unique in the marketplace is they work in complete confidentiality: employees, suppliers, customers, bankers and landlords will never know the business is for sale. Some business owners try to sell their company in the same way they would sell a house: publicly. The negative impact of public advertisement of a business can be significant to the value of a business. Once the news gets out, you could lose long-time employees, clients and suppliers—all of which will significantly bring down the company’s market value and ultimately, your retirement funds. 

Waiting to Sell? Don’t Wait Too Long…

As the Baby Boomers continue to enter retirement, our economy faces one of the most dramatic demographic shifts in history.  A sellers’ market and an aging baby-boomer population is causing many entrepreneurs to consider exiting. 

Many business owners wait until retirement to sell, and as baby boomers are getting older, the numbers of businesses for sale is rising. In fact, 57% of business owners identify their age as the main motivation for considering a sale. Over 30% of all business owners in BC are already over the age of 60.  “There’s a whole generation of owners that will need to convert their businesses into cash,” says Michael Naprawa, President of BC Business Brokers, a Vancouver Island-based business brokerage firm.  Fortunately for business owners, the market is ripe.  Mergers and acquisitions is a cyclical industry, and we're in one of the largest sellers' markets that has ever occurred. The current combination of low interest rates and favourable capital gains taxes is making it easier to acquire than grow organically, which means buyers are eager.

Yet business owners tend to procrastinate during the good cycles. According to a recent survey of business owners, 35% held off from selling their business because they anticipated continued growth. Unfortunately, waiting too long is probably the single biggest factor in reducing the proceeds from the sale of a privately held business.What the majority of business owners don’t realize is that you can’t outgrow interest rates, and you can’t outgrow capital gains. The time to sell is when the market is flush with buyers – and the market is flush now. 

If you are interested in selling your business and would like more information, contact our Nanaimo office at 250-751-7917 or 1-877-289-0969 or email us at nanaimo@sunbeltnetwork.com.